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Aban Offshore Ltd
Strong Results with Record
EBITDA Margins
Quick Comment Impact on our views: Aban offshore
reported consolidated F2Q11 results with EBITDA and
PAT 15-20% above our estimates on the back of lower
operating costs. With Aban deploying 90% of its jackup
fleet, margins for the company improved to a record
67.2% in F2Q11 as against our expectation of 63%. We
expect margins to average 65% in F2011 as the
company deploys Aban Abraham by the end of F2011.
The company has written off its investment in Petrojack
– without this, PAT would have been 13% higher.
What we liked: Aban offshore reported consolidated
F2Q11 with EBITDA an Rs5.6bn, up 23% YoY and
7%YoY due to lower costs and improved utilization of
higher end jackup assets. EBITDA margins at 67.2%
were up 543 bps QoQ and 274bps YoY. Margins
improved on a QoQ and YoY basis due to improved
utilisation of Deep Driller assets and cost control
measures implemented by the company. Aban India
recorded margins of 71%, while Aban Singapore
margins were a record at 64.7%. We believe Aban could
see improved margins once it deploys Aban Abraham
What we didn’t like: Despite the company reducing its
debt to US$2.84bn, interest cost for the company
increased by 6% QoQ and the company had an average
interest cost of 7.5%. With Aban having a put option on
one of its high yield bonds in Nov-11, we believe the
interest cost for the company to reduce in 2H11.
Delays in deployment: We have seen delays in
deployment of Aban Abraham and Deep Venture, which
we expected would begin operation in Dec-10.
Assuming Aban Abraham does not generate cashflows
until F1Q12, we believe our F2011 earnings could be at
risk by 7-9%.
Key risk remains that of refinancing in F2012: We
believe the reduction in leverage after receiving the
insurance claim on Aban Pearl will ease pressure on
re-financing in F2012, however expect Aban to
refinance US$450mn in F2012.
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