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Oil India
Our verdict on Oil India isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
Drilling plan for high potential areas like Barekuri and Sesabil. — target: 15 wells in Barekuri, 3-4 wells in Sesabil
“Specifically, in Barekuri, we are going to drill around 15 more wells in coming days. And in Sesabil, we are planning for another 3, 4 wells.”
Target to reach 4 million ton crude oil production and 5 BCM gas production. — target: 4 MMT oil and 5 BCM gas (+1 more commitment)
“Our target is to become a 4 million ton crude oil and a 5 BCM company, so that's our target... We will reach that 4 million ton target by the year '27.”
Natural gas production target for the current financial year. — target: 3,300 MMSCM
“3,300 for gas. That is our target now. Probal Sen: That is for this financial year, sir, right, FY '25? Abhijit Majumder: Yes, yes.”
Numaligarh Refinery (NRL) capacity expansion project completion timeline. — target: Mechanical completion by December 2025 (+3 more commitments)
“We are completing -- mechanical completion will be by December 2025. There will be some commissioning exercise that will be there, so it will take some time.”
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How durable is the business?
Crude oil production grew by 5.76% YoY to 3.359 MMT, the highest in recent years, driven by enhanced recovery techniques and new discoveries. (2 expanding across 1 engine)
“the company has continued to improve its crude oil production, which is higher by 1.4 percentage in quarter ended 31st December 2024 as 0.868 MMT vis-a-vis 0.856 MMT in quarter ended 31st December 2023.”
Natural gas production reached an all-time high of 3,182 MMSCM, though revenue was impacted by lower price realizations. (2 expanding across 1 engine)
“Natural gas production for quarter ended 31st December 2024 is marginally higher by 0.85 percentage at 0.829 BCM vis-a-vis 0.822 BCM for quarter ended 31st December 2023.”
The company is aggressively expanding its exploration footprint, acquiring 40,000 sq km of acreage and entering new basins like Mahanadi, KG, and Cambay (Gujarat). (1 expanding)
“Oil India Limited has been aggressively acquiring exploration acreages under the open acreage licensing policy bid round.”
NRL's profitability and revenue declined significantly due to a refinery shutdown and fire incident, though the expansion project to 9 MMTPA is progressing. (2 contracting, 3 expanding across 1 engine)
“Profit after tax of NRL during quarter 3 of financial year 2025 is INR385.36 crores vis-a-vis INR858.72 crores during Q3 of Financial year 2024.”
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Where does growth come from?
Management has reaffirmed 'Mission 4' (4 MMT oil) and 'Mission 5' (5 BCM gas) targets for FY27, noting that while FY25 targets are slightly lower (3.5 MMT oil), new drilling areas like Barekuri and Sesabil are expected to accelerate growth toward the long-term goal. (1 accelerating across 1 signal)
“Our target is to become a 4 million ton crude oil and a 5 BCM company, so that's our target... We will reach that 4 million ton target by the year '27.”
The company is aggressively expanding its exploration footprint, with acreage expected to nearly double from current levels following the award of OALP Round IX blocks. (1 accelerating across 1 signal, 1 leading indicator)
“over the past 4, 5 years, we have increased our exploration acreage by six to sevenfold... Our acreage will go up to more than 1 lakh square kilometers.”
The company has made a breakthrough discovery in the North Bank of the Brahmaputra river, opening a new frontier for production after 30 years of effort.
“after 3 decades of perseverance in the north bank of river Brahmaputra, it is for the first time that we have tested crude oil, in the sense that we have established a working petroleum system over there.”
Crude oil production is showing steady growth, with the 9-month performance (4.1%) significantly outpacing the single-quarter YoY growth (1.4%), indicating a strong cumulative trend despite natural field depletion. (1 steady across 1 signal)
“the company has continued to improve its crude oil production, which is higher by 1.4 percentage in quarter ended 31st December 2024 as 0.868 MMT vis-a-vis 0.856 MMT in quarter ended 31st December 2023.”
The Numaligarh Refinery (NRL) expansion is progressing steadily with physical completion reaching 78%, up from 70-73% reported earlier in the same period, with a clear target for mechanical completion by December 2025. (1 steady across 1 signal, 3 leading indicators)
“3 to 9 MMTPA capacity expansion of the NRL is concerned, that has already achieved about 70% -- more than 70% complete and physical progress has been made. And already around INR23,000 crores of capex has already been spent on this project till now.”
See the full cited Future Growth analysis of Oil India
What could break the thesis?
The risk is stable but remains a significant factor. Crude oil price realization decreased from USD 95.47/bbl to USD 83.03/bbl (a 13% drop), leading to a marginal decrease in crude oil revenue despite higher production volumes. (1 stable, 1 high-severity)
“average crude oil price valuation for Q3 financial year 2025 is $73.82/ barrel vis-a-vis $84.14 per barrel for financial year '24, which decreased by 12.27% for 9 months ended 31st December 2024.”
The risk is easing as the company achieved its highest ever total oil and gas production of 6.541 MMTOE. Crude oil production grew by 5.76% year-on-year, and natural gas production reached an all-time high, successfully arresting the decline from mature fields. (2 easing, 1 high-severity)
“However, as you have seen that there are huge challenges. Our fields are all depleting fields.”
The risk remains intensifying in terms of annual profit impact. NRL's Profit After Tax (PAT) dropped from ₹ 3,702.79 crore to ₹ 2,160.11 crore (a 41.6% decline) due to a refinery shutdown and a fire incident in the Hydrocracker Unit. (1 intensifying, 2 easing, 2 stable, 1 high-severity)
“NRL's gross refining margin during the quarter 3 of financial year '25 is $2.10 per barrel vis-a-vis $12.72 per barrel during quarter 3 financial year 24, and gross refining margin for the 9 months ended 31st December '24 is $3.61 per barrel vis-a-vis $13.12 per barrel for the corresponding period last year.”
The risk is stable as the company continues to expand its acreage in frontier basins. Domestic operating acreage reached 58,564.2 Sq. KM. Contracts for offshore drilling in Andaman are finalized to start in October 2024. (2 stable)
“But since the release of this no-go zone areas, Oil India Limited has taken a very aggressive and very calculated step in acquiring around 40,000 square kilometers of acreage just as an operator... we have signed a technical service agreement with TotalEnergies France for helping us in our exploration and development and understanding deep and ultra-deep offshore waters”
The risk is easing. The company commissioned several major pipelines (Kumchai-Kusijan, Lakwagaon, Nadua-Dikom) which reduced flaring and improved gas evacuation. However, low upliftment by major consumers still caused an opportunity loss of 297.257 MMSCM. (2 easing)
“But our expectation is that once the IGGL is commissioned, we'll scale up our production. We have plenty of gas there. The current situation doesn't quite prompt us to scale up our production, the moment the IGGL happens... this integration of their network will help us to send gas to all parts of the country”
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