Delay in govt nod for deal with Vedanta hurting co: Cairn

Cairn India has beaten street expectations in the third quarter ended December 2010. Its profits surged to Rs 2010 crore as compared to Rs 291 crore in the same period last year, while net sales came in at Rs 3096 crore versus Rs 495 crore that it reported a year ago.

Rahul Dhir, CEO, Cairn India said in a conference call that it was a good performance operationally. "We are pleased with our performance in the Mangala (oilfield) and are consistently producing at 125,000 barrels per day." The overarching issue that remains, he said, was the finality on the part of Cairn Energy's stake sale to Vedanta. The energy major's board has decided that it is not going to accept the government's pre-conditions and that the delay in getting approvals is hurting Cairn. Being a large and unprecedented transaction in terms of the complexity, Dhir said, it is taking the government time to get its head around the deal. Cost recoverable royalties is not acceptable to Cairn's board. The deal has created complexities in decision making relating to Cairn's business, he said. He also said that Vedanta is committed to reinvesting cash generated by Cairn India. The company believe it is at the end of the period of uncertainty. Crude realisations from Rajasthan came in at 13.5% discount to brent crude. The company has spent USD 2.8 billion in capital expenditure in Rajasthan so far, out of which USD 191 million was done in Q3. The energy major guidance of achieving 1.75 lakh barrels per day by calendar year 2011 remains unchanged. Its capex guidance for the calendar year is USD 2 billion. Its current operational expenditure Of USD 2.7 per barrel is expected to go up to USD 5 per barrel in two years. The company has entered into agreements to sell up to 1.43 Lakh barrels per day With private and public refineries. It is selling to Reliance Industries, Essar and IOC among other companies, adding that a majority of crude sales were happening in the private sector. Cairn's management informed that it is in talks with three new buyers for crude sales in FY12 and expects the existing buyers to continue buying in the current fiscal. On its exploration plans going forward, the company said its plan to up production at Mangala to 1.5 lakh barrels per day is still pending government approval. Separately, it plans to have a three-well exploration for six months in Sri Lanka. It is also likely to start seismic work on the NELP VIII block very soon. To listen to the conference call click on the video icon...