So here is the write-up on the OIL / say my investment thesis - Not Invested
So the Narrative first
Positives : -
One of the only 2 listed OIL exploration / up-stream oil companies in India. The other one is NIFTY stock - ONGC. Though the Indian Govt is hell bent on reducing oil dependence through SOLAR / WIND / HYDRO energy, oil is still a MUST for any country. And if it’s produced within the country, whatever small amount is always welcome. So the company will always have the GOVT support.
Oil is situated in NE region of INDIA. And due to geo-political reasons, GOVT will always push to protect & develop that area. But also being in the NE region, this exposes potential terrorist activities.
About oil, what people don’t realise is that almost 70-90 % of chemicals / plastics / pharma drugs / agrochemicals are STILL produced from oil. So not only is it essential, but it’s also indispensable / irreplaceable.
No country can afford to lose such an asset by any means.
Being a PSU, good dividend yield.
Negatives: -
This is a very capital intensive business.
You have to find the wells, dig them to know their potential, then finalise which ones to drill and then transport the crude and REPEAT. All this is very CAPEX heavy.
Another major negative for the market is its PSU. So not at all investor friendly. Govt. may keep on diluting its stake which will cause regular oversupply in the market and hence no price appreciation.
Being a PSU, Govt squeezes every penny out of it through dividends. And even if you earn more from increased oil prices, it will put the WINDFALL TAX on you.
The most important negative is Oil being a commodity, it’s hard / nearly impossible to predict its future movement.
Now Numbers
Recent Golden crossover in technical term.
This is what surprised me the MOST. Check these numbers. They are great considering such a cyclical industry.
Check the FLOAT.
Now PE RATIO
p/b ratio
p/s ratio
So all these parameters are trading at near all time low.
So it looks like a safe bet , the way Mohnish Pabrai says - Heads I win, Tails I don’t lose much.
All are my personal opinions.
I am just tracking it & not invested as of today.
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