April 9 (Bloomberg) -- Cairn India Ltd., which extracts crude from the nation’s biggest deposit on land, rose the most in a week in Mumbai after saying it found oil in a new well.
The shares climbed as much as 3.7 percent to 296 rupees, poised for the biggest gain since April 1, and traded at 293 rupees as of 11:05 a.m. in Mumbai. The stock has fallen 7.2 percent this year, compared with a 4.6 percent drop in the Nifty Index.
Cairn India, controlled by billionaire Anil Agarwal’s Vedanta Resources Plc, discovered oil after a gap of four years when it resumed drilling in a new deposit in its block in the western state of Rajasthan. The company is accelerating plans to start 30 wells in the year started April 1 and a similar number in the following 12 months as it seeks to raise production in the area by 71 percent to 300,000 barrels a day.
“They have to drill more wells to access the potential of the discovery and see if it can significantly add to output,” said Gagan Dixit, a Mumbai-based analyst with Quant Broking Pvt., who has a buy rating on the stock. “Investors will have to wait for more drilling results for the shares to really take off.
A slower-than-expected production ramp-up at the Rajasthan block has impeded Cairn India’s shares this year. The company discovered new oil in the Dharvi Dungar sands in Rajasthan’s Barmer district and is evaluating the size of the reserves, according to a stock exchange filing today.
Cairn India started its first commercial sales of natural gas from the area and activated a new oilfield to revive lower-than-expected output on March 23. The new field, called Aishwariya, has capacity to produce 10,000 barrels a day.
Cairn India’s profit rose 48 percent to 33.4 billion rupees ($613 million), or 16.5 rupees a share, in the third quarter ended Dec. 31 after it raised output from Barmer.
The government in January approved Cairn India’s plan to raise production from the Barmer block to 300,000 barrels a day, equivalent to about 40 percent of India’s current output. To reach that target, the company will need to find more oil in the area, Chief Executive Officer P. Elango said in February. The block has proved reserves of 1 billion barrels.
Vedanta Resources and unit Sesa Goa Ltd. completed buying a 59 percent stake in Cairn India from Cairn Energy Plc and other shareholders in December 2011. India’s cabinet approved the takeover on the condition the cost of developing the Rajasthan field would include royalty, which could be recovered from sales.
Oil & Natural Gas Corp., Cairn India’s partner with a 30 percent stake in the Rajasthan block, has paid the entire royalty since production started in August 2009.
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