MS-Oil Natural Gas Corp. Ambitious Targets-20251014

ONGC, like other global oil majors, in a surprise announcement highlighted its strategy to prepare for oil in a US$60s/bbl environment. Production growth remains key with potential to tap 440mn boe of reserves, while raising exploration activity.The company has identified resources that can be monetised to generate US$15bn over the decade and it's also looking at aggressively lowering costs by 15% ( ~US$3/bbl). These are some of the most ambitious targets on production and cost savings we have seen in years. While ONGC has a path to lower costs by US$1.5/bbl by using more inhouse oil services work, we believe the associated capex may remain in play near term.

Capital allocation efficiency is key and with a focus on growing domestic reserves,we believe the likelihood for returns to remain near 9% ROCE on a standalone basis do look better. ONGC expects US$1.2 bn in capex savings over 3-4 years through cost optimization initiatives and dual port logistics.