Cairn India Q3 net slumps 53% to Rs 1,349 cr on lower crude realizations

Financial numbers below estimates but analysts think these should pick up

Cairn India Ltd, the oil and gas exploration arm of London-listed Vedanta Plc, has reported a 53 per cent decline in net profit for the quarter ended December, owing to lower crude oil realisations and higher depreciation charges.

The net profit was Rs 1,350 crore, compared to Rs 2,884 crore in the corresponding quarter last year.

“We continue to drive operational efficiencies in the current crude (oil) price environment,” said Managing Director Mayank Ashar.

The net profit, however, was much lower than the Bloomberg consensus expectation of Rs 1,977 crore.

Total income declined 30 per cent to Rs 3,504 crore during the quarter, compared to Rs 5,000 crore in the same one last year. The company said the dip was “on account of lower realisations of $68.1 per barrel, down 25 per cent, due to softer crude prices.” The impact was partially offset by the 13 per cent increase in volumes.

Analysts said Cairn’s financial numbers were lower than market estimates. “The bottom line has fallen by 41 per cent due to lower crude oil realisation, lower other income and a higher depreciation and exploration charge by Rs 140 crore,” said Sumit Pokharna, analyst at Kotak Securities.

He added, on the positive side, Cairn had increased oil and gas production from the Rajasthan block by 10 per cent to 188,263 barrels a day and overall production rose 12 per cent to 228,662 barrels a day  as compared to the second quarter. “Any meaningful recovery in crude oil prices will improve the earnings,” said Pokharna.

The company said it had spent Rs 1,858 crore during the quarter, largely in the development of the Rajasthan block. Cairn India paid Rs 1,113 crore as profit petroleum to the government during the quarter, including Rs 949 crore for this block, beside Rs 694 crore as royalty for it.

The depreciation and depletion charge was Rs 891 crore as compared to Rs 703 crore in the second quarter, as a result of an increase in production and capitalisation of assets. It had net cash of $2.8 billion as on end-December.

The company said for the nine months ended December, its average production was 175,451 barrels a day, two per cent lower as compared to the same period last year, primarily on account of planned maintenance at the Mangala processing terminal in the second quarter.

Piyush Jain, analyst at Morning Star, said Cairn was primarily a low-cost onshore producer. ‘The capital outlay plans are on track, and we expect volume growth to pick up after one or two quarters, as the company’s drilling and well sustenance programme start to yield results. We believe investors have over-reacted on the crude prices and similarly on the onshore oil producers.”