Selan Exploration is into oil exploration. Though not a very big company, they produce about 3 lakh barrels of crude oil per year from their two operational blocks at Gujarat. Two more has already undergone 3i seismic studies and in my view, they should be operational in the next 6 to 8 months. Going forward, company should be able to ramp up production by about 50-100% in the next couple of years.
As for the financial position of the company, Selan Exploration is sitting on a cash balance of about Rs 100 crore. So they do not have to borrow any thing for this research and exploration survey activity. That translates into Rs 60 per share and if you see the financial performance for FY11, they posted an EPS of close to about Rs 18 with topline of about Rs 75 to 80 crore.
With the market cap of about Rs 550 crore and an enterprise value, if I knock out the cash held by the company, of about Rs 450 crore, and aided by the gradual upside we have been seeing in the crude prices, I think this can be a steady stock to hold in the portfolio. One can expect a price of about Rs 415 in the next 6 to 8 months time.
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