2 Undervalued Crude Oil and Natural Gas Stocks Trading Below Fair Value
- August 27, 2026
- Posted by: Kunal Singla
- Category: Market
Crude oil and natural gas sector PE varies by classification. ONGC trades at 6.5x. Jindal Drilling at 9.6x versus its own peer group.
Quick Answer
Two crude oil and natural gas stocks, Oil and Natural Gas Corporation and Jindal Drilling and Industries, are trading below their respective sector average price to earnings ratios while both post positive return on equity. ONGC is India’s largest state owned exploration and production company, while Jindal Drilling provides offshore drilling services to the broader industry. This gap between valuation and profitability is why these crude oil and natural gas stocks stand out on a simple sector screen, though a formal buy rating needs deeper company specific research.
India’s crude oil and natural gas sector remains closely tied to global commodity prices, exploration success rates and government policy on subsidies and pricing. Not every stock in the space trades at the same multiple. A screen of listed crude oil and natural gas stocks against their sector average price to earnings ratios surfaces two names still priced below that benchmark, a rare pairing of a giant state owned explorer and a smaller offshore services provider.
ONGC and Jindal Drilling and Industries both currently trade below their respective industry PE benchmarks, despite posting positive return on equity. This piece breaks down why each stock screens as undervalued, what the underlying financials show, and the risks that come with owning exploration and oilfield services companies.
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Why These Crude Oil and Natural Gas Stocks Screen as Undervalued
The crude oil and natural gas industry currently carries different average price to earnings ratios depending on sub-classification, reflecting the different risk profiles of exploration companies versus oilfield services providers. A stock trading meaningfully below its own peer group average, while still posting positive return on equity, is a reasonable starting point for a relative valuation screen.
Both companies below clear that bar relative to their own classification, though ONGC operates at a scale many multiples larger than Jindal Drilling, a distinction worth keeping in mind among crude oil and natural gas stocks that otherwise look similarly undervalued.
The table below lists these two companies alongside their current price, valuation multiple and return ratios.
| Company | NSE Ticker | CMP (Rs) | PE Ratio | Sector PE | ROE | Market Cap (Rs Cr) |
|---|---|---|---|---|---|---|
| Oil and Natural Gas Corporation | ONGC | 233.20 | 6.54 | 7.57 | 11.14% | 2,92,995 |
| Jindal Drilling and Industries | JINDRILL | 642.95 | 9.56 | 15.86 | 11.57% | 1,832 |
ONGC: India’s Largest Exploration Company
Oil and Natural Gas Corporation explores, develops and produces crude oil and natural gas across onshore and offshore fields in India. The stock trades at a price to earnings ratio of 6.54, below the sector average of 7.57, at a current price of around Rs 233.
Return on equity of 11.14 percent reflects steady profitability tied to crude oil realisations, supported by a debt to equity ratio of 0.47. On an EPS of Rs 35.61 and book value of Rs 295.52, the price to book multiple works out to 0.79, one of the lowest among crude oil and natural gas stocks generally.
Jindal Drilling: Offshore Services at a Discount
Jindal Drilling and Industries provides offshore drilling rigs and related services to oil and gas exploration companies operating in Indian waters. Its price to earnings ratio of 9.56 is well below its own peer group average of 15.86, at a current share price of around Rs 643.
Return on equity of 11.57 percent is broadly comparable to ONGC despite the much smaller scale, and the debt to equity ratio of 0.05 keeps the balance sheet close to debt free. On an EPS of Rs 66.13 and book value of Rs 628.10, the price to book multiple of 1.01 sits almost exactly at book value, a rare combination among crude oil and natural gas stocks of this size.
Valuation Snapshot: PE, PB and Dividend Yield
Beyond the headline price to earnings ratio, book value multiples and dividend yield highlight the different risk and reward profiles of these two companies. Both trade close to or below their own book value, a signal worth weighing alongside the earnings based discount.
| Company | Price to Book | Book Value (Rs) | Dividend Yield | Debt to Equity |
|---|---|---|---|---|
| ONGC | 0.79 | 295.52 | 3.11% | 0.47 |
| Jindal Drilling and Industries | 1.01 | 628.10 | 0.16% | 0.05 |
ONGC pays a substantially higher dividend yield, typical of large state owned energy companies, while Jindal Drilling carries far less leverage and reinvests more of its earnings. Both trading near or below book value adds to the case that these two names are priced conservatively relative to their asset base.
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Risks to Consider Before Buying These Crude Oil and Natural Gas Stocks
A discount to the sector average price to earnings ratio does not remove company specific risk for crude oil and natural gas stocks in a business highly sensitive to global commodity cycles.
Crude Oil Price Volatility
Realisations for exploration companies move directly with global crude oil prices, and a sustained decline can significantly reduce profitability even when production volumes hold steady.
Government Policy and Subsidy Sharing
State owned energy companies have historically been asked to share the burden of fuel subsidies during periods of high crude prices, a policy risk that can affect realisations independent of market pricing.
Exploration and Production Risk
Exploration success rates, reservoir performance and the pace of new discoveries directly affect future production volumes, and disappointing results can weigh on growth expectations.
Offshore Services Demand Cyclicality
Demand for drilling rigs and offshore services depends on capital expenditure plans at exploration companies, which in turn depend on crude oil price expectations, making order visibility for service providers such as Jindal Drilling inherently cyclical.
How to Track These Crude Oil and Natural Gas Stocks
Investors evaluating these two names should track global crude oil price trends, production volume data, and how each sector average PE moves relative to each company’s own multiple over time, rather than relying on the valuation gap in isolation among crude oil and natural gas stocks. Comparing these numbers regularly is the most reliable way to judge whether the discount to fair value remains intact or has already closed.
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Conclusion
ONGC and Jindal Drilling and Industries are the two crude oil and natural gas stocks currently trading below their respective sector average price to earnings ratios, while both post positive return on equity. That combination makes them worth a closer look for investors who already want exposure to India’s energy exploration theme, though crude price volatility and policy risk mean position sizing and diversification still matter when adding these names to a portfolio.
Disclaimer: Data and figures in this article are sourced from publicly available information. These may or may not be accurate. Please verify all data with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
FAQs on Undervalued Crude Oil and Natural Gas Stocks
Which crude oil and natural gas stocks are trading below their sector average PE?
Ans. ONGC and Jindal Drilling and Industries are currently trading below their respective sector average price to earnings ratios, based on live NSE and BSE pricing.
Is ONGC undervalued compared to its sector?
Ans. ONGC trades at a price to earnings ratio of 6.54, below the sector average of 7.57, while delivering a return on equity of 11.14 percent and trading below its own book value.
Why does Jindal Drilling trade at such a wide discount?
Ans. Jindal Drilling trades at 9.56 times earnings against its own peer group average of 15.86, reflecting the market’s cautious view of offshore drilling services demand, even though its return on equity of 11.57 percent is comparable to ONGC.
What is the market capitalisation of ONGC?
Ans. ONGC has a market capitalisation of around Rs 2,92,995 crore, with a price to earnings ratio of 6.54 against the sector average of 7.57.
Do these crude oil and natural gas stocks pay dividends?
Ans. ONGC pays a dividend yield of 3.11 percent, typical of large state owned energy companies, while Jindal Drilling pays a smaller yield of 0.16 percent as it reinvests more of its earnings.
What are the main risks in undervalued crude oil and natural gas stocks?
Ans. The main risks include crude oil price volatility, government policy on subsidy sharing for state owned companies, exploration and production uncertainty, and cyclicality in offshore services demand.
Is a low PE enough reason to buy an oil and gas stock?
Ans. A price to earnings ratio below the sector average is a useful starting screen for crude oil and natural gas stocks but not a standalone buy signal. Investors should also review production trends, reserve life and commodity price exposure before investing.
