Selan Exploration Technology currently produces about 2,75,000 barrels of oil every year from. Recently management has undertaken contour mapping of the Bakrol field where they say that they are trying to find sweet spots, which when drilled can have the potential to give 10 times more oil than what the current well is producing. So this means that the production has been more or less stagnant for the past one year but you may have one-two quarters where you may see the production going up significantly, you may see it doubling from the current levels in maybe two quarters because their current well gives about 10,000-15,000 barrels and 10 times of that would be about 1,00,000 to 1,50,000 barrels per well.
Now the reserves of the Bakrol field is about 75 million barrels (2P reserves), which translated into Rs 25,000 crore as against this the market cap of the company is just about Rs 650 crore. They have ownership of five fields, they are all proven fields. The company currently is not even exploiting 5% of the reserves of Bakrol oil field and the other four fields are still virgin.
Towards the end of the previous fiscalSelan Oilbegan drilling it’s first well in the Lohar, Gujarat Onshore field. Selan also intends to dig another 7 wells in Karjisan fields in FY11. The corporate has spent close to Rs 80 crore and nearly 2 years in mapping the unexplored fields for which it holds the licence to operate.The expectations from both Lohar and Karjisan are positive,and even though it may be speculative to count the chickens at this stage, the success of the first well at Lohar will lead to drilling ofanother 8-9 wells.
Theaim is to get around 1.25 to 2.5 lakh barrels of crude per annum from Lohar. This would effectively raise Selan’s Oil production to about 400,000 barrels in FY2012, including production from Indrora and Bakrol.
The other positives for Selan are:1) All proven fields… 2) zero debt…3)Rs 80 cr for drilling oil…4… survey completed…5. drillingcommencedin the lohar field… 6. Selanwill drill 10 oil wells this year… 7… seismic done with 3d.
Annualproduction from existing fields is 2.5 lakh barrel per year from 20 wells. With another 15 wells in 2 new fields production could begin to ramp up over the course of the year.For the moment, cash flows of Selan cover it for the cost of drilling new wells, but there is a likelihood that a foreign strategic partner may be brought in as Selan has discovered Shale gas in some fields, and the latest rock fracturing technology rests with a few US corporations.
Back of the envelope calculations indicate EPS for FY12 will be Rs 60-65 as production is estimated is4 lakh barrel, going upto EPS of Rs 115 in FY13 as production may reach 8 lakh barrels.