New Delhi: Mining billionaire Anil Agarwal- controlled Cairn India Wednesday reported a 70 percent plunge in September quarter net profit on oil prices dipping to their lowest levels in six years.
Cairn, which operates India's biggest onland oilfield at Barmer district in Rajasthan, reported net profit dropping to Rs 673 crore or Rs 5.54 per share in July-September compared with Rs 2,278 crore or Rs 13.77 per share in the same period a year ago.
Revenue dropped 44 percent to Rs 2,242 crore, the company said in a statement.
The company sold oil at an average price of USD 43.7 a barrel in the second quarter, 53 percent lower than USD 92.1 a year earlier.
The slump in oil prices has prompted the oil producer to cut its capital expenditure plans for the current fiscal by more than half to USD 500 million.
The drop was "due to fall in crude prices and increase in discount to Brent for Rajasthan crude," it said.
As per government approved formula, Cairn sells Rajasthan crude oil at a small discount to widely traded Brent crude oil.
"Discount to Brent for Rajasthan crude widened to 14.3 percent from 9.9 percent on sequential basis due to lower demand for heavy crude," Cairn said.
Decline in benchmark Brent prices was followed by a greater incentive for processing light grades, driving the demand for light crude. Oversupply of heavy crude also suppressed the prices.
Depreciation of 2.3 percent in the average exchange rate for the rupee against the dollar partially offset the impact of crude prices.
Cairn ended 0.5 percent higher on BSE to close at Rs 154.25 before the results were announced.
The company had a cash balance of Rs 17,943 crore as on September 30.
It produced 2,05,361 barrels of oil equivalent a day during the quarter, six percent more than 194,508 barrels per day in the same period a year ago.
Output from its flagship Rajasthan block was 3 percent higher at 168,126 barrels a day.
It relinquished exploration rights in Sri Lanka.
"We have submitted the requisite closure documents to Petroleum Resources Development Secretariat (PRDS), the regulatory authority for petroleum resources in Sri Lanka. The review is under process and is expected to be closed in October 2015," the statement said.
On outlook, Cairn said despite prevailing low oil prices and substantial cut in capex, the company will at a minimum maintain Rajasthan production in current year at FY15 levels.
Cairn India Managing Director and CEO Mayank Ashar said:
"Our strategic objective is to maintain healthy cash flows post dividend. The last quarter has seen this strategy tested and we have responded by recommitting our efforts to drive down costs and focus on adopting advanced technologies to improve our efficiencies and productivity."
Enhanced Oil Recovery from core fields, recovery of tight oil reserves and Raageshwari Deep gas are all examples of projects where technology and cost efficiency factors are at the heart of Cairn's growth strategy.
"With good visibility in near term on multiple projects in the pipeline, we are optimistic of meeting our production projections for 2015-16," he said.
Ashar said the company was in dialogue with the government on improving the investment climate for oil and gas industry in the country.
"We believe that these discussions will be enablers of our mid-term growth ensuring consistent value creation to our stakeholders," he said.
Cairn is in talks with the government to reduce the Rs 4,500 per tonne cess it has to pay on Rajasthan crude oil as well as extension of the licence for the Rajasthan block.
"We believe that these policy revisions will enhance the investment climate for the oil and gas sector in India," the statement said.
