 "Output ramp-up, rise in reserves key for Cairn India")
On net profit, Cairn India’s performance for the quarter ended September was in line with expectations, though the revenue fell short of estimates. While the rupee’s depreciation to record lows and the rise in crude oil prices (owing to the crisis in Syria) helped, a sharp increase in forex gains also boosted profits. Compared to the year-ago quarter’s forex loss of Rs 786 crore, Cairn reported a forex gain of Rs 429 crore. Thus, net profit, at Rs 338.5 crore, rose 46 per cent year-on-year. Excluding these gains, as well as other income contribution, profit before tax would have been almost flat at Rs 2,925 crore in the September quarter.
On Wednesday, the company stock closed at Rs 321.3 on the BSE, down 3.4 per cent, against a 0.5 per cent fall in the Sensex.
For the September quarter, the average rupee-to-dollar exchange rate stood at 62.1, compared with 55.8 in the June quarter and 55.1 in the year-ago quarter. Brent crude oil prices, which stood at $103 a barrel at the beginning of the quarter, soared to $117 levels, before dropping to $110 levels by the end of the quarter. Amid this, the revenue increased 4.7 per cent year-on-year to Rs 4,650 crore, lower than the consensus estimate of Rs 4,862 crore, as many analysts had factored in higher oil production.
Cairn India reiterated its production remained on track and the company would close FY14 with gross production of about 2,25,000 barrels of oil equivalent per day (boepd), including about 2,00,000 boepd from the Rajasthan block. For the quarter, the gross production stood at 2,13,299 boepd, with the Rajasthan block contributing 1,75,478 boepd. In an analysts call after the announcement of the results, the company said government’s recently announced policy on integrated field development would help reduce its field development timeline by half. This would help fast-track production and add to reserves in the long run.
Amid this environment, the company’s prospects remain healthy, and this is why most analysts are positive on the stock.
Rikesh Parikh, vice-president (institution corporate broking), Motilal Oswal Securities, says, “We remain optimistic on Cairn on the back of steady crude oil prices; currency depreciation would support earnings, while the management continues to forecast a ramp-up in production and higher payout (interim dividend of Rs 6 a share).”
Angel Broking’s Bhavesh Chauhan maintains a ‘buy’ rating on the stock.
Of the 28 analysts polled by Bloomberg after the results were announced on Tuesday, 25 have ‘buy/accumulate/overweight’ ratings; two have a ‘hold/neutral’ rating and one has a ‘sell’ rating. The consensus target price was Rs 390.
The gains for the stock would depend on Cairn’s ability to meet its production estimate and addition to its proven oil and gas reserves, something the markets would be monitoring closely.
Nitin Tiwari at Religare Capital Markets says an increase in the reserve base and utilisation of cash on the books remains crucial to the stock’s performance. Cairn is a cash-rich (and debt-free) company, with Rs 18,319 crore of cash and cash equivalent, as of September-end. While the company has stated it would distribute 20 per cent of its profits as dividends, deployment of this cash towards exploration and production activities for higher returns should help boost investor confidence.
On Wednesday, the company stock closed at Rs 321.3 on the BSE, down 3.4 per cent, against a 0.5 per cent fall in the Sensex.
For the September quarter, the average rupee-to-dollar exchange rate stood at 62.1, compared with 55.8 in the June quarter and 55.1 in the year-ago quarter. Brent crude oil prices, which stood at $103 a barrel at the beginning of the quarter, soared to $117 levels, before dropping to $110 levels by the end of the quarter. Amid this, the revenue increased 4.7 per cent year-on-year to Rs 4,650 crore, lower than the consensus estimate of Rs 4,862 crore, as many analysts had factored in higher oil production.
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Operational profit stood at Rs 3,481 crore (up 1.6 per cent year-on-year) and margins stood at 74.9 per cent, helped by higher realisations and lower exploration costs. The management said realisations from the Rajasthan block, at $96 a barrel (13 per cent discount to Brent prices), helped boost overall realisations.
Cairn India reiterated its production remained on track and the company would close FY14 with gross production of about 2,25,000 barrels of oil equivalent per day (boepd), including about 2,00,000 boepd from the Rajasthan block. For the quarter, the gross production stood at 2,13,299 boepd, with the Rajasthan block contributing 1,75,478 boepd. In an analysts call after the announcement of the results, the company said government’s recently announced policy on integrated field development would help reduce its field development timeline by half. This would help fast-track production and add to reserves in the long run.
Amid this environment, the company’s prospects remain healthy, and this is why most analysts are positive on the stock.
Rikesh Parikh, vice-president (institution corporate broking), Motilal Oswal Securities, says, “We remain optimistic on Cairn on the back of steady crude oil prices; currency depreciation would support earnings, while the management continues to forecast a ramp-up in production and higher payout (interim dividend of Rs 6 a share).”
Angel Broking’s Bhavesh Chauhan maintains a ‘buy’ rating on the stock.
Of the 28 analysts polled by Bloomberg after the results were announced on Tuesday, 25 have ‘buy/accumulate/overweight’ ratings; two have a ‘hold/neutral’ rating and one has a ‘sell’ rating. The consensus target price was Rs 390.
The gains for the stock would depend on Cairn’s ability to meet its production estimate and addition to its proven oil and gas reserves, something the markets would be monitoring closely.
Nitin Tiwari at Religare Capital Markets says an increase in the reserve base and utilisation of cash on the books remains crucial to the stock’s performance. Cairn is a cash-rich (and debt-free) company, with Rs 18,319 crore of cash and cash equivalent, as of September-end. While the company has stated it would distribute 20 per cent of its profits as dividends, deployment of this cash towards exploration and production activities for higher returns should help boost investor confidence.