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SHIV‐VANI Oil & Gas Exp Ltd (SHIOIL)
Fundamental – BUY
• SHIV‐VANI OIL & GAS has evolved from an shot‐hole drilling services provider into an integrated
onshore oilfield service provider and now dominates the Indian upstream onshore services space
(especially sub‐segments like onshore seismic and drilling). Among domestic service providers,
SHIOIL owns the largest fleet of both onshore seismic (10 crews) and drilling (40 rigs) assets.
• SHIOIL is expected to be a key beneficiary in the Indian onshore services space, as industry activity is
buoyed by better hydrocarbon prices, pending NELP commitments and capex outlay by ONGC and
Oil India. Also, Crude oil (hovering ~USD 78/bbl) and natural gas prices (USD 4.6/mmbtu) have
gradually inched up, improving viability of exploratory and development drilling.
• SHIOIL has a robust order book of ` 32.0 bn (2.5x FY10 revenues) as on April 2010, ensuring revenue
visibility for ~2‐3 years. This could result in favorable earnings traction, with EPS expected to grow
36.6% to ` 59.9/share in FY11E respectively. With its recently expanded seismic and drilling asset
base, SHIOIL requires limited capital expenditure to execute its current order book. The company
has a tender book of ` ~30 bn, which could support order book accretion in future.
We are positive on SHIOIL’s long term outlook, given good revenue visibility, likelihood of impressive
order book accretion, and attractive valuations. Hence, we recommend Buy on SHIOIL with a
medium term target of ` 525.
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