The Hindu Business Line : Near-term earnings upside for Aban

Contracted at a day rate of $200,000, this deal will earn the company about $18 million (Rs 79.2 crore) over its three-month contract period. This highlights the strong demand undercurrents in the rig rental market, as the day rates procured under the new contract are at par with the rates commanded by the company’s other rigs deployed in recent times.

With a fresh supply of newly built jack up rigs expected to hit the markets in the next two years, the reason much touted for the likely fall in day rates, Aban’s deal at such a competitive rate comes as relief.

Trends in the rentals for short-term rig contracts reflect the prevalent demand-supply scenario.

That the company has managed to not just place its new rig within two months of its delivery (delivered in July 2008), but also at competitive rates suggests the continuance of a robust demand for jack up rigs.

While these short-term contracts let the company leverage on the near-term demand-supply mismatch in the rigs market, its long-tenure contracts help it lock-in the prevalent rentals for a much longer duration.

On that note, the recently bagged order at an operating day rate of $4,95,000, for its asset Deep Venture, held under a company in which Aban’s subsidiary has a 50 per cent shareholding, reiterates strong long-term prospects.

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