Stock Idea : Aban Offshore

Aban Offshore Ltd., formerly Aban Loyd Chiles Offshore Limited, is an off-shore oil and gas drilling company. The Company has two business segments: Offshore Oil Drilling and Production services, and Wind Power generation. The Company together with its sub-sidiaries, provides oil field services for offshore exploration and pro-duction of hydrocarbons in India and internationally.

ASSETS

It owns and oper-ates offshore drilling rigs, as well as provides drilling services to vari-ous oil and gas operators. The Company pos-sesses twenty offshore assets including fifteen jack-up offshore drilling rigs, two drill ships, one floating production platform and a jack-up rig and drill ship each on bareboat charter. It enjoys the privilege of part-nering with several global players in the oil and natural gas industry by offering them reliable, state-of-the-art drilling services. Its notable cus-tomers include ONGC, Hardy Exploration & Production (India) Inc., Oriental Oil Co. (Dubai), Shell Burnei, Shell Malaysia, Hind Oil Explo-ration Co. Ltd, Cairn Energy, Petronas Carigali etc. It is India`s largest offshore drilling entity in the private sector. Its innovative and cost ef-fective solutions make the company one of the most efficient interna-tional drilling contractors. Aban Singapore Pte. Ltd. (ASPL) was formed as a wholly owned subsidiary of Aban Offshore Ltd. to offer drilling services to large global oil and gas operators.

INVESTMENT RATIONALE:

Aban Offshore has received a contract to drill two wells and for two optional well programmes. The firm period of the contract, ex-pected to commence following the delivery of the rig from the yard in the first quarter of 2009, is likely to last for 150 days with an es-timated revenue of USD 30 million during the firm period.

Venture Drilling AS, in which the Aban Singapore (ASPL), sub-sidiary of Aban Offshore, has a 50% indirect shareholding, has agreed with ExxonMobil for a six month extension of the present drilling contract, in direct continuation and on same terms (at an operating day rate of USD 425,000 after withholding tax). The ex-tended period is likely to last till July 2009.

The company has received a contract to drill 3 wells in Malaysia. The estimated revenue from the contract is USD 17 million for 90 revenue days.

It has won another contract worth USD 38 million to drill 6 wells and one optional well program in Malaysia. Aban Offshore signed an agreement with Exxon Neftegas for the deployment of the jack-up rig Murmanskaya Offshore Russia for a 2 well programme. The project is expected to generate USD 34 mil-lion worth revenues, which has an estimated duration of 160 days and will commence in direct continuation of its present contract that is expected in June 2008.  It will strengthen the top & bottam line of the company.

The company received letter of intent for the deployment of the newly built jack-up rig Aban VIII in the Middle East for 18 wells plus 4 optional wells programme. The company expects USD 300 million in revenues over 4 years. The deployment is to commence following delivery of the rig, which is expected in the second quar-ter of 2008.

KG Basin: Doubling India’s Gas Supply by 2010

India, Asia’s third-largest oil consumer, is encouraging use of natural gas to control its oil import bill and rein in inflation but there is not enough supply to satisfy rising demand. Gas demand in India, at around 179 million standard cubic meters a day, is far short of the supply of about 95 mmscmd (including LNG).

Supplies are expected to double by 2010 when KG-D6 reaches peak of 80 mmscmd and flow of additional LNG (read production from RIL K- G Basin blocks) . However, by them demand projections made by Petroleum Ministry see the need for about 230 mmscmd of gas.

K-G Basin Estimated Reserves:The Directorate General of Hydrocarbons, the oil and gas regulator, had earlier said gas reserves in the block amount to 1.38 tcf. Reliance Industries’ block, one of the largest discoveries in the country, in the same basin has reserves of 11.3 tcf.

Patel also said GSPC had booked a capacity of 10 million cubic metres per day (mcmd) in the gas pipeline that Reliance Industries is laying to transport its oil from Andhra Pradesh to Gujarat.

On Shore Terminal at Kakinada: Modi added that 300 acres had been acquired in Kakinada, Andhra Pradesh, to build an onshore gas processing terminal.

GSPC has drawn a master-plan at a cost of Rs 8,000 crore for setting up city gas distribution projects in 40 cities in Gujarat, the company said in a statement recently.

Source: BS, Hindu