Aban Offshore: Experts on the FY10 earnings forecast

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Aban Offshore: Experts on the FY10 earnings forecast

Aban Offshore had a phenomenal run in the last three months. However in the last few days it has become a bit volatile. Deven Choksey of KR Choksey Securities, said Aban Offshore�s valuations were high, it had huge debt level of Rs 15,000 crore. Aban's FY10 earning per share (EPS) was seen at Rs 70, he said.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » Aban Offshore BSE | NSE 17/02/12 Are Mutual Funds betting on Aban Offshore? Other Stocks in this news Oil and Natural Gas Corporation |

Aban Offshore has had a phenomenal run in the last three months. However in the last few days, it has become a bit volatile.

In a discussion on CNBC-TV18, Deven Choksey of KR Choksey Securities, said Aban Offshore's valuations were high, it had huge debt level of Rs 15,000 crore. Aban's FY10 earning per share (EPS) was seen at Rs 70, he said.

However, Amit Shah, Vice President - Oil & Gas, BNP Paribas Securities, was a little more positive on the stock. "I expect balance sheet improvement in Aban Offshore and see signs of improvement in Aban's business," he said. Shah said he saw Aban's FY10 EPS at Rs 110.
Here is a verbatim transcript of the exclusive interview with Deven Choksey and Amit Shah on CNBC-TV18. Also watch the accompanying video.

Q: Is it the recent business uptick that you favour or is it the balance sheet improvement which is making you more optimistic?

Shah: The balance sheet improvement as yet hasn't come but that is something on the cards. We are expecting some kind of an announcement by the end of this month but what you are seeing is that in the past six months roughly we have seen 100 new jackup contracts being announced globally and the key segments or the key markets which have seen in this growth are southeast Asia, the Mediterranean region and the Middle East.

The key point to note here is that Aban has moved few of its rigs from Singapore to the Middle East. If you go back from 1996 and see the trend of jackup rates, the Middle East is the only space which has held up otherwise you have seen jackup rates off by 30%. So, while the business has seen the improvement, I wouldn't say we are out of the woods as yet but it is definitely clear signs of improvement. The recent order from Mexico also is an indicator of that. Considering Aban's fleet of new rigs, I think the company is pretty well positioned.
Q: How significant have been the upping of rates? Can you give us a ballpark number on how much rates have improved in the last few contracts that have been signed globally and whether in the last couple that Aban has done, rates are significantly higher than what they were doing six months back?

Shah: That would not be the case because the jackup market has seen a serious upturn because you had seen the day rates going as high as 200,000 from the lows of 50,000-60,000 that we had seen in 1997-1998. But the key to watch here is that the rates which went as low as 110,000 or 100,000 for new rigs are now moving up to around USD 125,000-126,000. The idea is when you talk to most of these E&P companies; they are bullish about capital expenditures on the exploration side simply because they don't want to miss the boat as they did last time when their exploration cost went up significantly because rig reach went up. What they are looking at is chartering rigs at the current low rates and hence keeping their exploration cost low. So, if you see Sinoc, PetroChina, Oil & Natural Gas Corporation (ONGC), none of these guys have cut their capex and the last trend over the past decade has been such that you are seeing national oil companies gaining reserves as opposed to the independent oil companies.

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