Venezuela crisis fueling Indian oil stocks! RIL hits 52-week high; ONGC up 1% — Here’s why

Oil and energy firm shares began the week in green amid ongoing geopolitical concerns in surrounding South American oil producing nation, Venezuela. Reliance Industries Limited (RIL) soared 1% to its 52-week high of Rs 1,611.20 while other oil stocks also added up to 2% on Monday. The rise came even as global crude prices remained mostly flat due to supply surplus concerns.Hindustan Petroleum led the gains, rising 1.85% to an intraday high of Rs 508.45. ONGC advanced 1.16% to Rs 246.80, Indian Oil Corporation added 1.03% to Rs 168.79, and Oil India rose 0.47% to Rs 432.45. This follows the dramatic removal of Venezuela’s President Nicolas Maduro and his wife, in a large-scale US military operation over the weekend. The duo was transported to America where they will be facing many charges, including narco-terrorism and drug trafficking. US President Donald Trump has vowed to “run the country” until there is a “proper” transition of power, introducing fresh uncertainty for Venezuela’s oil industry and its international partners. ONGC is expected to remain under the spotlight due to its direct exposure to Venezuelan assets through its overseas arm, ONGC Videsh, which holds equity stakes in two projects in the country. Market interest has intensified amid speculation that a US-led restructuring of Venezuela’s oil sector could potentially unlock long-pending cash flows. Global brokerage house Jefferies, as cited by ET, said that ONGC may be close to recovering around US$500 million in unpaid dividends from its Venezuelan upstream investment. “ONGC has not been paid its share of dividends from production at San Cristobal, totaling more than US$500mn,” the brokerage said, adding that “with the US stepping in, ONGC may stand to recover these unpaid amounts,” subjected to a possible easing of sanctions and changes in control and marketing of Venezuelan crude. The unpaid dividends are linked to ONGC Videsh’s investment in the San Cristobal field. While the asset has been producing, the repatriation of profits has been blocked by US sanctions on Caracas, forcing ONGC to continue carrying the receivable on its books and leaving investors uncertain about when, or if, the funds would be realised. Jefferies said that any recovery from Venezuela would come in addition to ONGC’s existing cash generation. The company reported a consolidated net profit of Rs 571 billion in FY24, with free cash flow to firm of Rs 473.6 billion and a double-digit free-cash-flow yield. The stock is trading below book value, with a FY24 price-to-book multiple of 0.9 times and an earnings yield of 18.1%, according to ET. The brokerage also flagged potential upside from ONGC’s second Venezuelan asset. “It might also be able to develop the Carabobo field in Venezuela’s Orinoco belt; ONGC has an 11% equity stake in the field,” analysts wrote, adding that the stalled capital expenditure plans might be revived if operating conditions improve. Jefferies valued ONGC’s consolidated operations at 8.2 times its December 2026 forward earnings. The brokerage has maintained a ‘Buy’ call on the stock, setting a target price of Rs 310, which implies a potential upside of 28% from its last closing level of Rs 241.50.However, the brokerage warned, “lower Brent, lower crude/gas price realizations, and/or lower-than-expected production from KG 98/2 are key downside risks,” while identifying the potential US$500 million dividend recovery as a medium-term catalyst, ET reported. Another company under the radar is Oil India. The firm, through its wholly owned subsidiary, Oil India Sweden AB, owns 50% of Indoil Netherlands BV, which holds a 7% equity stake in Petrocarabobo SA, the joint venture behind Project Carabobo-1. Reliance Industries is also expected to remain in spotlight, as the company has been buying Venezuelan crude. However, reports in March last year said that it may halt such imports after the US announced a 25% tariff on countries purchasing oil from Venezuela. Indian Oil Corporation may attract attention as well, as its subsidiary, IOC Sweden AB, functions as an investment company for exploration and production projects in Venezuela, alongside a battery technology venture in Israel.Meanwhile, crude prices showed limited movement. Brent crude futures edged up 0.2% to $60.87 as markets weighed the US intervention in Venezuela against an OPEC+ decision on Sunday to keep oil output unchanged.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)