Oil Drilling and Exploration stocks Alphageo india Aban Offshore Shiv Vani Oil Jindal Drilling Dolphin Offshore

Oil demand growth may increase

About crude oil -
Crude oil is used to produce petrol, diesel, kerosene etc. The current international price of Crude oil is at $77, it was at $149 in the year 2008 and low at approx $35 in the year 2009.

The rising crude oil prices increases the revenues and profits of oil drilling and exploration companies (companies used to find all and to dig all from oil wells).

According to top world’s analyst, the analysis they made is growing world oil use will increase in coming years, vanishing the huge Crude oil stocks buffer which have done by most of the countries during the economic crises.

According to a Reuters poll of ten top oil-tracking analysts and organizations, oil demand is predicted to rise 1.3 million barrels per day (bpd) next year to 85.9 million bpd.

At the same time, the rise in production from outside the Organisation of the Petroleum Exporting Countries(Opec) and output of natural gas liquids (NGLs) from Opec members is seen growing by just 8,00,000 bpd in total.

“The key question for prices is supply,” Barclays Capital analyst Costanzo Jacazio said. “2010 is really a bridging year - if the economies continue to perform as well as they have been doing during the early stages of the recovery, then I think by 2011 we will be seeing the demand number at or above where they were in 2008.”

Non-Opec output is seen averaging 51 million bpd in 2010, up from 50.8 million bpd, while Opec output of NGLs - which are not subject to the producer group’s production quotas - are expected to rise to 5.6 million bpd, up more than 20 per cent since 2008.

If Opec members can maintain current adherence levels to present output quotas, with group output including Iraq assessed around 28.9 million bpd, crude oil inventories could fall by almost 150 million barrels next year.

Taking into consideration above scenario investing in oil drilling & exploration companies will provide good returns in next 3 to 5 years.

Please Note -
1. According to our analysis, markets are trading at higher valuations so some profit booking in coming months cannot be ruled out. So in such scenario it is advisable to buy stocks in steps and keep adding as the stock price comes down.

2. Due to posting of good financial results, there are high probabilities that the stock price may go up before mentioned duration periods so it is recommended to book profits as and when required instead of waiting for mentioned duration period.

Following are few researched stocks,

Alphageo India
Current Price - Rs 199
Market Capital - Rs 118 crore
PE ratio - 10.52
EPS - 18.99
Expected Returns - 50 to 65%
Holding Duration - 2 to 4 years

Aban Offshore
Current Price - Rs 861
Market Capital - 4853 crore
PE ratio - 13.36
EPS - 64.46
Expected Returns - 50 to 70%
Holding Duration - 2 to 4 years

Dolphin Offshore
Current Price - Rs 294
Market Capital - Rs 521 crore
PE ratio - 9.95
EPS - 29.58
Expected Returns - 50 to 70%
Holding Duration - 2 to 4 years

Jindal Drilling Industries
Current Price - Rs 479
Market Capital - Rs 1241 crore
PE ratio - 13.1
EPS - 36.6
Expected Returns - 60 to 70%
Holding Duration - 2 to 4 years

Reliance Industries Ltd
Current Price - Rs 1062
Market Capital - 350518.72
PE ratio - 21.45
EPS - 49.55
Expected Returns - 60 to 70%
Holding Duration - 2 to 4 years

Cairn India Ltd
Current Price - Rs 314
Market Capital - 57307.59
PE ratio - Company is new and not yet started to announce the results.
EPS - Company is new and not yet started to announce the results.
Expected Returns - 50 to 60%
Holding Duration - 2 to 4 years

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