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Shiv-Vani Oil & Gas Exp for Medium Term

September 29, 2007

ICICI recommends investment in Shiv-Vani Oil & Gas Exp for medium term [3-6] months with a price target of Rs 403.

Shiv-Vani provides services to ONGC, OIL, RIL, and Cairns India for on-shore exploration services. The company provides the entire value added services from seismic data acquisition through drilling. The growth of the company is a function of increase in the number of onshore block on offer for exploration and production. Under the New Exploration Licensing Policy – VI (NELP), the central government has invited bids for 55 exploration blocks comprising 25 onshore, 6 shallow water blocks and 24 deepwater blocks (beyond 400 metres). Only 18% of the total sedimentary basinals area has been explored so far. Huge potential is yet to be explored. Shiv-Vani has a 50% market share and is set to be one of the primary beneficiaries of the increase in the number onshore blocks on offer.

Shiv-Vani is sitting on an order book position of Rs 3,200 crore. Of this, Rs 1,000 crore pertains to a company in Oman and is spread over 15 years. The remaining Rs 2,200 crore, to be executed over the next 2 to 2.5 years is around 8x CY06 consolidated revenue of Rs 276.78 crore.

The stock trades at 11.37x its diluted CY08E EPS of Rs 29.56.Its foray into the offshore business could lead to a re-rating on the counter. The stock will be an outperformer with price target of Rs 403 over a 6-month time frame.

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