Mumbai: Aban Offshore said on Wednesday it has received a major portion of the $235 million insurance claim for its semi-submersible rig, sending its shares soaring but analysts are not considering upgrading the stock yet.
The company had lost its gas exploration rig, Aban Pearl, to the Carribean sea on 13 May, prompting analysts to downgrade the stock saying the accident will hurt the offshore services provider’s revenue.
“We are not upgrading the stock,” said Syed Jaffery of Ambit Capital, which has a sell rating on it. “This is in line with our expectations, only the timing has surprised us. Our estimates for FY11 have already factored in the insurance claim.”
Aban’s two deep-water assets are lying idle which is posing risks to FY11 earnings, Jaffery said, adding, some of its assets are coming up for renewal in FY12 and there could be some downward revision in day rates.
Aban Offshore has already received about 97% of the claim amount and the balance is likely to be received shortly, it said in a statement to the Bombay Stock Exchange. In FY10, the company posted a near 43% fall in consolidated net profit to 3.1 billion rupees on lower shipping costs.
Analysts were also concerned about Aban’s high debt. “I don’t think the company will be able to generate cash flows to repay debt over the next 3 years,” said Alok Deshpande of Elara Capital, which also has a ‘sell´ rating on the stock. Aban had a net debt of about $3 billion as on 31 March .
Shares in the firm have shed about 19% of their value since it lost the Aban Pearl rig on 13 May. On Wednesday, shares ended up 8.91% at Rs898.15 in a weak Mumbai market.