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Great Eastern is moving offshore - Views on News from Equitymaster
 
 
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  • Aug 12, 2000

    Great Eastern is moving offshore

    Great Eastern Shipping Company is the largest private operator of offshore support vessels and harbour tugs in India. These vessels are deployed for Oil and Natural Gas Corporation Ltd. (ONGC) for its oil exploration projects on time charter basis. Over the past two years, the company has been shifting its focus towards expanding its offshore division as oil exploration projects are set to take off in a big way.

    Offshore Division FY98 FY99 FY00
    Offshore vessels (dwt mt) 25,900 25,900 28,775
    Capital employed (Rs m) 2,382 2,190 2,765
    Operating Profit (Rs m) 554 791 963

    With crude and gas prices peaking up during FY00, the offshore division was affected as they determine the production and the exploration budgets of oil companies. In spite of these unfavorable conditions, the operating profits of the offshore division increased by 21% from Rs 791 m in FY99 to Rs 963 m in FY00. An additional 2,875 m dead weight tonnage (dwt) was added to the offshore division during FY00 with the average fleet utilisation level at 85%.

    The Changing mix
    The Changing mix FY98 FY99 FY00
    Anchor handling tugs supply vessels 8,136 8,136 10,636
    Supply vessels 3,000 3,000 3,000
    Anchor handling tugs 1,533 1,533 1,658
    Harbour tugs 830 830 1,080
    Barge 4,801 4,801 4,801
    Drilling units 7,600 7,600 7,600
    Total 25,900 25,900 28,775

    The fall in crude prices is expected to stimulate demand in the current year with Asia to account for half of all new crude demand. Moreover, the sharp increase in domestic refining capacity and a pick up in oil exploration activity will benefit the off shore shipping lines in the coming year as demand for their services picks up. To meet the demand, the company is augmenting its fleet, so as to widen the range of services. However several major international contractors are evaluating an entry into this market. This could pose serious threat to the company.

    The stock is currently trading at Rs 23 at a P/E multiple of 3.6x on the annualised FY01 first quarter earnings.

     

     

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