Mumbai: Essar Oilfields Services Ltd has raised at least $240 million (Rs1,157 crore) from a group of overseas and domestic banks to achieve financial closure for its semi- submersible rig Essar Wildcat.

Essar Oilfields is a subsidiary of Essar Shipping Ports and Logistics Ltd which, in turn, is part of the Essar Group that has interests ranging from steel and shipping to refining. The Essar Group also plans to invest at least $1 billion in the oil drilling business.

Timed well: Essar Oilfields rig Essar Wildcat. Drilling has been completed in a KG basin ahead of schedule.

V. Ashok, director of Essar Shipping confirmed the development, saying his company has been given “a four-year repayment profile at competitive terms". He did not divulge details of fund-raising or the banks involved in the deal.

The rig, which is currently drilling for Gujarat State Petroleum Corp. Ltd, or GSPC, in the KG basin off eastern India, has been awarded a second well after completing drilling the first one ahead of schedule. Wildcat’s current assignment with GSPC will continue through mid-2010.

“This (fund-raising) assumes great significance as Essar Shipping could leverage our strength in a very difficult market environment when the outlook for offshore segment and exploration activities was ruling low," Ashok said.

Kapil Yadav, a research analyst with Dolat Capital Market Pvt. Ltd, said the funds would be a positive development for the company since crude oil prices have been rising on hopes of a global revival of demand for goods.

“Since the exploration activities are gaining momentum, Essar Shipping will be able to get employment for this rig in long term," said Yadav, pointing out that Essar Shipping already has long-term contracts that will ensure fixed revenues.

A person close to the development said at least three domestic banks—State Bank of India, Canara Bank and Axis Bank—were involved in this deal, apart from two foreign ones. He did not want to be identified as he is not authorized to speak to the media.

Essar’s Ashok said the group will spend at least $1 billion in drilling sector and that the business currently contributes at least 25% to its revenues.

State-owned and private firms, as well as foreign companies, such as Oil and Natural Gas Corp. Ltd, UK’s BP Plc, BG Group Plc, Reliance Industries Ltd, and the GVK group have all stepped up exploration and production activities.

On 19 March, Mint had reported that Essar Oilfield Services will account for at least one-fourth of Essar Shipping annual revenue after the two entities are integrated by the end of this month.

The oilfield services division had contributed Rs145 crore to the group in the first quarter of fiscal 2010 and an operating profit of Rs109 crore. The firm had a gross turnover of Rs2,677 crore and an operating profit of Rs937 crore for 2008-09.

Ashok expects oilfield services, ports business and shipping will contribute one-third each in terms of revenues to Essar Shipping.

Essar Shipping has also placed orders with ABG Shipyard Ltd for two more jack-up rigs at a cost of $440 million, and these are expected to join its fleet by December 2011.

Essar Oilfield currently has 13 land rigs and one semi-submersible rig, with power capacities varying from 250 horsepower (HP) to 2,000HP.

After a slight dip in rates following the economic slowdown, the daily charter rates for jack-up rigs are beginning to rise again, commanding between $1,20,000 and $1,50,000 a day. “We expect the market to hold in the coming months," Ashok said.

He said that as the company acquires new assets, it plans to tap the offshore and onshore drilling markets outside India. “It is currently looking at various opportunities in the onshore and offshore drilling space in several regions, including the Norwegian region, Latin America, West Asia, Africa and Asia," he said.

The shares of Essar Shipping rose by 7.49% on the Bombay Stock Exchange or BSE to close at Rs71.75 on Friday.

The benchmark Sensex rose 0.18% to close at 16,741.30 points.