Oil & Natural Gas Corporation Limited (ONGC) shares tumbled as much as 3.3% after an immense fire broke out at the company’s plant at Hazira near Surat in Gujarat earlier today.
Nonetheless, they redeemed some losses later and were at ₹66.70, down 1.4% from the previous close, while the benchmark index, Sensex dipped around 2% to 36937.91.
Oil and Natural Gas Corporation (ONGC) gas processing plant witnessed an immense fire in Surat early this morning. However the company officials announced the sure is under control now. ONGC declared on its Twitter account that there is no casualty or injury to any person.
Three continuous blasts took place around 3:00 at two terminals of the Hazira-based ONGC plant in Surat. A massive for followed the blast that could be seen from a distance.
The eye witness stated they heard the sound of the blast from as far as 10 km.
Taking a precautionary measure, the Government has shut down all the terminals.
Surat Collector Dhaval Patel was quoted saying by news agency ANI, “three consecutive blasts took place around 3:05 am last night at the ONGC Hazira plant which led to the fire. A number of firefighters along with seven fire tenders immediately reached the spot to provide relief. No casualties have been registered until now.”
The depressurization of the pressurized gas system was underway, he added.
He also said, “We are thankful that the fire was restricted inside the premises of the plant and did not escalate to an off-site emergency.” The ONGC plant will also become partially operational in two to three hours, The official said.
The stock is up 28.57% from its 52-week low of ₹51.8 hit on 13 March. The counter is 124% away from hitting its 52-week high of ₹149.65 on 4 November 2019.
ONGC’s 1QFY21 oil and gas sales were in line with estimates along with net crude oil price realization, thus resulting in in-line revenues. However, lower other expenditure led to an EBITDA beat during the quarter.
Offtake of crude oil by refineries from ONGC was not affected. However, there was a reduction in gas production due to less off-take by some customers, which has now been restored to normal levels.
Production guidance in FY21 for oil stood at ~22.7mmt and for gas at ~24.9bcm.
OPEC+ managed production cuts well (in line with demand), as various economies globally came out of the lockdowns. Thus, crude oil prices hovered around ~USD45/bbl over the last two months. Starting Aug’20, OPEC+ also eased production cuts by 2mnbopd (to 7.7mnbopd).
Global demand is expected to reach ~97% of pre-COVID levels in the next quarter (Oct-Dec’20). We have built-in a crude oil price forecast of ~USD45/bbl for 2HFY21 and we expect prices to remain stable around current levels in the medium term.
ONGC has guided that the KG basin will see some delay in production as many vendors have enforced force majeure. Despite the domestic gas price ceiling declining, the KG basin’s production would not be impacted. Despite the delay, ONGC is expected to grow its gas production in FY22E, with efforts to arrest the decline in oil production from age-old fields (accounting for 60-70% of the total oil production). Maintain Buy.