Gremach Infrastructure Equipments & Projects To Acquire Oil & Gas Drilling Rigs

Gremach Infrastructure Equipments & Projects has decided to acquire 40 nos oil & gas drilling rigs, 40 on-shores and 4 off-shores in a period of 3 to 4 yrs at an approximate cost of $ 1 billion.

Gremach has proposed to tie-up with China's biggest oil & gas rig manufacturer and has placed order for design and manufacture of quantity 4, 2000 HP VFD oil & gas drilling rigs on, BAOJI OILFIELD MACHINERY COMAPANY (BOMCO) owned by China National Petroleum Corporation (CNPC). The contract has an option to order another 36 rigs.

Formation of a joint venture between Bomco and Gremach is mooted wherein BOMCO could pick up equity stake upto 8% in its Singapore based SPV which would be world's first purely rental company for oil & gas drilling rigs. This entity would be in a position to supply new state of the art rigs to global customers, within much shorter delivery period in the face of endemic problem of long delivery period of rigs experienced. Similar rental solutions already exist in caterpillar and volvo rentals.

The recent meeting between Gremach and high level BOMCO team represented at vice president level has put a seal to their deal for placement of order of qty 4 rigs with an option to buy 36 more over a period of coming 3 to 4 years and also to the proposal for a joint venture between two companies.

Gremach has incorporated a Singapore based SPV named Petrogrema Energy. Gremach shall be making investment up to US $ 1 billion considering the vast global market potential in oil drilling business. This business proposal is considered highly profitable, with projected IRR 35% in the light of huge market demand for on shore and off shore drilling rigs considering unprecedented rise in crude prices. Infact, rig rental day rates for off-shore rigs have risen by 13%, averaging to around $ 3 to 5 lakhs per day. In the case of on shore rigs the payback period is estimated at 3 years. Several reputed Banks and other financial institutions have evinced keen interest to fund the above business proposal / acquisition.

Internationally, oil rig owners like NABORS generate 25% profit. From its revenue of $ 4 billion, its profit is $ 1 billion. Another, US top drilling company, PARKER, with revenue of $ 587 million, have also deployed BOMCO rigs similar to that ordered by Gremach. Trans Ocean have order book position of $ 21.4 billion (approximately). This order placement by Gremach shall enable it to become on of the largest land rig owner in the times to come out of India. Gremach had recently acquired 75% stake in a Mozambique company having 11 prospecting licenses of coal, aggregating 13520 Hectares, in prime region of Moatize.

The company made this announcement after the trading hours on Tuesday, 30 October 2007.