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Essar Energy Plc will exit some of its exploration and production operations to free its finances. The company, London-listed energy arm of the Ruia's promoted Essar Group saw its half yearly earnings drop 7% due to a weak rupee. The company said it had taken a $483 million hit due to the rupee's depreciation, the majority of which was unrealised.
The company has posted $44.4 million loss against profit after tax of $52.7 million last year. "We will exit lower margin non-core assets. We have decided to farm out of our non-core E&P assets. This may bring improvement in our bottomline," said Sushil Maroo, CEO, Essar Energy Plc, on a call. Operational earnings before interest, tax, depreciation and amortisation fell to $543.7 million in the six months ended September 30 from $582.6 million a year earlier. Revenue, however, rose 5% to $13.4 billion.
The company has so far dollarised $870mn of its rupee term loans with negotiations regarding further dollarisation of debt ongoing. Net debt declined to $6.56 billion in the period from $6.74 billion. It would farm out or sell exploration and production blocks in India and overseas, Maroo said.
Essar has five exploration blocks outside India. In July, it decided to sell its 50% stake in a Vietnam offshore gas exploration block to Eni SpA. It has stakes in blocks including in Nigeria, Madagascar and Indonesia.
The company, in its financial presentation, said its farm down effort in Mumbai offshore block is ongoing. The company holds 50% in the block. Noble Enegry, its equal partner, has already exited the block. In its Nigeria block where it holds 63% interest, its farm our efforts are ongoing.
With diesel demand growing at about 7 percent a year and gasoline consumption rising by 5%, the company said it is positive on the India market. "The government proposed doubling gas prices to $8.40 per million British thermal units from April to spur production," Essar said.
Shashi and Ravi Ruia, will sell part of their 77% stake to meet the UK's free-float requirement, the company added in a press statement.
