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Key Takeaways
Strong RRR, OINL expects strong oil, gas production growth
Oil India (OINL) posted impressive RRR of >1.6 over the past five years and low
finding and development costs of ~USD5.5/bbl in FY11.
The management's FY12 guidance is for 4% crude production growth to 3.76mmt
and 12% gas production growth to 7.2bcm. However the management expects oil
production growth to be better than the guidance suggests.
OINL looks for value buys
OINL's cash reserves of >USD2b gives it options for overseas acquisitions.
Since OINL's overseas E&P portfolio is more of exploration blocks, the company is
looking to acquire discovered/producing assets.
OINL has formed a JV with IOC for overseas acquisitions and it has tied up with GAIL
India to invest in overseas shale gas prospects.
OINL optimistic about exploration acreage
OINL's historical success rate has been 70% against the global average of 30%.
OINL expects the success rate to drop going forward. However, even on a conservative
basis if the rate were to fall to 30% OINL hopes to build strong reserves in its NELP
acreage.
Prioritizing drilling program, work hit in MENA region blocks
OINL's planned FY12 capex is ~INR32b, including 52% on exploration and appraisal,
27% on development and 11% on overseas projects.
On the international front, due to political instability, E&P work in Egypt and Yemen
has been stalled and OINL is prioritizing its drilling schedule based on prospects of
striking oil.
In terms of key exploration blocks, OINL will focus on blocks in the KG Basin, Mizoram
and Gabon.
OINL plans to drill 34 exploratory and 34 development wells in FY12 v/s 16 exploratory
and 25 development wells in FY11.
Valuation and view
The stock trades at 11x FY11 EPS of INR120.
We are positive on OINL in view of likely subsidy rationalization. Not Rated.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Strong RRR, OINL expects strong oil, gas production growth
Oil India (OINL) posted impressive RRR of >1.6 over the past five years and low
finding and development costs of ~USD5.5/bbl in FY11.
The management's FY12 guidance is for 4% crude production growth to 3.76mmt
and 12% gas production growth to 7.2bcm. However the management expects oil
production growth to be better than the guidance suggests.
OINL looks for value buys
OINL's cash reserves of >USD2b gives it options for overseas acquisitions.
Since OINL's overseas E&P portfolio is more of exploration blocks, the company is
looking to acquire discovered/producing assets.
OINL has formed a JV with IOC for overseas acquisitions and it has tied up with GAIL
India to invest in overseas shale gas prospects.
OINL optimistic about exploration acreage
OINL's historical success rate has been 70% against the global average of 30%.
OINL expects the success rate to drop going forward. However, even on a conservative
basis if the rate were to fall to 30% OINL hopes to build strong reserves in its NELP
acreage.
Prioritizing drilling program, work hit in MENA region blocks
OINL's planned FY12 capex is ~INR32b, including 52% on exploration and appraisal,
27% on development and 11% on overseas projects.
On the international front, due to political instability, E&P work in Egypt and Yemen
has been stalled and OINL is prioritizing its drilling schedule based on prospects of
striking oil.
In terms of key exploration blocks, OINL will focus on blocks in the KG Basin, Mizoram
and Gabon.
OINL plans to drill 34 exploratory and 34 development wells in FY12 v/s 16 exploratory
and 25 development wells in FY11.
Valuation and view
The stock trades at 11x FY11 EPS of INR120.
We are positive on OINL in view of likely subsidy rationalization. Not Rated.
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