The Arbitration Panel constituted under the directions of Hon’ble Supreme Court has
pronounced the Award on 03 April 2025 in favour of the Company.
In view of the aforesaid Award of Arbitration Tribunal, receivables of Rs. 66.33 crores will be
adjusted against Other Financial Liabilities and balance amount of Rs. 100.42 Crore shall be
transferred to Profit & Loss Account, resulting in an equivalent increase in profit. The
Company is seeking requisite directions from appropriate Forum for implementing the Award
of the Arbitration Tribunal as referred above
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Can crude oil prices fall to levels of $40? Goldman Sachs says yes - CNBC TV18
All the jindal bulls. Crude has given a breakdown below 70. The breakdown target is 45 chart wise. The thesis of Jindal is broken with main antithesis playing out.
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This is what I wrote a few months from a big picture perspective. With oil below 60, many projects will face economic challenges and it also creates execution risk. If Jindal’s customers decide to postpone their drilling projects or put them on hold, there is nothing they can do about it, all the contracts notwithstanding. No small company will take their bigger customers to court for not honoring contracts. They need those big customers back when the cycle changes.
That said I’m still bullish about oil sector from long term perspective. But recovery in oil prices will not happen if current tariff situation is not resolved. Both US and China are the largest crude consumers and recession in any of them will be a bad news for oil related stocks.
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While I agree ONGC will continue exploration to reduce dependency on imports, they may use the global conditions created by lower oil prices and potentially increased rig supply to negotiate hard for lower day rate, when the next rig comes up for renewal.
For this to materialize, oil prices will need to be lower over a sustained period of time. Current fall seems like a knee jerk reaction to tariff war and if a few deals materialize over next 2-3 months, may well bounce back.
Having said that, the risk of oil price will always be there for Jindal.
Disc- invested.
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I am surprised, to see so many doomsday scenarios, in case one deal or even suspension of tariff, oil will move back . Just to remind, during Covid for 1 day, oil future was zero…commodity is like that only…
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Also India is net importer, and recent hydrocarbon bill was aimed at more exploration only. Also you need to understand 1 key change, Trump has junked all ESG theme. Trump’s focus on Traditional Fuel only…
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I didn’t use the word cancel. Said postpone or put on hold. There is a difference in case you don’t know 
From your assumption, I’m not sure if you understand the business process of an oil company. Every company has a field development plan which dictates how many wells they are going to drill in certain timeframe. That field development plan is based on certain assumptions of oil prices. And based on that schedule they sign contract with rig providers.
Now what happens if that assumption changes dramatically (and not mildly)? Company will review the drilling plans and try to optimize them. It’s very common practice in industry. During normal course of time, small fluctuations in oil prices don’t have any influence. But when you have a significant geopolitical event like the one is playing out today, an oil company won’t ignore that. Drilling schedules may get revised.
Not sure if you know but changes in drilling schedules don’t mean that company will stop ongoing operations, putting rigs on standby.
Price of any stock is a reflection of future cashflow that a company will be generating from its operations. So if market thinks those cashflows might get impacted prices will drop. The deep correction in current oil prices always create the fear that changes in drilling schedule may impact the execution for a service company (in this case Jindal).
Second thing delaying or putting on hold future drilling operation doesn’t mean a company like ONGC will start producing less as production comes from existing wells. That’s why you didn’t see any drop in crude production during covid because keeping the current wells open doesn’t really cost anything.
Stock is down 30% in response to severe correction in crude prices. So you need to ask yourself why it’s the case if crude prices didn’t have any impact on company’s execution, cashflow and orderbook.
I’m not predicting any doomsday or suggesting that all is over or Jindal is a bad stock…just explaining why stock prices are down.
Disclosure- I work for an oil field service company and am heavily invested in its stock.
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I can’t explain intricacies of oil and gas business here. Share you number and I will happily answer your questions.
The current fall in Jindal stock price is due to fundamental reasons. Once I have explained certain basics of the business I guess you might agree on some of the points I have raised.
Not everyone may have invested in stock on a long term basis like you have done. So I was just responding to some of the questions on this forum puzzling over recent fall after scorching rally since start of the year.
I agree with you that you have a long term goal then these corrections shouldn’t matter as long as your company is solid.
Disc- I work for one of the largest companies in this business and work with lots of global oil companies so just sharing my experience gathered over multiple boom and bust cycles.
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Here is my take
- Award of contract from ONGC have been minimal from October onwards. i am not able to find new contract awarded by ONGC. tender have been issued but no news of any order. Due to this, there is good availability of rigs which coupled with low crude price, gives ONGC upper hand in negotiation.
- it is possible that new contract may become even scarce as low crude prices will affect cashflows of exploration companies and there ability to do capex.
- For JINDAL situation may be slightly better as Rig about to be dehired is not significant in profit. Next Rig dehire is in May 26. Hopefully enough time for a rebound in conditions.
- Bigger risk is early dehiring of recently acquired Jindal pioneer. It has tentative work till dec,25. If there is delay in contract or not contract with ONGC will have significant impact on profitability.
Disclosure:Invested
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Although @Hemant_Kumar2 has already explained a lot about the nature of works in an oil industry, I would add / elaborate some points hoping it would help bring further clarity to the topic. Though not directly associated with any upstream company, i have several years of experience in downstream industry working for one of the largest PSU in both technical and contracts role.
Before proceeding, I would like to say that my comments below are not intended as investment advice on jindal drilling, ONGC, or any other company for that matter. They are an attempt to explain only the contractual conditions that are prevalent in this industry.
A contract / work order for services ( even materials in some cases) issued by a large PSU to any service provider has several layers of protection built into it for the issuer, as it should be. By this, what i mean is that to prevent large losses in case of any unpredictable / disadvantageous event in future, clauses are put into the contract beforehand. Drastic changes in oil prices, major change in government policy, huge currency depreciation etc are examples of such events. These clauses effectively have the power to alter the value of contract or even cancel it.
If you would go to the kotyark industries thread, you will get an idea. What’s happening with kotyark is an example of such an event where government policy is changing on biodiesel.
This in no way means that ONGC is going to cancel any tender or not going to issue new ones. All i am saying is that there exists ways in which they can do it. One would need access to the general conditions of contract document to know exactly what clauses are there. Again, refer kotyark industries thread where a massive order was recently cancelled by all OMCs.
Once such an action ( cancellation of agreement, delay in payment processing etc) is taken, the other company can always file a lawsuit. One may think that the bigger company ( say ONGC in this case) will try to avoid these lawsuits. However, the incentive (& punishment) structure of PSUs are very different. All lawsuits are filed against the company and very few against person specific. You may or may not win the case and Even when there is large a probability that the service provider company ( say jindal in this case) will win the case, it takes its own sweet time and the asset heavy nature of the industry severely punishes the company with idle assets.
Few people mistakenly believe that contractual obligations are something written in stone. They are not. This must be factored in any calculation leading to an investment decision to provide adequate margin of safety.
Disclosure: Not invested in Jindal, kotyark. Invested in Deep industry. No transactions in last 30 days. Not registered. Please do your own due diligence before investing anywhere.
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Thanks @Hemant_Kumar2 for detailed post. Very helpful to hear from someone working in the industry.
I fully agree Jindal Drilling is exposed to the risk of oil price fluctuations. It always will be.
However, the bigger risk for people who invested recently is that in recent times all positive developments (increased day rates in recent renewals, expectations of higher day rates in upcoming renewals) were all known to the market. Effectively very less margin of safety. The best time to buy Jindal Drilling was when the day rates were ~20K, but one would really need to track demand/supply of rigs closely and take a probabilistic call as to when day rates might reverse.
Investing is not easy. Is it?
Disc - invested
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Need support of industry experts for below query-
- I found a tender placement from ONGC for 4 Jack up rigs. What is found strange is that make of jack up rigs is specifically mentioned as 03 Nos Of Mlt Or Bmc And 01 No. Of F N Gl Type Jack Up Rig
Query-
- is it normal for explorer to specify a particular make? Wouldn’t it make other make jack up ineligible and thus reduce competition?
- Jindal only has Pioneer available for tendering. However it is of different type (KFELS). can they still participate in tender?
Thank you in advance.
Pioneer is not KFELS, it is Marathon LeTourneau Super 116E. ONGC typically specifies make of rigs and Jindal’s rig specifications are in line with what ONGC wants.
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my mistake. i was talking about jindal explorer.