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4 Oil And Gas Stocks To Buy After Recent Drop In Their Stock Prices

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Markets have had a decent correction in the last few weeks and with it, they have provided opportunities to buy into select oil and gas stocks. Here are 4 oil and gas stocks that you can buy for decent profits, picked from a recent report of brokerage firm, Emkay Global.

 

Rationale for buying these stocks

Rationale for buying these stocks

According to Emkay Global, despite perceived volatility in energy prices and margins, key parameters for Indian oil marketing companies and upstream companies are steady and they do not foresee any risk of core earnings downgrade.

"We do not anticipate major inventory losses for oil marketing companies in Q3FY22. For OMCs, benchmark GRMs in Q3 are up at USD5.5-6.0/bbl with a steady outlook till Mar'22. Accounting marketing margins on auto-fuels have risen to Rs9/ltr as prices have been frozen for 50 days. Diesel volumes have been a drag but would not impact much," the brokerage has noted.

Attractive on dividend yields
 

Attractive on dividend yields

Most of the oil marketing companies also tend to provide good dividends and this could mean steady dividends yields from these companies in the next few years.

Apart from this, according to the Emkay Global report, most of these stocks are currently trading at very low price to earnings multiples.

Current market priceTarget price
BPCL374510
Indian Oil110150
ONGC137185
Oil India175270
Brent remains volatile

Brent remains volatile

Brent saw volatility, with prices falling by almost USD20/bbl from the recent peaks due to omicron fears and the release of strategic reserves by major oil consumers amid rising OPEC+ output.

"Nevertheless, prices remain above USD70/bbl due to a deficit market and a sharp spike in global gas prices. We see limited downside risk to our USD75/70 per barrel assumptions for FY22/23. However, APM (domestic) gas prices would cross our estimate of USD4.5/mmbtu GCV in Apr'22, as the recent spike in NBP prices implies that the next revision will be to USD6.5/mmbtu+. Steady oil prices and higher-than-expected gas prices bode well for ONGC and Oil India. For every USD1/mmbtu change in APM price, ONGC/Oil India's FY23 standalone EPS will change by Rs2.4/Rs4.5 per share, or 10%/12%," Emkay Global has said.

Disclaimer

Disclaimer

The stocks mentioned above have been picked from the brokerage report of Emkay Global Financial Services Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

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