Best Oil Drilling and Exploration Stocks to Invest in Feb, 2026

What are Oil Drilling and Exploration Stocks?

Oil drilling and exploration stocks represent shares of companies engaged in locating and extracting crude oil and natural gas. These firms earn revenue through domestic production, exploration contracts, and government licensing.

India’s upstream oil sector, valued at over ₹1.5 lakh crore in 2024, is projected to grow at a 9% CAGR through 2030. Driven by rising energy needs and the goal to cut crude imports (currently 85% of demand), the government is pushing policies like HELP and OALP to boost domestic exploration.

Companies like ONGC and Oil India are investing in deepwater drilling, 3D seismic mapping, and green extraction technologies. Capex plans like ONGC’s ₹1 lakh crore investment signal long-term growth. 

Why You Should Invest in Oil Drilling and Exploration Stocks?

You should invest in Oil Drilling and Exploration Stocks for 3 main reasons. The reasons are Rising Domestic Energy Demand, Favourable Policy Push and Strategic Capex Expansion.

• Rising Domestic Energy Demand: India’s crude oil consumption is expected to rise from 4.9 million barrels per day in 2024 to over 6.2 million by 2030 (IEA). With over 85% of crude currently imported, upstream companies like ONGC and Oil India are expanding drilling operations to boost domestic output and reduce import dependency.
• Favourable Policy Push: The government’s Hydrocarbon Exploration and Licensing Policy (HELP) and Open Acreage Licensing Policy (OALP) simplify exploration rights and offer revenue-sharing models. Over 144 blocks have been awarded under OALP since 2018, accelerating private and public sector participation in deepwater and onshore drilling.
• Strategic Capex Expansion: State-run giants like ONGC plan to invest over ₹1 lakh crore in exploration and enhanced oil recovery (EOR) by 2030. These long-term capex moves reflect confidence in India’s upstream growth.

With oil prices firming and India’s energy security push, firms like ONGC and Oil India offer long-term value through robust reserves, policy backing, and scale-focused investments.

What is the Future of Oil Drilling and Exploration Stocks?

India’s oil drilling and exploration sector is gaining traction amid rising energy demand, import reduction goals, and supportive policies. The country’s oil consumption is projected to grow from 4.9 to 6.2 million barrels per day by 2030, while 85% of crude is still imported. To bridge this gap, the government’s Hydrocarbon Exploration and Licensing Policy (HELP) and Open Acreage Licensing Policy (OALP) have awarded over 140 exploration blocks since 2018.

Public sector giants like ONGC (₹5.8 lakh crore market cap in 2024) and Oil India are ramping up domestic exploration, including offshore and shale assets. With planned investments exceeding ₹1 lakh crore in enhanced recovery and deepwater drilling, domestic output is set to improve.

As India targets energy security and reduces reliance on imports, oil exploration stocks stand to benefit from policy reforms, rising crude prices, and large-scale capex commitments by firms like ONGC and Oil India.

What Factors Affect Oil Drilling and Exploration Stock Prices?

Oil and Exploration Stock Prices are affected by 4 main factors. The factors are Crude Oil Prices, Exploration Success Rates, Policy Incentives and Capital Expenditure Efficiency. 

• Crude Oil Prices: Higher global oil prices improve profitability. ONGC’s net profit surged 77% YoY in Q2 FY24 as crude averaged $90/barrel, lifting realisation per barrel to $85.
• Exploration Success Rates: Successful discoveries drive valuations. In 2024, Vedanta’s Cairn Oil & Gas reported three hydrocarbon discoveries in Rajasthan, boosting investor sentiment and reserve estimates.
• Policy Incentives: The Open Acreage Licensing Policy (OALP) has awarded 144 blocks to firms like HOEC and Oil India, ensuring faster approvals and lower royalties in difficult terrains.
• Capital Expenditure Efficiency: Companies with lean, tech-driven operations deliver better ROI. Hindustan Oil Exploration Company (HOEC) raised output by 18% in FY24 while keeping capex under ₹150 crore through brownfield expansion.

With Brent crude staying above $80 and India aiming for a 25% import reduction by 2030, explorers like HOEC, ONGC, and Vedanta stand to benefit from both volume growth and reforms.

What are the Advantages of Investing in Oil Drilling and Exploration Stocks?

Investing in Oil Drilling and Exploration Stocks is advantageous for 3 main reasons. The reasons are Energy Demand Growth, Policy Push for Domestic Exploration and Capital-Efficient Operations. 

• Energy Demand Growth: India’s crude oil demand is projected to rise from 4.9 million barrels/day in 2024 to 6.5 million by 2030. This supports upstream firms like ONGC and Vedanta, which are scaling exploration to meet future needs.
• Policy Push for Domestic Exploration: The government’s Hydrocarbon Exploration and Licensing Policy (HELP) and the Discovered Small Fields (DSF) rounds offer lower royalties and faster approvals. HOEC and Oil India have secured blocks in key basins under these reforms.
• Capital-Efficient Operations: Efficient capex use boosts profitability. HOEC grew production by 18% in FY24 while maintaining capex under ₹150 crore through cost-focused brownfield expansions.

With India targeting 1 million barrels/day of domestic oil output by 2030, low-debt, high-ROI explorers like HOEC, Oil India, and Deep Energy Resources offer strong long-term value in a volatile global energy market.

What are the Risks of Investing in Oil Drilling and Exploration Stocks?

Investing in Oil Drilling and Exploration Stocks is risky for  3 main reasons. The reasons are Policy Sensitivity, High Capex Burden and Global Price Volatility. 

• Policy Sensitivity: Exploration relies heavily on timely approvals under policies like HELP and OALP. Hindustan Oil Exploration Company (HOEC) faced delays in production ramp-up due to slow environmental clearances, affecting revenue timelines.
• High Capex Burden: Deep drilling projects demand massive capital with long gestation periods. ONGC invested over ₹35,000 crore in FY24, including the KG-DWN-98/2 deepwater block. Smaller firms like Deep Energy struggle to fund multi-basin expansion without external financing.
• Global Price Volatility: Earnings hinge on Brent crude prices. Cairn Oil & Gas (Vedanta) saw lower profitability in FY24 after a 15% decline in crude prices, despite maintaining output. This volatility makes forecasting returns challenging.

With high costs, policy reliance, and market swings, oil exploration firms like HOEC and ONGC must balance efficiency with resilience. Only those with strong reserves, integrated models, and low leverage are poised to withstand sectoral shocks.

When Oil Drilling and Exploration Stock Prices Go Up?

Oil Drilling and Exploration Stock Prices Go Up mainly due to 4 reasons. The reasons are  Crude Price Upside, Reserve Addition, Policy Incentives and Exploration Success.

• Crude Price Upside: Global oil price volatility directly impacts profitability. In FY24, Brent crude averaging over $85/barrel helped ONGC and Oil India report higher realisations and stronger quarterly results, pushing share prices upward.
• Reserve Addition: Stock valuations often rise when companies increase their proven reserves. Hindustan Oil Exploration Company (HOEC) added 15% to its reserves in 2023 through new drilling in the Cambay basin, lifting its market cap.
• Policy Incentives: The Hydrocarbon Exploration and Licensing Policy (HELP) offers pricing and marketing freedom to explorers. Vedanta’s Cairn Oil & Gas secured 41 blocks under OALP, boosting investor optimism due to large-scale potential.
• Exploration Success: Discoveries lead to rerating. ONGC’s deepwater find in the Krishna-Godavari basin is expected to produce 45,000+ barrels/day, increasing long-term earnings visibility and stock momentum.

With India aiming to reduce crude import dependence by 10% by 2030, firms like ONGC and Vedanta are ramping up domestic exploration. ONGC’s KG Basin success and Oil India’s expansion in Assam show that exploration-led reserve growth can drive long-term stock value.

When Oil Drilling and Exploration Stock Prices Go Down?

Oil Drilling and Exploration Stock Prices Go Down mainly due to 3 reasons. The reasons are Volatile Crude Prices, Policy Delays and Cost Overruns in Exploration.  

• Volatile Crude Prices: Global oil prices directly impact profitability. In FY20, crude’s fall below $30/barrel caused a 40% drop in ONGC’s net profit, triggering a sharp stock correction. Lower realisation per barrel reduces upstream revenues, making earnings highly cyclical.
• Policy Delays: Exploration relies on timely government clearances. Vedanta’s Barmer block expansion faced setbacks in 2023 due to delayed environmental and lease renewals, stalling capex and weighing on investor sentiment.
• Cost Overruns in Exploration: High upfront costs and uncertain yields make drilling risky. Oil India’s ₹2,000 crore capital expenditure in the Northeast faced delays and cost escalations, affecting margins and ROE projections.

With volatile crude pricing and execution risks, stocks like ONGC and Oil India remain sensitive to global trends and project hurdles. Investors should watch for timely policy support and disciplined capex management to mitigate downside risk in this capital-intensive sector.

What Role Does ESG Play in Oil Drilling and Exploration Stock Valuations?

Environmental, Social, and Governance (ESG) norms are increasingly influencing investor decisions. Firms with cleaner extraction methods and robust disclosure frameworks attract more institutional investment.

For instance, Oil India’s methane emission control plan helped it gain ESG index inclusion in 2023, improving long-term investor sentiment. ESG-friendly practices now impact both market cap and borrowing costs.

How Should Retail Investors Assess Oil Drilling and Exploration Stocks?

Retail investors should focus on production cost per barrel, reserve life index, debt levels, and diversification across blocks and basins. Firms with lower break-even points (like under $40/barrel), strong balance sheets, and steady output, despite global headwinds, tend to offer better downside protection. Comparing operating metrics across firms provides clarity on sustainable returns.