Citi maintains sell on Aban Offshore

MUMBAI: Aban Offshore reported a 4QFY09 loss of Rs 930 million as against Citigroup Global Markets��� expectation of a profit of Rs 1.8 billion. The loss was driven by a one-off impairment charge of Rs 1.5 billion on one of its assets ��� jack-up Murmunskaya. This was an asset, leased by Aban, which had been lying idle.

���The company has decided to return the asset to the owner and capex incurred on the same has correspondingly been written off. Sequential PAT was also impacted by lower other income (NOK/US$ exposure hedged),��� said a report of Citigroup Global Markets.

���EBITDA of Rs 4.3 billion was down 9% q-o-q driven by lower revenues (-7% q-o-q). Revenues were impacted by: (I) jack-up DD 7 lying idle during the quarter, and (II) drillship Aban Ice being dry-docked during the quarter. While 1Q EBITDA should recover with commencement of contribution from drillship Aban Abraham, this could be partly offset by higher capital costs on the same,��� the report added.

The brokerage added that, ���Four of Aban Offshore���s 20 assets are currently idle (Aban VII, DD2, DD6, DD7), with contracts for another 4 (DD1, DD4, DD5, DD8) ending over the next 6 months. Further, US drillers reporting so far have stated that global demand in the shallow water segment remains weak and that there are not a meaningful number of opportunities to put idle rigs to work.���

Moreover, the brokerage expects with activity still falling and more rigs expected to go idle worldwide, competition for any incremental demand is likely to be fierce. Consequently, day rates and utilizations could face severe erosion for Aban���s jackups.