Essar Wildcat to Continue Operations Offshore India

Essar Oilfields Services Limited (EOSL) has achieved financial closure for its semisubmersible rig, Essar Wildcat. The rig which is currently drilling for Gujarat State Petroleum Corporation (GSPC) in the KG basin off Eastern India has been awarded a second well after successfully completing drilling the first well ahead of schedule.

Announcing this financial closure, Mr. V Ashok, Director, ESPLL mentioned that the closure had taken place for the Wildcat for an amount of US $240 million. A consortium of offshore as well as Indian banks were involved in this financial closure. The company has been given a four-year facility at competitive terms.

Ashok mentioned that the current contract with GSPC would go on till mid 2010. The rig is currently drilling in water depths of 500 meters. While at KG 19, the rig had drilled to its target depth of 5400 meters and is expected to do the same at its new location. In addition, Essar Wildcat had received excellent HSE recommendations on an independent audit conducted by IRCA.

The Essar Group, with interests ranging from steel and shipping to refining, is sharpening its focus on the offshore oil field services business. "We have a committed spend of more than US $1 billion in this sector. Going forward, we are contracted with ABG to build two Jackup rigs at a cost of US $440 million which are expected to join our fleet within December 2011," Ashok said.

Ashok mentioned that EOSL currently has a fleet of 13 land rigs and one semi submersible rig, with capacities varying from 250 HP to 2,000 HP and are employed at various locations within and outside India, including in Brazil and Syria. "All these existing rigs are on long term contracts. Going forward we expect huge potential in this market and would be open to acquire new assets provided we have a contract in place," he said. He added that currently EOSL is sharpening its focus on the offshore oil field services in the wake of the booming oil exploration and production market.

It is notable that the Oilfields Services Division of ESPLL has contributed significantly to the earnings of ESPLL with net revenue standing at Rs 145 crore during Q1 of FY 2010 and EBITDA for the same period stood at Rs 109 crore. The company had a gross turnover of Rs 2,677 crore and an EBITDA of Rs 937 crore for financial year 2008-09.

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

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.