Earnings Benefit from Royalty Reduction

Research evidence excerpt

Earnings Benefit from Royalty Reduction

India | Oil & Gas Exploration & Production

ONGC EquityMayResearch12, 2026

TARGET | ESTIMATE CHANGEEarnings Benefit from Royalty Reduction

The government has reduced the headline royalty on crude production from RATING BUY

nomination and pre-NELP JV blocks from 20% to 12.5%. It has also allowed PRICE INR294.00^

a higher cost offset on crude for royalty calculation, further lowering ONGC's PRICE TARGET | % TO PT INR360 (INR325) | +22%

royalty burden. Gas royalties are unchanged. We upgrade FY27/28 EPS 52W HIGH-LOW INR307.50 - INR228.80

4%/8% and maintain our Buy rating with a higher PT of Rs 360. ONGC FLOAT (%) | ADV MM (USD) 30.8% | 67.31

continues to receive the market price for crude. MARKET CAP INR3.7T | $38.8B

TICKER ONGC IN

Royalty rate cut is positive for upstream: The government has announced a reduction in the ^Prior trading day's closing price unless otherwise noted.

headline royalty rate from 20% to 12.5% for areas awarded on a nomination basis and for

blocks awarded to JVs prior to the New Exploration Licensing Policy (NELP). Thus, the effective

loyalty rate for these fields has come down by 560bps. This is to encourage investment in FY (Mar) CHANGE TO JEFe JEF vs CONS

exploration. Royalty rates for gas fields remain unchanged. 2026 2027 2026 2027

REV NA NA NA NA

Higher cost offset lowers royalty burden further: Earlier, royalty was computed on the "Well

EPS NM +4% +3% +17%

Head price," allowing limited cost offset. Now, the "Well Head price" is to be arrived at by

allowing a deduction of 20% of the sale price for nomination fields and 15% for all other fields.

2026 (INR) Q1 Q2 Q3 Q4 FY

Royalty calculations must be ex-royalty for all regimes. This is to further reduce the royalty

EPS -- -- -- -- 33.92