annual report - Jindal Group of Companies

MANAGEMENT DISCUSSION AND ANALYSISForming part of the Directors’ Report for the year ended March 31, 2011.INDUSTRY STRUCTURE AND DEVELOPMENT OFFSHORE DRILLINGThis was yet another successful year for the Company inspite of lowering of charter rates due to volatility in crude prices witnessedduring the year and competitive market pressure.Offshore drilling servicesThe newly built jack-up rig “Discovery I” has completed more than 2 years of incident-free operations with a good track recordof drilling complicated wells in Vasai field in ONGC.Second newly built jack-up rig “Virtue I” has also completed more than 2 years of service without any lost time incident clockinga remarkable figure of only 0.02% of Non Productive Time (NPT).After successfully completing the previous contract with ONGC, Noble rig “Noble Charlie Yester” was dehired on 31.03.2010.This rig was offered against new tender, invited by ONGC and commenced operation on 10.06.2010. Since then, it is operatingsuccessfully throughout the year without any lost time incident.Second Noble rig “Noble Ed Holt”, which was rehired by ONGC against their new contract on 23.02.2010, is also performing wellwithout any lost time incident and NPT of only 0.1%.The third Noble rig “Noble George McLeod” has also completed more than 2 years without any lost time incident and is performingwell. This rig is expected to be dehired at the end of the year 2011.Highlights of Directional Drilling Service performance / achievement during the Year 2010-11The year under consideration was a year of mixed performance for Directional Drilling Division. However, with the upswing inthe market, there are more opportunities and Companies looking ahead with renewed optimism.During the year, a few major contracts executed successfully came to a close. However, the Company bagged 4 long termcontracts from ONGC and a couple of short term contracts from other operators. The contract value for the new long termcontract is approximately Rs. 27.25 crores and will sustain the present market share.During the year, the Company developed business with 3 new clients namely Niko Resources Limited, Essar Oil Limited and SelanExploration Technology Limited.During the year, with focus on operational efficiency, incidents of lost time due to tool failure decreased drastically resulting inhigher tool availability period for the clients.Mud Logging ServicesDuring the year, the Company bagged a long term contract for 4 Mud Logging Units (MLU) for a period of 3 + 1 years from OilIndia Limited after successful completion of previous 3-year contract for 4 MLU.One MLU contract has been received from M/s Naftogaz and operations commenced from 27.02.2011 initially for 2 wells, whichis likely to be extended for additional 5 wells in the Assam region. In order to improve the operational safety, the electric degassermotors were replaced with air motors, which are safe in zone 1 and 2. Fire & smoke detectors / hooters were also installed insideand outside of MLUs, as additional safety measures.Parallely, the softwares were upgraded to a new version having more advanced features which can provide additional operationalparameters. All these initiatives have resulted in reduced operating downtime and commendable satisfaction report from thecustomers.OPPORTUNITIES & THREATSCrude prices continue to influence exploration & spending of E&P Companies worldwide. Crude price volatility witnessed duringthe previous year had somewhat abated with upswing in crude oil prices. This has resulted into increased E&P activities globally.However, backlash of previous years’ economic downturn is still being felt with pressure on charter rates of the rigs. Companyis, however, taking steps to streamline its operations as well as looking for other growth opportunities to minimise the overallnegative impact on the rates.26