With crude oil futures trading at 41-month highs, it is natural for companies exploring and extracting the resource to be in demand. One such stock is Mercator, which is likely to commence oil production shortly.
Mercator has other businesses including dredging, shipping and coal.
“Production from our Oil Blocks is expected to start soon and would be scaled up optimally by last quarter of FY 19; it is poised to significantly add to the revenues and may pan out to be our largest earnings segment in FY 20," Shalabh Mittal, Chief Executive Officer told Moneycontrol.
“Brent Crude futures crossed the $75 per barrel mark, their highest level since December 2014, after a series of production cuts by OPEC nations and ahead of the all-important global IPO of Saudi Aramco, the world's largest producer of crude oil. Some estimates peg the commodity to cross $80 a barrel in the near term,” he said.
The company owns two oil blocks in Cambay basin (Gujarat), two light sweet crude oil discoveries with proven reserves exceeding ~23 million barrels have been made at CB-9, one of the Cambay basin blocks. This is set to clock production this year.
Mercator, as a group, has presence in upstream sector through block ownership and project execution services. It had constructed and operated a Floating Production Unit (FPU) currently deployed in Nigerian waters. An FPU is a combination of a Mobile Offshore Production Unit (MOPU) and a Floating Storage and Offloading (FSO) vessel. The FPU was last year sold off to the field operator where it was deployed.
Speaking about the company’s coal business, Mittal said, “Having revamped the management team at Indonesia, revenue flow from the mining business in Indonesia has resumed optimum capacity. The company also expects to increase its production of high quality coal and increase its Infrastructure capacity by end of this fiscal year, full benefits of which will be reflected in FY 19-20.”
Mittal seemed optimistic on coal margins. He continued, “Coal prices are firm and shall keep contributing to healthy margins.”
When asked about debt on the books, Mittal said that the company has reduced consolidated debt from ~Rs 3,850 crore in March 2015 to ~Rs 1,720 crore as on March 31, 2017 and continues to move towards achieving its goal of becoming a debt light business.
“Our endeavor is to reduce debt and to increase overall shareholders’ returns,” Mittal added.
“The business and the nation are poised towards a positive growth in the coming days due to the conducive business environment the government has created, which is currently attracting diverse sector of businesses coming in to the system”, he noted.
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