Aban Offshore - New contract to improve utilisation... - ICICIdirect

Aban Offshore has secured a contract for the deployment of jack-up rig Deep Driller 7 (owned by the company's step down subsidiary) Offshore Mexico for a firm period of 1005 days, ending December 31, 2015. The estimated revenue from deployment is about US$152 million (equivalent to approximately Rs. 828 crore). The day charter rate for rig Deep Driller 7 works out to US$1,51,152/day, ~10% higher than the previous rate.

Contract renewals, refinancing efforts key to profitability

Contract renewals for the jack ups (DD2, DD4 and DD5) and Aban-Ice drillship would be events to watch out for. It is of paramount importance that Aban improves its fleet utilisation otherwise; servicing its interest and debt repayment obligations would be a challenge. The company had last quarter refinanced ~$300 million of rupee debt, which is expected to bring the overall cost of debt to around 6.5-7%. Aban Offshore has a loan repayment schedule of ~US$875 million over the next two years.

Revise estimates

We have revised our EPS estimates from Rs. 60.4 to Rs. 72.7 per share in FY14E and from Rs. 65 to Rs. 75 per share in FY15E, post today's contract. We recommend a BUY rating on the stock with a target price of Rs. 389 (0.55x FY15E book value).

Source : Equity Bulls

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