I had written a note about Selan exploration here. I will not repeat the analysis as the main thesis laid out earlier, still holds true.
The company is cheap from multiple perspectives – enterprise value per barrel of oil reserves, EV/EBDITA etc. However due to lack of timely clearances for drilling new wells, the production and profits have stagnated for the last few years. As a result, the stock price stagnated for a few years, before the recent run from the 200 levels to around 620 now.
In addition to the above disclosure, there is another very key variable which is showing an upward trend – development of hydrocarbon properties. This is the cost incurred by an oil and gas company to prospect for locations for new wells and then drill the well and complete it. The company has spent close to 80 Crs in the last four years in prospecting for new drilling locations.
We cannot be sure how many of these wells will be successful and when exactly they will come online. At the same time, the typical lead time from start of drilling to production of oil and gas varies between 6-9 months. So we are in effect talking of about 3-6 months of time for the oil production to ramp up.
This is not a core position
This is not a big position as i think it is risky for the reasons already detailed in my earlier post. Let me repeat the key ones
– The management provides the minimum level of commentary on the performance and outlook for the company. There are no interviews, quarterly conference calls etc. In effect short of speaking to the management directly, there are no publicly available sources of information. One is driving through a foggy windshield and being forced to make inferences based on published data
Please do not consider this to be a stock recommendation and do you own homework. Please read the disclaimer if you still have some doubts
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Stocks discussed in this post are for educational purpose only and not recommendations to buy or sell. Please contact a certified investment adviser for your investment decisions. Please read disclaimer towards the end of blog.
This company freely shares data in private 1-on-1 meetings with investors but refuses to do so with its investors through annual reports, website. These 'sophisticated' individuals and institutions, armed with this 'inside' info…oops 'analysis', then make money 🙂 Thats how it works…selective leaking of info.
Hi Rohit,Mailed you a report on one of the cheapest oil company globally.Regards,Excel
hi rohit,i would like to invest in elder pharma is it good decision or bad?
HI Rohit,Of late Selan Exp is going down one sided, almost a drop of 17% in last one month.Do you think it is still prudent to hold shares i mean has something fundamentally gone wrong.Will appreciate your views.Best Regards.