SHIV VANI OIL stay invested

ONGC order to fuel growth

Shiv-Vani Oil is India’s largest services provider for onshore exploration and production activities and is currently operating 32 rigs. It is the largest seismic data operator and also the largest operator of land breaks in India. Its financial performance for the first quarter ended 30^th June 2008 can be termed as flat. Maintaining its operating expenses and lowering interest and depreciation outgo helped shore up its bottomlines.

Consolidated net sales rose 6% and EBITDA by 9% but lower interest and depreciation outgo led to the PBT rise by 27%. Tax outgo rose 92% and this dented the PAT growth a bit, it was up 14% at Rs.36.30 crore.

The stock price surged in August after the company said it secured a contract worth Rs 1610 crore from Oil & Natural Gas Corporation to deploy eight onshore deep drilling rigs. With this contract, the company’s order backlog stands over Rs 4500 crore executable over a period of three years, except an order from Oman worth Rs 800 crore, which is executable in 11 years.

Shiv-Vani has already placed the order for the rigs, and will mobilise the order within seven months. The exploration projects are scheduled to start towards the end of the current fiscal year. The eight rigs will include one 3,000 hp rig that is understood to be the largest onshore rig used in India. The remaining seven would be in the 1,500-2,000 hp range.
Two rigs will be deployed in Tripura, four in the Sivasagar asset in Assam, and two in the Rajahmundry asset in Andhra Pradesh, which includes the prolific Krishna-Godavari Basin.

This fiscal would be good for the company but the full benefit of the ONGC order would start accruing by FY09. Currently quoted at Rs.567, stay invested.
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