The oil & gas market consists of the activities of exploration, development, production, refining, storage, transportation and marketing of oil & gas. The total revenues of $76.3 billion was generated in India market in 2009. The total revenue reduced by 31.4% in 2009 with respect to 2008, wherein it had increased by 45.4% in 2008. A compound annual growth rate (CAGR) of 10.3% for the period spanning 2005-2009 was observed. The revenues for this industry segment is dependent on the global oil prices, thus there was a stark increase in 2008 and subsequent in 2009.
In terms of volume the market consumption increased with a CAGR of 4% during 2005-2009, to reach a total of 1.4 billion BOE in 2009. In 2009 the market volume increased by 2.3%. The performance of the market is forecast to accelerate, with an anticipated CAGR of 12.4% for the five year period 2009-2014, which is expected to drive the market to a value of $136.9 billion by the end of 2014.
One of the specific segments of the oil and gas industry is Oil Exploration and Allied Services. These companies provide exploration and well development services to the producers. They provide services in terms of testing, seismic analysis, data analysis etc. In India 16 companies are listed under this category.
There has been a steady rise in the total revenues with an annual CAGR of about 11.77%. The total revenue for the sixteen firms last year was Rs. 927 Crores ( an increase of 8.23% over last year).
The following graphs depicts the revenues of the industry has been increasing with almost in the similar fashion as that of GDP of India. The growth rate for the past four years are also showing similar trend.
Industry Structure and Performance
The oil and gas market primarily comprises companies which are usually large and highly vertically integrated. They operate at large economies of scale and benefit from it. The initial investment is also very high due to the requirement of highly technical equipments and machinery and skilled labor for the operations. Thus, presence of such powerful incumbents and the capital intensive nature of the industry raise the entry barrier very high.
2008 experienced increased demand for specialist equipment and services as commodity prices went very high which pushed drilling companies to explore commodities deposits previously deemed too costly, boosting suppliers revenues. However in 2009 the commodity prices fall drastically, and the future of the prices varies with opinion.
Threat of entry
Government Regulations and the entry and interest of the foreign players
Rivalry between existing competitors
Presence of Government firms and large firms
Pressure from substitute products
No other product available at the present price. As the renewable resource are developed or the oil prices increases, threat may increase
Bargaining power of buyers
Presence of high number of individual as well as institutional buyers
Bargaining power of suppliers
Requirement of the specialized equipments
Asian Oilfield Services Limited was started in 1992 with an aim to provide service to the oil and gas industry. Since the inception Asian Oilfield Services Limited has gained wide range of experience by executing several Seismic Data Acquisition, Seismic Job Services, Shot Hole Drilling and Up Hole Drilling projects. Market capitalization of the company has increased from Rs. 7.9 Crores in 2005 to Rs. 77.92 Crores in 2009.
The revenue has also increased to Rs. 72 Crores with an increase of 50% with respect to last year. The reported net profit has come down to Rs. 5.25 Crore from Rs. 9.96 Crores last year.
The EPS is Rs. 4.66.
The industry is capital intensive industry with requirement of lot of working capital at any given time. The company has high current assets with respect to the respective industry. The inventory turnover ratio for the firm is very high in the range of 1300 where in the industry average is about 14. Similarly, the fixed asset turnover ratio is about 3.5 times the industry average.
Debt Equity Ratio
The debt equity ratio of the company has come down to .08 wherein the average industry figure is 0.32. The decrease in 2009 was substantial as it came down from 0.24 to 0.08. Similar is the case with the long term debt, with the industry average at 0.14 and company at 0.08.