Shares of Aban Offshore are trading at Rs. 393.5 currently, down 2.53% from yesterday’s close of Rs. 403.70. However, the share price of Aban has been on a decline since early December itself. This current share price is the lowest since the 30th of Jan earlier this year. That makes it a new 10-month low for the share price.
Having said that, the share price has been on a downward trend since November this year, when it was at around Rs. 600. The recent fall in share prices has coincided with the fall in global oil prices.
Aban Offshore is India’s largest offshore drilling services provider, with revenues of Rs. 1018.5 cr. (for Q2 FY2015). As part of its operations, they provide exploratory and drilling services to their clients. Their clients include a who’s-who from the OnG industry, from ONGC to RIL to Shell and Petrobras.
They also operate and maintain various wind farms throughout India and produce about 70MW of energy annually.
In fact, for Q2 2015, Aban reported a 91.5% jump in Net Profits owing to reduced expenses despite a meagre 1.7% increase in Revenues. Despite showing some impressive figures, it would seem that oil prices are really affecting the company’s market value. In fact, in one of their recent presentations to analysts, released in May 2014 (much before oil prices started to plummet), we picked out this little piece:
The management at Aban expected brent crude prices to be at $102 to the barrel (as did most other firms). The prices are now at the sub-$60 levels.
Another issue that the company faces, is that of its debt. As of March 31, 2014, Aban had debt of $2.4 billion on their balance sheet. Of this, around 97% of the loans are dollar-denominated. The company also had plans of listing its Singaporean subsidiary, Aban Singapore Pvt. Ltd., by which it looks to raise nearly $500 mn. But the company is confident of its structured debt repayments being carried out successfully.
One interesting development that could help Aban’s fortunes, is the announcement by one of its biggest clients, ONGC, that they have discovered 3 new OnG sites. This comes on the heels of ONGC awarding Aban 2 orders for deploying offshore drilling rigs, worth $182.7 mn.
We shall wait and watch how latest developments in oil prices further affect the fortunes of Aban.
To subscribe to new posts by email, once a day, delivered to your Inbox:
Also, do check out Capital Mind Premium, where we provide high
quality analysis on macro, fixed income and stocks. Also see our
portfolio which has given stellar returns in our year, trade by trade
as we progress. Take a 30-day trial: