What Are Analysts Saying About ONGC Share Price for the Next Quarter?

As India’s leading oil and gas player, ONGC remains at the forefront of steering the nation’s energy self-reliance. With its integrated operations spanning exploration, production, and refining coupled with a dominant industry position, investors closely track ONGC’s financial health.

With the sector poised for growth as global economies recover post-pandemic, all eyes are on ONGC’s upcoming quarterly performance. Analysts are assessing key factors like global crude prices, domestic output, government policies and ONGC’s capex plans to understand the company’s profitability and ONGC share price outlook.

This in-depth article analyses recent analyst commentary to summarise the bullish, bearish, or neutral stances on ONGC’s stock for the next quarter.

Recent Performance Overview

After facing pandemic-induced turbulence, ONGC has recently rebounded as energy demand patterns normalise globally. Analysts believe ONGC’s latest results validate the upside of rising crude prices and the company’s resilience to navigate industry challenges.

Backed by its robust fundamentals, balance sheet strength and market share, ONGC seems poised for multi-year growth.

Key Factors Influencing ONGC’s Outlook

Experts assess a range of variables such as crude price forecasts, gas pricing reforms, shifts in government policies and ONGC’s production outlook to forecast future earnings and share price performance. Here is a detailed rundown of critical factors at play:

1. Crude Oil Prices

Analysts expect crude prices to be volatile in the near term but will likely stay within a certain range around current levels. This is expected to be driven by strong demand from recovering economies and a disciplined supply from OPEC+.

Higher price realisations for upstream companies like ONGC should help mitigate margin pressures. However, any unforeseen drop in oil prices could pose risks to profitability.

2. Domestic Production and Exploration

While ONGC’s base production from mature fields is relatively stable, analysts are optimistic about the company’s recent offshore finds, which signal exciting exploration potential in regions like Mumbai High and Kerala Konkan Basin.

However, timely execution remains critical to unlocking value from these resources. ONGC plans to drill 20 new wells for exploration in Tripura from 2024 to 2025.

3. Government Policies

Experts feel pricing reforms around gas and marketing freedom will aid the monetisation of ONGC’s discoveries while highlighting downside risks from higher tax levies or aggressive government dividend expectations.

As an oil PSU, ONGC remains susceptible to unpredictable policy moves that can impact investor sentiment.

4. Global Expansion

ONGC’s strategic overseas acquisitions focused on expanding global oil and gas production are monitored closely by analysts for integration progress. They anticipate substantial production and earnings growth over the next 2-3 years once operational challenges at assets in Russia and blocks in Mozambique and Vietnam are resolved.

5. Renewables Investments

In addition to its core hydrocarbon business, ONGC invests in natural energy sources such as solar, wind, hydrogen and biofuels – which analysts feel holds long-term solid potential. While the contribution is small, shareholders will watch closely if ONGC can scale up this business to tap into the global energy transition.

Analyst Forecasts on Share Price 

Incorporating these strategic factors, analyst consensus indicates a potential upside for ONGC stock in the coming quarters. Global crude prices and steady domestic fuel demand are expected to support ONGC’s earnings growth.

However, analysts caution global energy market volatility or abrupt regulatory/policy surprises pose critical risks to ONGC’s profitability.

Analysts adopt a cautiously optimistic outlook, forecasting returns of 10-15% above current price levels for the next quarter. However, they advise investors to take a long-term perspective, with a 2-3 year horizon, to navigate through periodic market volatility.

SWOT Analysis of Key Factors Influencing Outlook

Besides financial forecasting, analysts often rely on SWOT analysis to assess ONGC’s business and stock from a holistic perspective, covering internal strengths & weaknesses along with external opportunities and threats:

Strengths

• Integrated operations across upstream and downstream sectors
• Market leader accounting for over 70% of India’s crude oil production
• Technically skilled workforce and expertise running complex oilfields
• A healthy balance sheet with high liquidity

Weaknesses

• Bureaucracy and lack of autonomy in decision-making
• Delayed project execution, leading to cost overruns 
• Lower efficiency and productivity compared to private oil companies
• Gas pricing control and subsidies affecting profitability

Opportunities

• Exploration upside from new offshore finds
• Production ramp-up from overseas assets with operational fixes
• Leverage expertise in offshore drilling for global expansion
• Potential upside from new energy investments like solar, wind, etc

Threats

• Volatility in global crude oil prices
• Adverse changes in domestic energy policies or higher taxes
• Delay in clearances impacting operational efficiency
• Increased competition from private players

The SWOT analysis provides a quick perspective into critical internal and external factors influencing ONGC’s performance based on its current business and operating environment.

Analyst Recommendations for Investors

Here are some tips analysts commonly highlight for investors when considering ONGC stock:

• Maintain a long-term outlook spanning 3-5 years rather than reacting to near-term volatility
• Use significant dips to accumulate the stock at attractive valuations
• Focus on ONGC’s stable cash flows rather than quarterly fluctuations 
• Consider its diversification plans into renewables as potential value creators over 5-10 years horizon 
• Factor government policy risks before overweighting ONGC in the portfolio

Analysts expect ONGC to achieve modest gains but recommend tempering return expectations and preparing for potential volatility due to the unpredictable nature of oil markets and the risks associated with government interventions.

Conclusion

Despite near-term uncertainty, analysts remain positive on ONGC’s investment case, backed by its integrated operations, dominant industry position, and attractive stock valuations. As global energy demand continues to recover post-pandemic, ONGC appears well-positioned to deliver sustainable shareholder value through its core oil and gas operations while also expanding into renewables and new energy ventures. Savvy investors may find it advantageous to take advantage of short-term price corrections to accumulate ONGC shares, keeping an eye on the company’s stable cash flow generation potential in the long run.

Amit Gohar