Aban Offshore: Huge write-offs and a rig loss will put pressure on the company's operations
In FY09 Aban wrote off a Russian rig, booking roughly Rs 200 cr in losses. In FY10, it has lost Rs 75 crore on currency, written off investments in a bankrupt Norwegian outfit, and finally lost a Rs 1200 crore rig into the waters off Venezuela.
It is obvious like so many other Indian companies, Aban has failed to show any ability run global drilling operations. The debt equity now stands at 7, and the corporate will need a bail-out just to survive if not an outright sell-off by the promoter Reji Abraham.
With a debt-equity ratio of around 7:1, payment of debt with reduced revenues increases concerns. The company has announced that it will be raise Rs 4,407 crore through a mix of debt and depository receipts. This will entail an equity dilution and put further pressure on its share price. Claiming insurance for Aban Pearl can be a long process. Therefore, the company will take some time to mend before it cruises into calmer waters.
Aban Offshore seems to be hit by the fury of the weather gods. In the fourth quarter, when strong fleet utilisation pulled revenues up by 32 per cent to Rs 1,020 crore, beating market expectations, operating profit margins fell 294 basis points to 52.78 per cent due to the exchange rate fluctuation loss of around Rs 74.36 crore.
This was despite a 25 per cent year-on-year increase in earnings before interest, tax, depreciation and amortisation (Ebitda) to Rs 538.91 crore.
The company also had to provide another Rs 120.52 crore as a write-off related to Petrojack, as the Norwegian company (in which Aban had 18 per cent stake) filed for bankruptcy. The net profit fell 56 per cent on a year-on-year basis to Rs 39.26 crore.
For the whole year, revenues grew 10 per cent and operating margins rose 215 basis points to 58.96 per cent, but net profit plunged 42.5 per cent due to the diminished value of equity investment in the Norwegian company.
If this was not enough, Aban lost its rig, Aban Pearl, in the Caribbean waters. This highest-contributing rig used to earn revenues of $358,000 per day. Though the rig had a full hull insurance cover of $235 million, the loss to revenues was a big hit. A respite comes with the letter of intent being received for a four-year deployment of its vacant rig, Deep Driller 6.
Estimated revenues from the contract stand at $187 million, not sufficient to make up for the loss of revenues from Aban Pearl.
