A company where growth and returns go hand in hand

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1 Breath to your Investment Tarun Aggarwal s Sanjivani Stock id- sanjivanistock@gmail.com July 21, 2011 CMP-Rs.305/- Target Price Rs.1000/- (Time Frame 3-4 yrs) Research report on Selan Exploration Technology Ltd. (BSE code & NSE code -SELAN) A company where growth and returns go hand in hand Background & Business of the company: Selan Exploration was incorporated in 1985 and come out with its IPO in the year The company is involved in onshore drilling for exploration of oil and gas. Business area of the company: Selan Exploration Technology (SELAN) is a private sector listed company, engaged in oil exploration and production since In the last two years, the company has also signed two more Production Sharing Contracts with the GOI for discovered oil fields in Gujarat. The company is engaged in the exploration of - Hydrocarbons, oil and gas. Future plan: SELAN has a Development Plan for drilling of additional wells in these blocks in the next 3 to 5 years. The Plan is intended to be executed in a phased manner and would involve large capital expenditures, to be funded through a combination of external borrowings and internal accruals. The

2 proposed external borrowings shall be drawn in various stages of completion of each phase. Infrastructure:- The company has allocation of 5 Oil/ Gas Fields by Government of India these are Bakrol, Indrora, Lohar, Ognaj & Karjisan. The company has 100% ownership of these fields. The company currently derives bulk of its revenues from BAKROL Oilfield. The company has aggressive plans to increase Oil production from the BAKROL Oil field by drilling new wells and would lead to significant ramp up in production in the coming years. Industry Prospects:- Government has awarded and signed a number of Production Sharing Contracts with Private Sector Oil Companies for Exploration Blocks under New Exploration Licensing Policy (NELP) and Coal Bed Methane (CBM) Projects. Further, the Government is expected to launch new E & P blocks under Open Acreage Bidding. This could result in expansion of the industry along with creation of new employment opportunities in the oil industry. The Private Sector with its Joint Ventures has contributed significantly in exploitation of existing oil reserves in the country with the striking of huge discoveries of oil and gas (onshore / offshore) within the Country. As a result, the domestic crude oil production is continuously improving with significant contributions of crude production from private operators, thus reducing foreign exchange outflow on crude imports. Oil sector, today, is one of the most prospective sectors where newer growth avenues for business and employment are opening up, nevertheless, crude oil still represents India's single largest item of import. Key management personnel: ROHIT KAPUR Held senior management positions with American Cyanamid Inc., a Fortune 100 Company, including General Manager of one of its worldwide subsidiaries. A graduate of Columbia College (BA) and Columbia Business School (MBA), he has

3 been actively involved with SELAN since its inception; Chairman of Board of Directors of SELAN. D. J. CORBISHLEY Dr. Corbishley began his career with Shell in 1971 and has spent over 30 years with them in various countries including most recently as Managing Directors of Shell India for five years. Dr. Corbhishley has a Ph. D. from the University of Durham; Corporate Advisor with SELAN. P. TRIVEDI Dr. Trivedi is a Natural Science post graduate from Mumbai University and has had 20 years of experience as Advisor / Consultant in various fields such as Project Management, Development Finance, Valuation of Private Equity, Wealth Management and Investment Advisory services. He has also held Senior Advisory and Management positions at SELAN since 1995 and contributed successfully. SHIV KAPOOR Mr. Kapoor has over 20 years of experience, including 15 years with Schlumberger, a leading global oilfield service company and Transocean, a leading global offshore drilling company. A fellow member of the Institute of Chartered Accountants in England and Wales, he has recently launched MaxKapital, a proprietory business providing strategic advisory services; Head Strategy Development of SELAN. Financials: The company has been given out good numbers for the past few quarters & reporting a sustainable growth and Profits compared to corresponding quarters of the previous years. For the full year, the company has reported topline of around Rs.71 crores and a Net Profit of around Rs.32 crores resulting in an EPS of around Rs The promoters hold roughly 42% of the Equity and the company is TOTALLY DEBT FREE. Selan Exploration Technology Ltd.Latest Result [INR-Crore] Quarter Ended Year To Date Year Ended Description Var% Var% Var% Sales

4 Other Income PBIDT Interest PBDT Depreciation PBT TAX Deferred Tax PAT Equity Latest Developments:- Production Sharing Contracts (PSCs) with the Government of India were signed by SELAN in 1995 for Bakrol, Indrora and Lohar oilfields. Further, the Company was also awarded Contracts for the Karjisan Gasfield and the Ognaj Oilfield with the Ministry of Petroleum and Natural Gas (MoPNG) in Now, The Company is in the process of executing elaborate plans for the development of its oil and gas fields. This is expected to increase the production of crude oil / gas by implementation of the new technology coupled with services of experienced professionals for managing its oil and gas assets. As a part of Field Development initiatives and to monetize the assets, the company has started drilling oil wells in its fields at Lohar and Ognaj. We believe

5 that the company would start drilling wells in Karjisan and Bakrol fields in due course. Conclusion: We believe that good times have just started for Selan the company over the past few years spent close to Rs.80 crores as expenditure for 3D Siesmic Studies in all its Fields. The company is expected to now monetize its various oil & gas fields to significantly ramp up its production. We believe the next 3-5 years could be the period where growth happens exponentially for the company leading to multiplication in its production. The production of oil which currently stands at 2.38 lakh barrels we believe has the potential to reach 10 lakh barrels over the next 3-4 years, signifying quadrupling of production from the current levels. We feel it is only a matter of time that more Institutional Investors, both domestic and foreign get interested in the stock. However, as always they would start buying after there is a substantial news flow from the company by which time the market cap of the company would already have gone up substantially from the current levels. Institutional Investors being custodians of public money like to play it safe and invest only after they get fully convinced about the visibility of future earnings. Risk Takers however can accumulate the stock at the current levels and hold on/ add more in case of a decline in the price. We believe that the stock is a potential multibagger. Tarun Aggarwal is an equity analyst and investment consultant based at New Delhi, INDIA. At the time of writing this article, he, his firm and dependent family members donot have a position in the stocks mentioned above. The author, his firm or any of his dependent family members may make purchases or sale of the securities mentioned in the report while the report is in circulation. The author invites readers to send him and welcomes comments, feedback & queries at sanjivanistock@gmail.com This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice.

6 Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.

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