ONGC's Q2 Surprises: Mixed Results, Production Delays, And What Investors MUST Know!

Energy

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Updated on 12 Nov 2025, 03:10 pm

Oil and Natural Gas Corporation (ONGC) announced its Q2FY26 financial results, which were broadly in line with market estimates. The company reported standalone revenue of Rs 33,000 crore and an oil realization of $67.3 per barrel, reflecting a $3.2/bbl discount to Brent crude. Operating and net profits also met expectations. However, the much-anticipated production increase did not materialize as planned. Production stood at 9.97 million metric tonnes of oil equivalent (mmtoe), showing marginal growth but falling 1.5% short of estimates.

Management has revised its oil production guidance downwards to 19.8 million tonnes for FY26, though FY27 remains at 21 million tonnes. Gas production guidance for FY26 is also about 5% lower at 20 billion cubic metres (bcm), while FY27 guidance is maintained. The company plans to achieve Rs 5,000 crore in cost savings through optimization and targets 10 gigawatts (GW) of renewable capacity by 2030. Future growth drivers include increased output from the KG-98/2 field, Daman, and DSF-II projects, as well as New Well Gas (NWG), which is expected to command a price premium.

Risks include potential dry-well write-offs from increased exploration, though downstream subsidiary Hindustan Petroleum Corporation Ltd (HPCL) may benefit from strong refining margins. Unlisted subsidiaries ONGC Videsh Ltd (OVL) and ONGC Petro Additions Ltd (OPaL) continued to post losses, though OPaL's losses are narrowing.

Impact: While the stock saw an initial positive response, analysts remain cautious due to production delays and softer commodity price outlook. Key factors for future performance include sustained cost efficiencies, progress on KG-98/2, and clarity on gas pricing. The overall impact on the Indian stock market and ONGC's stock is moderate, with potential for short-term volatility due to guidance revisions, but long-term growth drivers remain.

Difficult Terms: Standalone revenue: Revenue generated by the company itself, excluding any subsidiaries. Oil realisation: The average price received by an oil producer for each barrel of crude oil sold. Brent crude: A major benchmark grade of crude oil used to price international oil markets. Upstream realisations: Income generated from the exploration and production (E&P) phase of oil and gas. Million metric tonnes of oil equivalent (mmtoe): A unit of energy used to measure the volume of oil and gas production. Quarter-on-quarter (Q-o-Q): A comparison of a company's financial performance between two consecutive quarters. Year-on-year (Y-o-Y): A comparison of a company's financial performance between the same quarter of two consecutive years. KG-98/2 field: A specific offshore oil and gas block in the Krishna Godavari basin, India, operated by ONGC. Barrels per day (bpd): A standard unit for measuring oil production or consumption. Million standard cubic metres per day (mmscmd): A unit for measuring natural gas production or flow rates. Capital expenditure (CAPEX): Funds used by a company to acquire, upgrade, and maintain physical assets. Billion cubic metres (bcm): A unit for measuring large volumes of natural gas. Gigawatts (GW): A unit of power equal to one billion watts, used for large-scale electricity generation capacity. New Well Gas (NWG): Gas produced from newly drilled wells, often associated with higher prices. Force majeure: An unforeseeable circumstance that prevents someone from fulfilling a contract. ONGC Videsh Ltd (OVL): The international upstream subsidiary of ONGC. Downstream subsidiary: A company involved in the later stages of the oil and gas industry, such as refining and marketing. Hindustan Petroleum Corporation Ltd (HPCL): An Indian state-owned oil and gas corporation, where ONGC is the majority shareholder. Dry-well write-offs: Financial charges incurred when exploration wells drilled do not yield commercially viable amounts of oil or gas. H1FY26: The first half of the financial year 2026 (April to September 2025). KG-DWN 98/2: Refers to the Krishna Godavari Deep Water Block 98/2. Gas pricing policy: Government regulations and mechanisms that determine the price at which natural gas is sold in the market. Rating: 6/10