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Aban Offshore – Back to Growth

November 19, 2009

The Capital restructuring and the award of long-term contracts at premium dayrates have helped Aban tide over its near-term cash shortfall. Aban has raised US$150 mn through issue of 5.7 mn shares at Rs1,224/share. This amount will primarily be used to redeem the outstanding bonds of NOK1 bn (US$150 mn) due in Dec’09, which were issued by its Norwegian subsidiary Sinvest.

The deployment of four of its jackup rigs at better-than-market rates has significantly improved near-term revenue and cash flow visibility for Aban. Management indicates that it is in an advanced stage of negotiation for the remaining three idle rigs, the deployment of which will reduce the risk of idle assets to a large extent

Financials:
Aban posted a Rs714m net profit, down 73% yoy, on back of lower utilization of rigs. Going forward for, FY10, the company expects to report an EPS of Rs 164 and Rs 320 for FY10 and FY11 according to Anand Rathi. While Kotak expects it to be Rs 160 and Rs 300. Both the brokerages have a BUY recommendation with price targets of Rs 1700 and Rs 1500 [Kotak].

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