Venture Drilling AS, a company in which a subsidiary of Aban has a 50% shareholding, has signed an 18-month contract with Maersk Oil Angola, at an operating day rate of $495,000 after withholding tax.
The contract is for a semi submersible deep venture and is likely to commence in July 2009, in direct continuation of its current contract.
The estimated revenue from the contract is approximately $271 million. The day rate is 16.7% higher than our estimates of $425,000 per day.
Over the last few months, large drilling companies across the world have witnessed steep correction in their stock prices, with Aban leading the pack. The fall was on the back of weakening sentiment for drillers as crude oil prices fell sharply from the high of $148/bbl.
We believe that the correction has only made the valuations more attractive to get into these counters as investments in E&P space has not slowed down. We recommend a buy with a target price of Rs2,425.