Cairn India Q3 profit tanks 98.7% on EBITDA, forex impact

Moneycontrol Bureau

Cairn India, the subsidiary of Vedanta Resources, disappointed analysts with its third quarter earnings on Friday. Consolidated net profit plunged 98.7 percent to Rs 8.7 crore in Q3 compared to Rs 672.7 crore in Q2FY16, impacted by lower operating profit and forex gain. Tax writeback saved the company from turning into losses.

Revenue declined 9 percent sequentially to Rs 2,039.5 crore from Rs 2,242.1 crore, primarily due to a 13 percent fall in crude oil prices and increase in discount to Brent for Rajasthan crude to USD 9.2 a barrel.

Average realisation came down by 19 percent Q-o-Q to USD 35.2 a barrel as realisation for Rajasthan crude reduced to USD 34.5 per barrel.

Operating profit (earnings before interest, tax, depreciation and amortisation) fell 26.9 percent quarter-on-quarter to Rs 666 crore on increase in operating cost (due to higher polymer volume injection) and lower revenue. Margin contracted by 790 basis points to 32.7 percent on sequential basis.

A fast ramp-up in the polymer injection volumes has increased the blended operating cost by 7.8 percent Q-o-Q to USD 6.9 a barrel, the company said.

Cairn reported a forex gain of Rs 48.8 crore during the quarter, declined sharply compared to Rs 380.7 crore in preceding quarter due to stable rupee during the quarter compared to 3.3 percent depreciation against US dollar in previous quarter. It has tax writeback of Rs 49.4 crore in Q3 against Rs 131 crore in Q2.

The oil & gas exploration company said since there is a lag between injection and impact on production, it expects the volume to rise further.

As far as Mangala enhanced oil recovery project is concerned, it said injection ramp up plan is on track as it has been increased from 200,000 barrels of polymer solution per day in Q2FY16 to 330,000 polymer solution per day in Q3FY16.

Further increase in injection volume to 400,000 barrels per day is expected by March 2016, as per the plan, it added.

During Q3FY16, it had a gross production of 18.6 million barrels of oil equivalent (MMBOE) across all assets, of which net working interest production was 11.8 mmboe. Gross production per day for Q3 was 202,668 boepd and working interest production per day was 128,402 barrels of oil equivalent per day.

For FY16, the company planned net capital investment of USD 300 million. It maintained its view to ramp-up the investment as oil prices improve and costs bottom out. It aims to have healthy cash flows post capex so as to retain the ability to pay dividends.

Cairn has cash and cash equivalents of Rs 18,470 crore at the end of December 2015.