Oil Producers & Service Providers Opportunities

Oil prices have fallen more than 60% in the global markets. Under $50 per barrel.

But oil companies have not gone down by 50%. Exception Cairn and Selan.

Oil services companies hve taken a fair beating.

Are there any opportunities in this space?

Cairn India is a cash generating company even if oil remains at $50. Also there is probable chances of good gas discovery, volume ramp up both in oil and gas production. Its a decent dividend paying company as well. The overhang is possibility of merger between sesa sterilite, Balco, Hzinc and cairn india.

However its a safe and deepvalue stock but for very long term.


There is Corporate Governance issue of low cost loan to group company.

[source: http://www.livemint.com/Companies/hX8GOMxKd1w6CHVZe57iJK/The-curious-case-of-Cairn-Indias-loan-offer.html]

As Kamlesh rightly pointed out, the Cairn’s valuation has taken a beating due to global fall in crude prices and the corporate governance issues. The possibility of merging of all businesses under single umbrella, results in cash rich, Cairn and Hind Zinc, to provide source of funds for Debt laden sesa group firms. all this leads to one conclusion, you need to be wary of Anil agarwal than Cairn.

Cairn could have been a great company if it was under its parent Cairn Plc.