Great Offshore ready to sail

Though Great Offshore’s second-quarter financial numbers were disappointing, the outlook for the coming fiscal looks better on higher utilisation of its assets.

The company, one of the largest integrated offshore oilfield services providers in India, on Wednesday informed the exchanges that it had bagged a one-year contract worth $4.3 million from GSPC to deploy its anchor handling tug supply vessel Malaviya Twenty Three. The vessel was earlier operating on short-term charters.

The new contract comes close on the heels of its key drilling unit Kedarnath commencing a 5-year charter with ONGC recently, after being out of operation for almost 6 months.

The company reported a 15.5% decline in net revenues for the quarter ended September as two of its major rigs Kedarnath and Badrinath were non-operational due to dry docking and refurbishment work being carried out on them. Revenues from its marine construction segment were also affected due to monsoons, leading to further decline in the topline.

However, the company reported a strong improvement of 1150 basis points (bps) year on year in its operating margins to 52.6%, led by better margins in the offshore services division.

According to the management, revenue visibility on existing charter contracts (as on September 30) for its owned vessels for the remaining two quarters of the current fiscal stands at Rs235.08 crore.

The company, which has a fleet of 47 own vessels including 3 drilling units and 28 OSVs, is expected to show better revenues in the coming quarters as its high-yielding assets become operational. Kedarnath has already comenced operation, while its drilling rig Amarnath is expected to be deployed by mid-December.

Further, a new jack-up rig, V351, being constructed by Bharati Shipyard, is expected to join the fleet by this fiscal end, thereby aiding revenues in FY12. Drilling rig Badrinath, which has recently gone into dry-docking after completing a 3-year charter with ONGC, is expected to re commence operations by early FY12.

“We expect revenues in FY11 to be flat at Rs1,165.2 crore for the current fiscal but expect 24% revenue growth in FY12 as the utilisation levels of its drilling rigs increase,” analysts Bharat Chhoda and Jehangir Master of ICICI Securities wrote in their earnings update dated November 11.

Shares of Great Offshore, which touched a 52-week low of Rs348 apiece November 23, on post its disappointing results, gained 3.85% on Wednesday to close at Rs378.65 on the BSE. The analysts remain positive on the stock considering decent revenue visibility for the next fiscal. The stock is trading at 5.3 times its FY12E earnings and investors with a long-term perspective can consider the stock at current levels.