Aban to reduce focus on Middle East markets

While Aban Offshore’s four rigs remain idle and are being heavily marketed, the company is keen to reduce its concentration in any one geography.

Out of its 16 rigs deployed, 6 are in India and 5 in the Middle East (Iran).

According to a report by Amit Shah from BNP Paribas, the Aban management plans to diversify geographically and is reluctant to charter more than one rig in the Middle East from the four idle rigs - DD1, 6, 8 and Aban VII.

It is aiming to deploy three out of the four rigs by mid-FY11.

Utilisation rates in Latin America and South East are stabilising with no visible pressure in spite of incremental supply earmarked for 2010/11.

The company believes that rig market fundamentals are improving with E&P companies restarting long-gestation projects estimated to be viable at the current $70-80 per barrel crude price.

An Aban official on the condition of anonymity said the company by doing so will de-risk geographical concentration in the Middle East.

“For our 4 idle rigs, we are looking at Latin America, Gulf of Mexico, Africa and Southeast Asia as there is good demand in these markets. However, if our rigs remain idle for a longer time then we will have to look at the Middle Eastern market for deployment,” the official said.

The company may also plan to invest in a deepwater vessel backed by a long-term contract by FY12-13 if rig environment continues to improve in terms of utilisation and day rates, Shah
said in his report.

Apart from the concern over rig deployment, which is taking longer than expected, there have been additional concerns about Aban’s ability to service its debt. The company official disregarded these fears saying that for FY2010 the company has completed its bond bullet repayment of $226 million, of which a small portion has been refinanced by the banks, and of the $184 million bond amortisations only $5 million is left to be repaid. Aban was negotiating with State Bank of India and Punjab National Bank for a moratorium on short-term loans after failing to refinance Rs 200 crore bullet loan due last month.

Aban’s total repayment after the debt restructuring stands at $1,153 million, to be paid by FY2019.