Oil India Q1 FY27 earnings beat as oil production outlook strengthens

Investment View and Target Price

PL Research maintained its Accumulate rating on Oil India following a stronger-than-expected Q1 FY27 EBITDA performance and an improved crude-production outlook. The broker raised its target price to Rs 511 from Rs 455, reflecting higher production assumptions based on quarterly performance and management guidance.

Q1 FY27 Financial Performance

Oil India's Q1 FY27 standalone net sales were Rs 79.6 billion, increasing 33.5 per cent quarter-on-quarter and 58.8 per cent year-on-year. Revenue exceeded PL Research's estimate of Rs 75.6 billion and Bloomberg consensus of Rs 77.8 billion.

EBITDA rose to Rs 40.8 billion, exceeding both PL Research's estimate and Bloomberg consensus. The EBITDA margin expanded to 51.3 per cent from 30.5 per cent in Q4 FY26 and 32.0 per cent in Q1 FY26, supported by higher revenue and lower other expenses and employee costs. PAT was broadly in line with PL Research's estimate and above Bloomberg consensus.

Production Performance and Crude-Output Outlook

Q1 FY27 oil production increased 6.6 per cent quarter-on-quarter and 11.4 per cent year-on-year to approximately 1.0 million metric tonnes, which was 5.6 per cent above PL Research's estimate. Gas production was 0.8 billion cubic metres, broadly flat quarter-on-quarter but down 8.5 per cent year-on-year and 2.9 per cent below the broker's estimate. The decline in gas production reflected periodic shutdowns at downstream customers, including BCPL, as well as seasonal weakness in tea-garden demand.

Total production increased 3.8 per cent quarter-on-quarter and 1.6 per cent year-on-year to 1.7 million metric tonnes. Management reported its highest-ever daily crude production of 11,017 metric tonnes per day on August 3, 2026, aided by well-intervention and workover activity.

Management expects to sustain oil production of around 1.0 million metric tonnes per quarter in FY27. It targets at least 3.9 million metric tonnes in FY27, more than 4.0 million metric tonnes in FY28 and potential production of 4.2 million metric tonnes by FY29 from its main producing areas.

• Oil India plans to drill 100 wells in FY27, comprising 42 exploratory and 57 development wells, compared with 74 wells in FY26.
• The company intends to increase annual drilling by around 10 per cent.
• Deepwater exploration in the Mahanadi and KG basins is progressing, with the first rig expected in June or July 2027.
• A fourth Andaman well is planned by December 2026 following a gas discovery in the third well.

Gas Evacuation and Production Guidance

Gas evacuation remains a constraint. Management expects a 200-metre pipeline link to the national grid to be completed in two to three months. Planned IGGL and DNPL connectivity could gradually add around 1.5 million standard cubic metres per day during FY27, followed by a further 2.5 million to 3.0 million standard cubic metres per day after the remaining infrastructure is commissioned.

Management guides for gas production of 3.8 billion cubic metres in FY28, with a significant increase expected from Q1 FY29 once the pipeline infrastructure is fully operational.

NRL Performance and Expansion

Numaligarh Refinery Limited, or NRL, remained strong despite Q1 FY27 throughput declining to 791.2 thousand metric tonnes from 808.1 thousand metric tonnes in Q4 FY26. NRL reported a gross refining margin of US dollars 36.0 per barrel, including around US dollars 2.0 per barrel of inventory gains and net of oil marketing company discounts, compared with US dollars 5.0 per barrel a year earlier.

NRL EBITDA rose to Rs 18.4 billion from Rs 15.1 billion in Q4 FY26, while PAT increased to Rs 13.1 billion from Rs 4.8 billion in Q1 FY26. The expansion project mechanically completed the CDU and VDU in Q1 FY27. Sulphur recovery unit commissioning is targeted for October or November 2026, with the remaining units expected to be completed by March 2027. Utilisation of the expanded 9 million metric tonnes per annum capacity is targeted at around 75 per cent by Q4 FY28.

Earnings Estimates and Valuation

PL Research raised its FY27E oil-production forecast by 7 per cent to 3.8 million metric tonnes and its gas-production forecast by 2 per cent to 3.2 billion cubic metres. FY28E oil and gas-production forecasts were increased by 8 per cent and 4 per cent to 4.0 million metric tonnes and 3.5 billion cubic metres, respectively.

The broker values Oil India's standalone business at 10 times FY28E adjusted EPS and adds the value of investments in NRL and other joint ventures. Its NRL valuation assumes FY28 throughput of 7.0 million metric tonnes per annum, values NRL at six times EBITDA and applies a 25 per cent holding-company discount. This implies a value of Rs 61 per Oil India share.

Key Risks

• Field conditions could affect oil production.
• Gas evacuation bottlenecks could constrain production and sales.
• Shutdowns at downstream customers, including BCPL, could affect gas offtake.
• Seasonal weakness in gas demand, including from tea gardens, could weigh on performance.
• Refinery-expansion execution and funding requirements remain risks.