OREANDA-NEWS. April 20, 2010. Eurasia Drilling Company (EDC) sold 12m of its GDRs, which the company had previously purchased on the open market. The price of the secondary placement was USD 19/GDR. The company raised USD 227m, and plans to disburse USD 172m as interim dividends (USD 1.22/GDR). EDC purchased those GDRs on the open market in early 2009, at about USD 3/GDR, reported the press-centre of OTKRITIE FC.

View: EDC sold its securities at a 12% discount to the last market price. Based upon the SPO price, this amounted to P/E ratio of 9.4x (22% below peers). The company’s free float increased, and the share of minority shareholders was not diluted. The transaction was aimed at raising the liquidity of the company’s GDRs, hence the issuer was less concerned with the price. The implied dividend yield could amount to 5.6%, an unprecedented level for the domestic oilfield service sector. The majority of companies in this sector do not pay annual dividends.

Valuation and Action: EDC’s stock trades on a P/E ratio of 10.8x, which is a 9% discount to the rest of the sector. We view the news as a long-term positive for the company’s securities (liquidity of the GDRs is likely to rise), though a short-term correction should not be ruled out.