Oil and Natural Gas Corporation Ltd (ONGC) shares closed lower on April 12 as investors resorted to profit-taking after the stock surged nearly 6% in the previous two sessions.

ONGC surged in the past two days after the government accepted the main proposal of Kirit Parikh’s panel on the pricing of natural gas produced by Administered Price Mechanism (APM) fields held by public sector companies.

The APM gas structure could benefit the likes of ONGC as it has a base price of $4 and a cap of $6.5. A Motilal Oswal Financial Services report said that for state-run ONGC, the floor price was higher than the cost of production.

The new mechanism also guarantees a 20% premium on the gas production of new wells or the intervention of existing wells. That could be lucrative for companies like ONGC and Oil India Ltd.

ONGC declared it would spend billions of dollars on deepwater and ultra-deepwater exploration, even as the state-owned company’s oil and gas production declined.

The company plans to bid aggressively in an upcoming government auction to increase its exploration area from 1.63 lakh square kilometres to 5 lakh square kilometres by March 2026. The annual spending will rise to Rs 11,000 crore from Rs 7,000 crore to Rs 8,000 crore.

ONGC’s oil production has fallen to 16.88 million tonnes in the April-February period of the 2022-23 financial year from 20.8 million tonnes in fiscal 2018.

ONGC shares have been in the red for the past year, down nearly 7% on the BSE, but have returned 104% over the past three years.

On April 12, the stock closed down almost 1% at Rs 157.70 on the BSE.