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In view of the growing operations of the company and to augment the fund requirements of the Company it was proposed to create, offer, issue and allot equity shares, GDRs, ADRs, FCCBs, etc. for an amount not exceeding $400 million and company seeks approval of the members of the Board for the proposed QIP for an amount not exceeding Rs.2,500 crore, according to company's annual report.
During the last fiscal, the company completed a QIP of $125 million (around Rs 750 crore) and the proceeds were utilised to strengthen the gearing and replace expensive debt to the extent of $216 million carrying a coupon rate of 14.25%, this resulted in an estimated annual reduction of interest outgo of approximately $30 million, said the company.
Company's promoters infused $25 million (around Rs 156 crore), subscribing to share warrants and raising their shareholding to 47%.
The proceeds from this contribution were used to enhance net worth, moderate gearing and de-leverage the Company. The combination of these initiatives brought down the Company's financial breakeven and reinforced its capability to compete across market cycles, said the company.
According to company's balance sheet, borrowings (including current maturities of long term borrowings) stood at Rs 14,059.6 crore in 2014-15 as compared to Rs 14560.8 crore in 2013-14. Debt equity ratio stood at 2.47 in 2014-15 as against 3.49 in 2013-14.
Company's initiatives brought down the company's financial breakeven and reinforced its capability to compete across market cycles, Reji Abraham, managing director, Aban Offshore in his message to the shareholders.
He pointed out major initiatives from an operational standpoint which was taken by the company last year. Company contracted most of its rigs at satisfactory day-rates, securing prospects and enhancing revenue visibility across the next few years, as part of an on-going process, company moderated its operating expenses by renegotiating various contracts. The result was that overheads as a proportion of revenues declined from 42.45% in 2013-14 to 40.85% in 2014-15.
Even as contracts for jack-up rigs Aban III and IV were completed , the Company responded with speed to minimise asset idling and renegotiated their onward deployment at rates higher than the previous contracts (with ONGC Limited). These contracts will be operational for a period of three years commencing March-April 2015, said Abraham.
From a financial standpoint, the Company strengthened its financial management, right-sizing the Balance Sheet for enhanced viability. The company proactively inked longer tenure rig contracts that enhanced revenue visibility till 2018 and also strengthened the topline for the year under review and Aban took a decisive initiative to deleverage its Balance Sheet, he said.
Way forward
Abraham said he is optimistic of managing industry downtrends on account of the robustness of its business model. The Company believes that it is positioned to address the slowdown on the back of its operational effectiveness and incipient ability to rein in costs.
The Company will maximise asset utilisation by continuously deploying rigs across different geographies and sealing long-term contracts leading to enhanced revenue visibility. Client mix, most of them being large oil exploration majors and national oil companies who have not been significantly impacted by the recent decline in crude oil prices and have sustained their exploration and drilling activities during the downturn.
Lifting of sanctions on Iran, the largest market for jack-up rigs, will make it possible for the Company to deploy rigs profitably as well as optimising the insurance premia, said Abraham adding that Aban aims at reducing its gearing to around 2:1 over the next three years and increasing asset utilisation to expand its operations.
"As an opportunity-focused organisation, the Company will seek to acquire rig assets, should attractive opportunities emerge. These opportunities will be evaluated on the basis of environment stability and probable cash flows," he said.
However, in the event of crude oil prices persisting at rates below $50/bbl for an extended period, oil exploration majors may be forced to cut exploration and drilling activities to conserve cash, which could be detrimental to the oil exploration and drilling industry and result in falling demand and day rates for the rigs that the Company operates and increase in competition.
