Chennai-based Aban Offshore, the country’s largest offshore drilling service provider to oil companies which has a debt of around Rs 14,000 crore on its books, is trying to come out of choppy waters by working closely with bankers to moderate debt cost on the one hand and extend debt repayment tenure on the other. Presenting the company’s annual report 2016-2017 at the annual general meeting on Monday, managing director Reji Abraham said one of the biggest challenges that the company currently faces is debt management. He termed the financial year under review was one of the most challenging for Aban Offshore.
“As of March 2017, we possessed Rs 140.05 billion of debt on our books, corresponding to a debt-equity ratio of 5.31:1. While this appears high, we would need to bring to the attention of our shareholders that the average debt cost of 7.6% should in normal circumstances have translated into a good interest cover. However, with rig rentals declining, it became difficult to cover interest costs,” Reji said. He said the company repaid around Rs 224 crore of high-cost bonds during 2016-17.
The company reported an Ebidta of Rs 927 crore and a net loss of Rs 1,058 crore in FY 2016-2017. Revenues decreased by 47.28% to Rs 1,758 crore in 2016-17 from Rs 3,334 crore in 2015-16. “I have no hesitation in stating that this loss would have been higher but for the company’s proactive initiatives in terms of asset deployment on the one hand and cost management on the other. The fact that the company stayed Ebitda-positive in a difficult environment validates that Aban Offshore still remains one of the most cost-competitive rig service providers in the world,” he said.
He said in this context, the one big development during the year under review was a substantial rebound of the international crude oil price from a low of around $28 per barrel to the prevalent $50 per barrel. “However, I must immediately indicate that this substantial recovery was not mirrored in an improvement in rig rentals. The only improvement that was visible was that a few customers did announce capital expenditure programmes,” he said.
Aban Offshore had reduced overheads by Rs 598 crore during FY17 with a view to bringing down the break-even point, Abraham added.