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Cairn India Net Drops to Lowest in 3 Years on Depreciation Rule

July 23 (Bloomberg) -- Cairn India Ltd., operator of the nation’s biggest oil field on land, reported the lowest profit in 11 quarters after booking a one-time depreciation charge on new accounting rules.

Group net income declined 65 percent to 10.9 billion rupees ($182 million), or 5.76 rupees a share, in the first quarter ended June 30 from a year earlier, the company, based in Gurgaon near New Delhi, said today in stock exchange filing. Profit missed the 27.3 billion-rupee median of 31 analyst estimates compiled by Bloomberg. Sales rose 10.3 percent to 44.83 billion rupees.

Cairn India, 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. The company said in April its output will remain flat this year, hindering Agarwal’s confidence in the oil business to counter a slump in his metals division.

The company booked a charge of 16.3 billion rupees after adopting new guidelines to calculate depreciation of oil and gas assets. Total expenses increased 29 percent to 21.5 billion rupees.

Cairn India shares rose 0.7 percent to 345.55 rupees in Mumbai trading today, compared with a 0.5 percent gain in the benchmark S&P BSE Sensex. The stock has gained 7 percent this year, lagging behind the S&P BSE Oil & Gas Index’s 24 percent increase. The earnings were announced after the market close.

The company produced 217,869 barrels of oil equivalent a day during the quarter. Production from its flagship Rajasthan block was 183,164 barrels a day, according to the statement.

To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Abhay Singh, Indranil Ghosh

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