Jindal Drilling - Acquisition Of Rigs, Higher Charter Rates Provides Revenue Visibility: HDFC Securities
Significant increase in rig charter rates provides revenue visibility, better operating leverage and low valuations.
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HDFC Securities Retail Research
Jindal Drilling and Industries Ltd., a part of the DP Jindal Group, is a leading company in offshore drilling in India’s oil and gas sector for over 30 years. The company’s principal operating segments are offshore drilling, horizontal and directional drilling and mud logging services.
JDIL operates five Jack up rigs, six directional drilling sets (on average basis) and 22 mud logging units. The company owns rigs or takes rigs on lease from group companies and provides drilling services to upstream companies in Mumbai Offshore (Bombay High) region.
The company enters into charter hire agreement with Oil and Natural Gas Corporation Ltd., which is normally renewed every three years. On the back of strong demand of oil and natural gas and increase in oil/gas prices; the charter rates under renewal contracts saw a sharp jump thereby improving visibility of its topline and bottomline.
Acquisition of Jindal Supreme rig in Nov 2021 has been beneficial, as the hire charges associated with the rig will now not be borne by the company. JDIL’s management seems to be on right track with respect to its decision to acquire the rigs.
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