Upstream oil companies such as ONGC and Oil India are looking at greater margins as the price of crude oil climbs over $60 a barrel.

Speaking after the second quarter results of the current financial year, ONGC Chairman and Managing Director, Shashi Shanker, had said that rig hiring contracts recently signed during the $30 a barrel crude oil price time are coming to the company’s benefit.

“Margins are going to better now. We have hired jacked up rigs for as low as $30,000 a day. This used to be close to $100,000 a day when crude price used to be higher,” Shanker told BusinessLine .

An ONGC statement said that net realisation of crude oil from nominated fields stood at $51.22 a barrel during the second quarter of this financial year. This was 6.9 per cent higher than the realisation during the corresponding quarter of the last financial year.

Shares of ONGC on the exchanges have also been responding positively to the crude price movement. From ₹129.03 a share during February 2016, the company share prices have risen to ₹193.80 a share. This corresponds with the crude oil price recovery from its $30 a barrel levels to the current $60 a barrel.

Even Oil India’s share price has also been rising. From February 2016 levels of ₹256 a share, OIL’s shares now trade at ₹375 a scrip on the BSE.

An OIL official said that the company has signed service contracts for a fourth of what they used to cost. He said, “The rig hiring companies had nowhere to go during that time and we had hired jacked up rigs for as low as $25,000 a day on term contracts. This is a price that was unthinkable two-three years ago.”

But uncanny benefits of a low crude oil price scenario for an upstream company do not end here. The official added, “We now know that these rig service companies can operate at much lower prices. This is a benchmark we will keep when negotiating for future contracts.”

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