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We recently put the following chart together that shows just how cheap and high quality Cairn Energy (CNE LN) is relative to the entire universe of independent exploration & production companies (E&P) with market caps above $250 million. In the chart, we used Cairn’s first full year of projected EBITDA at current oil prices, and used trough cash levels to calculate the EV. Not only is Cairn an outlier in that it’s the cheapest stock in the selected universe (and also high quality), but it’s holding in Cairn India is also half the valuation of the industry, despite having modestly better-than-median ROIC.
Independent E&P Industry Landscape
Notes: Data from CapIQ, includes all independent E&P Companies with a market capitalization greater than $250 million. ROIC defined as EBITDA / Net Tangible Assets. Size of bubbles = market capitalization in USD. Cairn’s valuation uses estimated EBITDA in the first full year of UK production at current oil prices as well as trough net cash assuming all exploration unsuccessful.
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