Treading on Oily Surfaces

Why invest?
Oil India has a domestic acreage spread over 88,927 sq km in over 62 oil and gas blocks. The company has most of its assets in the North-east which accounting for 100 per cent of its crude production and 90 per cent of its gas production. However, it faces similar issues like ONGC: sharing of ad hoc subsidy burdens and an administered gas price regime.

To move away from the over dependence in India, the company has been acquiring companies abroad in Libya, Gabon, Nigeria, Yemen, Iran and Egypt. OIL also acquired 3.5 per cent participating interest in a subsidiary of Venezuela's state oil company. Further, OIL could gain by as much as 16 per cent says Motilal Oswal if the gas price is hiked to $8.4/mmbtu.

Caution: After a recent 50 per cent purchase in the Russian oil block for $85 million, OIL with its $2 billion cash (as of Sep 2013) is reportedly looking at a 30 per cent stake in Murphy Oil Corp's Malaysia assets as well as Royal Dutch Shell's Nigerian assets. Another matter of concern is the possible local disturbances, in the North East, where the company has over 90 per cent of its reserves.

This article was originally published on July 02, 2014.