Crude and gas production has been disappointing at best during the past three years. As per IIFL, the management has guided to 5.5% YoY increase in crude and 11% YoY growth in gas production for FY16. Following the commissioning of the BPCL cracker, the brokerage envisages a resumption of gas volume growth over FY16-17ii and builds in a modest 2% YoY growth in crude production over FY16-17ii.
Notwithstanding the above, OIL is trading at a lifetime low at 6.3x FY17ii EPS. Considering the soft crude price environment, IIFL envisages the company to report 15% YoY EPS growth in FY16ii. At 5.8%, the current dividend yield remains attractive. The company would benefit from the fact that MoPNG is proposing reduction in cess on crude production. The brokerage reckons that even a $5/bbl reduction can accrete Rs.7 to OIL's FY17ii EPS and thus sees a favourable risk-reward at the current price of the stock.