Motilal Oswal neutral on Cairn India

“We believe Cairn India's initial two overseas acquisitions indicate its conservative approach towards overseas expansion as it has chosen: (1) politically stable countries, and (2) discovered field as in the case of Block 1 in South Africa. Earlier, it had indicated that its acquisition strategy is to limit its operations only to 2-3 regions for better control.”

“PetroSA's 'Block 1' is in the early exploration stage, and Cairn India will be conducting 2D/3D surveys over the next 2 years. Based on the results of the surveys, it will be finalizing its drilling program. PetroSA's initial 'original inplace' estimates indicate resource base of 1.9-35.5bboe. However, in our view, the actual reserve size and commerciality will be known only after conducting detailed studies and drilling of wells. We currently do not assign any value to this block and would await further clarity from Cairn India post its studies. For FY13/FY14/long-term, we model in Brent oil price at USD105/100/90. Our SOTP stands at INR350/sh. Maintain Neutral,” says Motilal Oswal research report.  

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