Jindal Drilling

Jindal Drilling & Industries Ltd. reported a robust Q3 FY25, with revenue improving by 39% to INR254 crores compared to Q2 FY25. EBITDA saw a significant increase from INR31 crores to INR81 crores, while PAT surged from INR16 crores to INR49 crores. Consequently, EPS rose from INR5 per share to INR17 per share. This strong performance was primarily attributed to the deployment of the Jindal Supreme rig, and the standalone EBITDA run rate from December '24 is expected to serve as a base for the next 4-5 quarters.

A key driver for the Q3 FY25 results was the deployment of the Jindal Supreme rig with ONGC, which commenced operations on October 15, 2024. The rig operated for 75 days in the quarter, contributing materially to the improved financials. Management expects the full impact of Jindal Supreme's 90-day operation to be reflected in Q4 FY25, projecting higher revenue than the INR239 crores reported in Q3 FY25, further enhancing the company's earnings.

The company is in the final stages of acquiring Jindal Pioneer, a rig currently owned by a joint venture, for a purchase price of $75 million. This acquisition, for which shareholder approval was obtained in March 2024, is targeted for completion within the current quarter (Q4 FY25). The delay has been attributed to navigating regulatory requirements and obtaining customer consent for the change of ownership, with the company currently seeking legal opinion on the matter.

ONGC's recent press release on January 9, 2025, announcing the hiring of BP Exploration (Alpha) Limited to enhance production from Bombay High, was highlighted as a strong positive tailwind. Management views this as a clear indication of ONGC's intent to increase exploration activities and capital expenditure in the oil and gas sector. The broader oil and gas industry is perceived to be in a prolonged up-cycle, potentially longer than previous cycles, driven by global political shifts favoring increased drilling operations.

Jindal Drilling currently operates five offshore jack-up rigs with ONGC and provides mud logging and directional drilling services. The company's long-term strategy involves gradually consolidating rented rigs into Jindal Drilling's ownership, having successfully acquired two rigs in 2019 and 2021. This approach aims to create value by bringing technically known and efficient assets under direct control, while also being open to acquiring suitable rigs at competitive rates from other markets, provided it makes economic sense.

The company's net cash position significantly improved, doubling from INR51 crores to INR101 crores over the last nine months. As of December 31, 2024, gross debt stood at INR156 crores, with cash available at INR257 crores. This strong liquidity position is being conserved to fund the acquisition of Jindal Pioneer, which is expected to be a cash transaction. Management confirmed that the Jindal Pioneer rig itself carries no debt.

The contract for Jindal Explorer is set to conclude in May 2025, with a decision on its extension or de-hiring expected by late March 2025. Tendering for a new contract has been submitted, and management noted that even if de-hired, a 6-month gap would be needed for refurbishment. Refurbishment, a major overhaul required for safety and contract compliance, typically takes 4-6 months and is necessary to meet certifying agency criteria for continuous 24/7 operation over a three-year period.