Spot Rubber declines on Panic Selling: Very Good for Tyre Companies (Read, Vamshi Rubber Ltd):
Selan Exploration Completed Drilling in Oil Rich Cauvery Basin in January, 2007 and it is "Virtually Impossible" to think that it has not struck Crude Oil in its Wells; since it's operations are carrried out in "Proven Oil and Gas Fields":
Rumours of another Defence Deal for Premier Explosives becomes strong; the stock hits the Buyer Freeze:
[Updated on 19-02-07]
I am still out of station and is trying to do some updates from my friend's computer late at night.... Hope those who have paid heed to my call of not getting out of the markets and buying when the Indices fell by huge amounts have gained hugely. The pre-budget rally will continue with occassional Volatility....But Please keep holding ur positions in Selan Exploration Technology Ltd (SETL), as I am now almost certain that Crude Oil has been found in a number of its wells while drillig / renovation of abandoned wells in the Oil Rich Cambay Basin. As u must be aware that the company is carrying out developmental works in 10 (ten) oil producing wells in the Bakrol oil field which is estimated to increase the production by at least 500--600 barrels of oil per day (bpod). Additional Capacity will also come out from the Abandoned wells....
The Cambay Basin is an oil rich region and has been categorised as category I sedimentary basin, which essentially means that it is an established commercially productive region. In the past couple of years, operators like Niko Resources and Gujarat State Petroleum Corporation have discovered significant amount of oil and
gas in the Cambay Basin. Consequently, the management has initiated an aggressive plan to develop its oil fields in a phased manner. So if the company goes in for Renovation or Drilling in Cambay Basin, it is impossible to think that it has not found Crude oil. The company as mentioned earlier has COMPLETED DRILLING JANUARY, 2007.
It is thus only time when the company will COME OUT with official confirmation of the News of OIL FIND. Sources close to me said, "The company completed the drilling and exploration in January, 2007 and some good news is expected.....". The company is also thinking of starting production from some of its abandoned wells. A ramp up the production to around 500--600 Barrels per day additonal capacity in the next few months is also a biggest possibility.
The company expects the strong cash flows from the enhanced output to fund the development of its other oil fields. It is has already evaluated the seismic data of its recently acquired two oil & gas fields: Ognaj and Karjisan and GOOD NEWS IS EXPECTED IN THIS FRONT ALSO. The initial study indicates that there is scope for additional production by carrying out maintenance (or workover) drilling in some of the existing but abandoned wells.
Unlike its peers, SETL has not invested in exploratory blocks and all of its oil fields are located in the category I, sedimentary basin that has a track record of proven commercial production. This means that it is not exposed to the inherent risk associated with the exploration business UNLIKE ITS PEERS.
Over the past few years, the promoters have gradually hiked their stake by 7.5% through a reduction in the equity capital from a buyback of shares and an increase in the absolute number of shares held by them. This reflects the management's confidence in the business.
At an enterprise value (EV)/reserve of $0.7 per barrel of oil & oil equivalents (boe), the stock is trading at relatively much cheaper valuations as compared with the other domestic companies like Hindustan Oil Exploration Company (HOEC) and Oil and Natural Gas Corporation (ONGC). Globally, exploration and production (E&P) companies command a valuation in excess of $9---10 per boe of the estimated proven and probable (2P) reserve. The stock is expected to get re-rated with the commercialisation of additional wells and ramp-up in the production.
There have been some encouraging developments in (in SETL) the past few years in terms of the recovery of arrears from the government nominee and the settlement with the lending institutions. In February, 22, 2006, the company announced that, "Industrial Finance Corporation of India Limited (IFCI Ltd.) has accepted the OTS amount in the Delhi High Court in February 2006 and accordingly the Company has withdrawn the suit filed in the High Court and now IFCI Ltd. is in the process of withdrawing their claim in the Debt Recovery Tribunal.
It is to be noted that Minsitry of Petroleum and Natural Gas (MoPNG) and Selan Exploration Technology Ltd. (SELAN) had earlier signed a Production Sharing Contract (PSC) for the Karjisan gas field, located in Gujarat, on 16 February 2004.
Moreover, the continued firmness in Crude oil prices globally has also made the development efforts much more lucrative and viable. Consequently, the management has initiated an aggressive plan to develop its oil fields in a phased manner.The Scrip according to me is now headed towards the Rs.500 mark......as starting from FY-2006-07 to 2008-09, the company's EPS would take a quantum jump, due to these new developments.
Premier Explosives Ltd is on the verge of getting another contract from the defence according to the sources close to me...The company has applied for a number of tenders in the defence department. The company will get huge benefits from the overseas joint ventures and also from the value unlocking from selling the assets of the mushroom divison. Also the company has a number of factories in Maharastra, Andhra Pradesh and Madhya Pradesh whose real estate value is tremendous. The stock is headed towards Rs.80--Rs.90 mark.
Vamshi Rubber Ltd is close to finishing the expansion in its 4 acres of Land in Hyderabad. The company off-late has considerably ramped up its marketing and Franchisee networks. The most striking part of the company is that it is able to pass on the increased cost of raw materials to the end users. The last quarter results were simply excellent. The Rubber Prices have started to fall: Please read the news below:
Spot rubber declines on panic Selling:
The Hindu Business Line--->16-02-07
Heavy declines in trend setting Japanese markets hammered domestic rubber prices on Thursday. According to reports, TOCOM hit the lower circuit in its five out of six contracts on speculative selling and bull liquidation mainly following an accelerated bear spell in oil products futures.
The physical market lost moderately on buyer resistance amidst selling from traders who rear further fall in prices. RSS 4 declined to Rs.96 and Rs.96.5 a kg respectively at Kottayam and Kochi from Rs.97.5 a kg on Wednesday. The trend was visibly bearish as all major grades including latex lost lacking buying interest.
Futures Weak: The futures market fell further on NMCE. The last traded prices for February contract was quoted at Rs.94.50 ( Rs.97.90), March at Rs.97.65( Rs.99.56), April at Rs.102.73( Rs.104.15) and May Contract at Rs.107.49(Rs.108.99) a kg for RSS 4.
Keep holding Noida Toll Bridge Ltd and Sarda Plywood Ltd......This much for now, till I return back to my work desk......
Best wishes,
Suman Mukherjee
India
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