Essar Oilfields to convert rupee loan into dollar

Will reduce debt, prepare company for any possible downturn in sector

Essar Oilfields Services, a wholly owned subsidiary of Essar Shipping, is planning to convert a part of its debt from rupees to dollars. After converting debt of around Rs 650 crore to $125 million to reduce its financial burden, it is going to convert part of Rs 300-crore loan  into dollar loan. Currently, the total debt on its books is around $450 million.

The move is a part of the company’s strategy to tide over any downturn situation, which may arise in the oilfields business in future. The company is also expanding its capacity to add four more rigs to its fleet with an investment of $450 million. Nearly 50 per cent of these funds would be raised through debt. Currently, Essar Oilfield comprises 14 land rigs and two offshore and semi-submersible rigs. “We want to invest in high quality assets and dollarise our debt burden. Since this is a cyclical business and things are looking up right now, some day if things change, we have to be well protected,” said Ankur Gupta, chief executive officer, Essar Oilfields Services.

The shipping business is already facing challenges globally. This is one of the reasons why Essar has increased its focus on oilfields services in recent times.

The company is also looking for signing long-term contracts in far-east for this business. It is holding talks with companies in Malaysia, Indonesia and Vietnam to engage its off shore and land rigs. Within the next year, Essar's drilling contract with ConocoPhillips, Indonesia and drilling operations for the High Pressure High Temperature wells for BG Shirke Group (BGS) in the onshore KG Basin in the Manepalli field , will come to end leaving most of its capacity unutilised.

Around 10 per cent of its business comes from Essar group companies, while the remaining 90 per cent comes from others. Essar is also trying to explore domestic opportunities in providing exploration services to companies like Oil and Natural gas Corp, Reliance Industries, etc.

The company has increased its net profit nearly 33 times to $2.08 million (Rs 11.58 crore) in first quarter ending June 2013, from $0.06 million (Rs 0.29 crore) in the corresponding period last year. The enhancement of quarter-on-quarter performance of the company has been attributed to the deployment of new onshore rigs for the coal bed methane project at Raniganj and improved operating efficiency of its offshore semi-submersible rig Essar Wildcat.

The company registered a growth of 1.2 per cent in revenue at $31.01 million against $30.64 million in the previous quarter.