Cairn India Ltd. (CAIR), operator of the nation’s biggest oil field on land, reported a 19 percent increase in fourth-quarter profit on higher production and predicted output would remain flat this financial year.
Group net income climbed to 30.4 billion rupees ($498 million) in the three months ended March 31 from 25.6 billion rupees a year earlier, the company, based in Gurgaon near New Delhi, said today in stock exchange filing. Profit beat the 29.6 billion-rupee median of 27 analyst estimates compiled by Bloomberg. Sales rose 16 percent to 50.5 billion rupees.
The company, controlled by billionaire Anil Agarwal’s Vedanta Resources Plc, is planning to spend $3 billion over the next three years to drill more wells in its biggest deposit, in the northwestern state of Rajasthan. An interim stagnation in production will concern Agarwal as he depends on higher returns from the $8.7 billion acquisition to counter a slump in his metals businesses.
“The stock will really feel the heat if production doesn’t rise this year,” said Kamlesh Kotak, head of research at Asian Markets Securities Pvt. in Mumbai. “Volumes won’t grow and the lower selling price evident in the quarter is going to put the company under pressure over the next year.”
The company sold oil and natural gas at an average $94.4 a barrel of oil equivalent in the quarter, 5 percent less than a year earlier, according to the statement. The average price of Brent oil in London was $107.87 a barrel in the quarter.
The stock fell 3.1 percent to 352.40 rupees in Mumbai trading today, compared with a 0.5 percent gain in the benchmark S&P BSE Sensex index. The stock has gained 8.9 percent this year, reaching a two-year high on April 17. The earnings were announced after trading closed for the day.
Total output from Cairn India’s fields rose 11 percent to an average 224,429 barrels of oil equivalent a day, according to the statement. Average production from the Rajasthan block was 190,881 barrels of oil equivalent a day in the quarter, 13 percent more than a year earlier. Cairn India produces oil and gas from two other smaller blocks in the country.
The company earned 4.1 billion rupees as income from sources other than its main business, 86 percent more than a year earlier, according to the statement. It had 137.1 billion rupees of cash and equivalent invested in rupee funds and $1.53 billion in dollar funds as of March 31.
Total average oil and gas production from Cairn India’s fields in the year ended March 31 was 218,651 barrels of oil equivalent per day, 6 percent higher than a year earlier. It said compounded annual growth until the year ended March 2017 would be as much as 10 percent, according to the statement.
In January 2013, the government approved the company’s plan to raise production to a peak rate of 300,000 barrels a day and next month allowed it to explore for new oil deposits in Rajasthan.
The explorer “has a mission” to accelerate its output from the fields to 400,000 barrels, Chief Executive Officer P. Elango said in December.
The company is spending $560 million in a so-called enhanced oil recovery project to produce from harder-to-extract pockets, Elango said then. The project, planned to start this year, will yield an additional 100 million barrels from the block, which has proven reserves of 1 billion barrels.
To contact the reporter on this story: Rakteem Katakey in New Delhi at firstname.lastname@example.org
To contact the editors responsible for this story: Jason Rogers at email@example.com Indranil Ghosh, Alex Devine