Revenues have more than doubled during the year, with better gains coming in the second half. The company, which offers drilling and production services through the hire of its rigs and a semi-submersible production platform to the oil exploration and production industry, has for the first time deployed both its rigs and the production platform simultaneously; at the highest rates since inception.

The financial results reflected this fact; with revenues doubling from last year to Rs 153 crore from Rs 64 crore. The changein earnings reflected two things, one, the fact that the production platform commenced operations during the year (from the second quarter onwards) and second, the offshore drilling rig renewed its present contract at higher daily rates. Margins came slightly under pressure both, since the drilling rig was not operational for little over a month, since it under went upgradations in between contracts and there was a lag in hiring out the Tahara.

Margins fell from 27 per cent to 25.5 per cent. Net profit grew by 67 per cent on top of a 100 per cent growth last year to Rs 19.81 crore from Rs 11.84 crore. The present return on equity stands enhanced at 30 per cent from 22 per cent.

Despite the fine showing in the just concluded year the risk of being invested in this stock is very much there. The risk is that with global demand and consequently international oil prices stagnating there is a threat that some fields may be closed or production reduced within the next couple of years, which will affect re-hirerates in India as well, even though domestic demand for these services as such will not falter.

This is a cyclical business and the revenues will eventually reflect this fact. But the stock market has been very bullish on Hitech Drilling and has gotten excited over its performance for the last year.

The market had spotted the benefit of investing in this business earlier on and the stock has been in a major uptrend for the last two years. The stock has already recorded a compound growth rate of 115 per cent in the intervening period has shown signs of the long term trend continuing.

Especially with the demand from the domestic oil exploratory and production industry rising business is very much assured. So, possibly growth in the future will have to come from expansion of its assets and not necessarily from increasing hire rates as it should in the current year. Any meaningful expansion of its assets may require a dilution of equity from Hitech to finance such expansions, which could be a dampener forthe stock.

As an example, the refurbishment of the Tahara platform that was undertaken last year alone required a capex of $24 million. But for the next couple of years Hitech Drilling is safe as earnings from two of its main productive assets the Tahara and the Hitdrill 1, are secure having just entered into renegotiated contracts with Hardy Exploration and Production India Inc and the Oil and Natural Gas Commission Ltd (ONGC) respectively for period of hire ranging between a minimum of three and upto seven years for the Tahara and for a minimum of two years for the Hitdrill 1. The jack up rig, Marine 201 in presently under contract and is operational in the Ravva oil field.

This contract expires in November, 1998, but renewal should not be a problem. The production platform Tahara was initially acquired by the company way back in 1988 on the specific understanding that it would be taken on a long term lease by the ONGC, instead it is currently on contract with the Hardy Exploration and Hindustan OilExploration combine.