Oil India remains a preferred pick in the oil and gas sector, with rising oil and gas production, improving gas realisations and the expansion of Numaligarh Refinery providing multiple earnings triggers, according to Probal Sen, Oil and Gas Analyst at ICICI Securities.
Sen expects Oil India’s oil production to rise significantly, while gas output could increase by nearly 50% by 2027-28 as new infrastructure enables better monetisation. The NRL expansion is another key trigger, with most of the required capital expenditure already spent, which should also help moderate leverage over the next couple of years.“I think Oil India remains a preferred pick for us, very clearly,” Sen said.

Oil India’s April-June quarter of 2026 oil production run rate was around 0.95 million tonne, and the company is targeting about 1 million tonne per quarter. This would translate into roughly 4 million tonne annually, compared with average production of 3.2-3.3 million tonne in recent years.
Gas production, which has been weaker in the last few quarters, also offers an upside. Sen expects output to rise from around 8 mmscmd to nearly 12 mmscmd by 2027-28 . The additional gas could qualify for newer gas pricing linked to crude, potentially improving realisations compared with regular domestic gas.

The NRL expansion could add another layer of earnings growth. Sen estimates NRL’s earnings before interest, taxes, depreciation and amortisation could potentially reach ₹7,500-8,500 crore at a $25 refining margin, including the excise duty benefit. With most of the capex already spent, the expansion could also support better cash generation and lower leverage.
On crude prices, Sen expects the uncertainty around the Strait of Hormuz to keep prices elevated in the near term. He sees crude in the $90-$95 per barrel range for some time, although his full-year estimate remains lower at $85-$90 as he expects some resolution in the second half.“$90 to $95 is I think something that will persist for a period,” Sen said.

The outlook for refining margins is also strong because product markets remain tighter than physical crude markets. Around 2-2.5 million barrels per day of Russian refining capacity has been knocked offline following Ukrainian drone attacks, adding to pressure on global product supplies.
However, Indian refiners may not fully benefit from the exceptionally high theoretical margins. Export taxes and negotiated pricing between refiners and oil marketing companies are likely to keep the effective margins closer to $12-$15, even though theoretical margins could be around $30.

For oil marketing companies, Sen expects the current trend to broadly continue. Strong refining margins should provide support, but weaker marketing margins and liquefied petroleum gas losses remain concerns. LPG losses were around ₹20,000 crore in the first quarter, according to Sen, equivalent to the entire LPG losses in 2024-25 and nearly half of those in 2025-26 .
If LPG availability remains tight, further losses could weigh on integrated profitability. Sen remains constructive on oil marketing companies , but sees them as a longer-term play, with FY27 earnings likely to remain under pressure. “This is now clearly a 12 to 18-month play.

FY27 earnings will be under varying kinds of stress,” he said. Among city gas distribution companies, additional gas allocation should benefit Indraprastha Gas and Mahanagar Gas , which have been facing pressure from higher reliance on short-term LNG.
Watch the full conversation hereGujarat Gas, however, faces a different challenge because of its dependence on industrial demand from Morbi. Morbi volumes have fallen as propane availability has improved, which could keep the stock sideways in the near term.

Sen, however, believes valuations have become attractive. Over a two-to-three-year horizon, he sees potential from 11-12% compressed natural gas growth and higher domestic penetration, although FY27 earnings could remain volatile depending on propane availability and its economics versus natural gas.
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