Cairn India Limited: First Quarter Financial Results for the Period Ended 30th June, 2014
Cairn India Limited (CIL), one of the fastest growing energy companies in the world, today announces its quarterly financial results for the period ending 30th June, 2014. Source: 2013 Platts Top 250 Global Energy Rankings
Mr. Sudhir Mathur, Interim CEO, Cairn India said:
"In line with our vision to contribute to the nation's energy security, we are confident of not only achieving the stated exploration target of 3bn barrels of hydrocarbons in-place, ahead of schedule, but also of adding another 3 bn barrel to our un-risked prospect inventory.
With multi-Tcf potential, we expect gas to be a significant contributor in our product mix. Before end of financial year 2015, we anticipate doubling of gas production from Rajasthan.
Our two main projects of enhanced oil recovery and debottlenecking Mangala Processing Terminal are as per schedule."
Q1 FY 15 Highlights
Financial:
Production:
Rajasthan Exploration:
Rajasthan Gas Development:
Rajasthan Oil Development:
Corporate and Regulatory Developments
The Equity Share Buyback programme of the Company closed on 22nd July, 2014. During the Buyback period, the Company bought back 36,703,839 shares for a total consideration of approximately INR
1,225 crore from the open market through stock exchanges. As a result, equity share capital of the company stands reduced to 1,874,196,581 equity shares.
On the Regulatory front, Environment Clearance from RJ block to augment production to 300kboepd was received during the quarter.
In conjunction with these financial results Cairn India is hosting an Investor Conference Call today. Details for the live audio webcast and dial in numbers for the call are available at the Cairn India website (http://www.cairnindia.co).
Financial Review
Revenue reported for Q1 FY15, post profit sharing with the Government of India and the royalty expense in the Rajasthan block, was INR 4,483 crore up 10% YoY on account of higher volumes and realizations despite higher profit petroleum tranche in Rajasthan. During the quarter, total profit petroleum was INR 1,778 crore (US$297 million) including INR 1,533 crore (US$ 256 million) for Rajasthan block. For the quarter, royalty for the RJ block was INR 1,069 crore (US$ 179 million).
Earnings before Interest, Tax, Depreciation and Amortisation was INR 3,120 crore for the quarter, up 3% YoY. Profit after Tax in Q1 FY15 was INR 1,093 crore, down by 65% YoY primarily due to change in method of depreciation from Straight line method (SLM) to Unit of production (UOP). Accordingly, diluted EPS was lower at INR 5.76 though the cash earnings per share was much higher at INR 18.17. Rupee depreciation led to Forex gain of INR 99 crore in the quarter.
Cash and Cash equivalents as at June 30, 2014 were ~INR
13,561 crore in rupee funds and
~US$ 922 million in dollar funds.
Operational Activity across the Portfolio
Exploration Review
During the quarter, we made significant advancements in our exploration and appraisal activities paving the way for future growth opportunities.
Rajasthan (Block RJ-ON-90/1)
During Q1 FY15, we have drilled three successful exploration and four successful appraisal wells.
The fifth rig dedicated to exploration and appraisal commenced drilling in this quarter. With the addition of higher capacity rigs in our drilling program, we have been able to drill two high impact prospects to test potential gas accumulation in the deeper section. The initial results obtained are encouraging and testing is ongoing.
The 3D seismic data acquisition programme for ~1,900 square kilometres that is currently underway will further help in identifying new exploration leads and augmenting the prospective resource base. As at 30th June, 2014, we have acquired 411 square kilometres of 3D seismic data.
Ravva (Block PKGM-1)
In November 2013, we commenced drilling of the 'High Temperature, High Pressure' (HTHP) deep exploration prospect LO110 in Ravva. The objective of the well was to test the hydrocarbon potential within Late Oligocene sands underlying the existing Ravva field. The well is currently awaiting logging.
KG Onshore (Block KG-ONN-2003/1)
The Declaration of Commerciality for the Nagayalanka discovery is currently under Management Committee review. The evaluation of the results of the Nagayalanka appraisal wells and extended well test is in progress with the objective of optimizing the field development plan. Nagayalanka-NW-1 encountered over 230m of sand in the Jurassic Golapali Formation and an 80m synrift section. Fracking and flow testing of the reservoir sections have been completed and the well has been temporarily suspended pending further analysis.
KG Offshore (Block KG-OSN-2009/3)
934 km[2] of full fold 3D seismic data has been acquired to date. Planning has begun for an additional 3D seismic programme in the remaining area, with acquisition expected to begin by end of Q3 FY 15. Exploration is focused upon building a high quality prospect inventory across multiple play types.
Mumbai Offshore (Block MB-DWN-2009/1)
2128 line km of 2D broadband seismic has been acquired. The processing contract has been awarded and is expected to begin shortly. Planning for acquisition of additional 500 square kilometres of 3D seismic data is underway.
Palar-Pennar (Block PR-OSN-2004/1)
The application for the shift of the restricted boundary has been accepted by government authorities, paving the way for resumption of exploration activity.
Sri Lanka (Block SL 2007-01-001)
In 2013, Cairn concluded appraisal and commercial studies to determine the next steps for the gas discoveries made on the block. We continue discussions with the Sri Lankan Government regarding commercial terms necessary to monetize the discovered gas resources on the block.
South Africa (Block 1)
Initial interpretations of the 3D volumes over South Africa Block 1 indicate that the acreage contains exciting plays similar to those in offset blocks along the West African margin. A deep water oil and a shallow water gas play comprise two promising play fairways that we will work up through ongoing interpretation.
Based on the preliminary assessment of the seismic data, a working petroleum system with multiple oil and gas plays is likely. The on-going seismic processing and technical evaluation is expected to identify drillable prospects during the remainder of 2014.
Operational Review
* Includes internal gas consumption
Rajasthan (Block RJ-ON-90/1)
* Includes internal gas consumption
Operations and Development
The Rajasthan Block produced ~16.7 mm barrels of oil equivalent in the quarter, achieving a cumulative total production of ~233 mmboe until the end of Q1 FY15. 34 new wells were brought on production during the quarter contributing to the Block's gross average production of 183,164 boepd. Sequential quarterly production was impacted by an unplanned outage at MPT in May 2014, resulting in reduced facility uptime of ~96%. The overall operating expense in Rajasthan continued at a low of US$ 4.2/bbl for Q1 FY15.
Lowering of drilling cycle time and significant improvements in rig movement times are examples of our focus on operational excellence. In line with our adoption of high HSE standards, we are planning to shutdown the processing terminal for around 10 days for routine operational and statutory maintenance activity in August, 2014. This could impact the daily gross average production rate for Q2 FY15. However, we would be utilizing this opportunity to tie-in new facility enhancements related to the development projects.
An average of 182,715 bopd, amounting to ~16.6 mmbbls for the Q1 FY14-15 was sold to PSU and private refiners, across India. Gas sales during the quarter were ~8 mmscfd, amounting to total sales of ~0.7 Bscf. The average crude price realisation for the quarter was US$ 97.5/bbl, an implied ~11.1% discount to Dated Brent.
We continue to focus on executing the major development projects in our Rajasthan Block and the related initiatives for the required facilities' enhancement.
Ravva (Block PKGM-1)
* Includes internal gas consumption
Operations and Development
Ravva block has been an excellent example of good reservoir management. Since inception in 1994, the Ravva block has produced more than 263 mmbbls of crude and over 332 billion cubic feet of gas, more than 2.5 times the initial resource estimates at the time the PSC was awarded.
During the quarter, the block produced 23,940 boepd supported by volumes from 3 new 4D infill wells, with a plant uptime of 99.7%. Due to the need for temporarily shut in wells as a precaution during rig movement, production of oil and gas is slightly muted in Q1 FY15 on year on year basis.
The campaign, based on the 4D seismic survey, commenced in March-14 using a mat supported jackup rig. The infill drilling campaign and prudent reservoir management are expected to sustain production levels and enhance overall recovery factor.
During the quarter, ~1.7 mmbbls of crude and ~2.4 billion scf of gas were sold, averaging 18,960 bopd of crude oil and ~26 mmscfd of gas, respectively.
Cambay (Block CB/OS-2)
* Includes internal gas consumption
Operations and Development
Since inception in 2002, the Cambay block has produced ~20 mmbbls of crude and over 220 billion cubic feet of gas.
During the quarter, the block produced 10,765 boepd, with a plant uptime of 99.7%. Production was higher on account of successful well intervention techniques undertaken in the previous quarter. In the same period, ~1.1 mmbbls of crude oil was evacuated through sea route. With this route, there has been an improvement in realisations as wells as a reduction in distance covered to transport crude oil by road, thus reducing the safety and environment risk involved.
During the quarter, ~0.9 mmbbls of crude and ~1.3 billion scf of gas were sold averaging 9,406 bopd of crude oil and ~14 mmscfd of gas, respectively.
Talent and Technology Development
During the quarter, the technical leadership team has been further strengthened with Director Exploration, Director Subsurface and Head for Integrated Engineering coming on-board to assist in the focused execution of programs. We continue our focus on investing in leaders for tomorrow with a new intake of 72 graduate & management trainees who have joined recently from established institutes like ISM, IIMs & IITs. The young talent helps us address the growing concern of the big crew change and build pipeline for future technical leadership roles.
Our focus is to continue to build on key specialist roles across verticals and to look at employer branding in a big way which will enable us to reach out to the best global talent.
Health, Safety, Environment and Sustainability
We are committed to meet the highest international standards of HSE and are in the top quartile HSE performance versus our peers as per OGP report 2013. All our operating assets maintain an excellent safety culture in an endeavour to record LTI-free work performance.
LTI frequency (Lost Time Incidents per million man hours) for Q1 FY15 stands at 0.60, higher than 0.16 in FY14, driven by 9 incidents. Primary reason for increase in LTIFR is insufficient control by Contractors with respect to Safety of their employees, especially on public roads. With an objective to prevent the recurrence of such incidents, Know Your Hazard, a program to recognize hazards at work place, has been successfully launched. Communication on driving related Zero Tolerance Behaviour is being reinforced across the contractors and workforce. We also undertook several HSE awareness initiatives like Environment Week celebration across all the sites engaging our employees, contract personnel and local communities.
Corporate Social Responsibility
The board approved the Corporate Social Responsibility policy as per the section 135 of the New Companies Act. In Q1 FY15, we continued to increase the reach of our local content and CSR programs. The major highlights include activities around potable water; education and vocational training, sanitation and healthcare; and enhancing farm productivity:
Going forward the plan is to scale up our existing programs to reach each and every household in our operational area.
Outlook
With our ongoing net capital investments program of $3Bn through end of FY17, we remain committed to the creation of long term shareholder value.
Based on our recent exploration successes, we are confident that we will establish ~3bn boe hydrocarbons in-place, significantly ahead of schedule. With renewed focus on appraisal and development, we aim to accelerate 2C-2P resources-reserves conversion. This strategy will contribute to the advancement of reserves booking in order to achieve our stated 2P RRR target of 150% over a three year period.
We have identified significant gas potential in the block and plans are underway to advance commercialisation of discovered gas volumes. Considering the significant potential of the Rajasthan asset, we continue to focus on other major development projects to enhance recovery and achieve a 3 year production CAGR of 7-10% from known discoveries with flat production in FY15.
Cairn India Limited Fact Sheet
On 9 January, 2007, Cairn India Limited was listed on the Bombay Stock Exchange and the National Stock Exchange of India. Cairn India is now part of the Vedanta Group, a globally diversified natural resources group.
Cairn India is headquartered in Gurgaon in the National Capital Region. The Company has operational offices in India including Andhra Pradesh, Gujarat, Rajasthan, Tamil Nadu and International offices in Colombo and London.
Cairn India is one of the largest independent oil and gas exploration and production companies in India. Together with its JV partners, Cairn India accounts for around one fourth of India's domestic crude oil production. Average gross operated production was 217,869 boepd in Q1 FY 15. The Company sells its oil to major refineries in India and its gas to both PSU and private buyers.
The Company has a world-class resource base, with interest in seven blocks in India, one in Sri Lanka and one in South Africa. Cairn India's resource base is located in four strategically focused areas namely one block in Rajasthan, two on the west coast of India, five on the east coast of India (including one in Sri Lanka) and one in South Africa.
The blocks are located in the Barmer Basin, Krishna-Godavari Basin, the Palar-Pennar Basin, the Cambay Basin, the Mumbai Offshore Basin, the Mannar Basin and Orange Basin.
Cairn India's focus on India has resulted in a significant number of oil and gas discoveries. Cairn India made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. To date, thirty three discoveries have been made in the Rajasthan block RJ-ON-90/1 and the exploration and appraisal drilling campaign is targeting over 3 billion barrels of gross oil in place resources.
In Rajasthan, Cairn India operates Block RJ-ON-90/1 under a PSC signed on 15 May, 1995 comprising of three development areas. DA 1 (1,859 km[2]) includes discoveries namely Mangala, Aishwariya, Raageshwari and Saraswati, DA 2 (430 km[2]), includes the Bhagyam and Shakti fields and DA 3 (822 km[2]) comprising of the Kaameshwari West Development Area, is shared between Cairn India and ONGC, with Cairn India holding 70% and ONGC having exercised their back in right for 30%.
The total resource base supports a long term vision to produce 300,000 boepd, subject to exploration success, further development investments and regulatory approvals.
In Andhra Pradesh and Gujarat, Cairn India on behalf of its JV partners operates two processing plants, 11 platforms and more than 200 km of sub-sea pipelines with a production of over 34,000 boepd as of Q1 FY 15.
Block SL-2007-01-001 was awarded to Cairn Lanka in the bid round held in 2008. This offshore block is located in the Gulf of Mannar. The water depths range from 400 to 1,900 meter. The signing of the Petroleum Resources Agreement (PRA) to explore oil and natural gas in the Mannar Basin was held in July 2008 in Colombo.
The farm-in agreement was signed with PetroSA on 16 August, 2012 in the 'Block-I' located in Orange basin, South Africa. The block covers an area of 19,898 sq km. The assignment of 60% interest and operatorship has been granted by the South African regulatory authorities.
India's gross imports of crude oil stood at 3.8* million bopd in 2013. India's domestic crude oil production for FY2013-14 was approximately 0.76** million bopd of which Cairn India operated assets (Ravva, CB/OS-2 and the RJ-ON-90/1) contributed ~28%.
For further information on Cairn India Limited, kindly visit http://www.cairnindia.com
*BP Statistical Review of World Energy 2014
**MoPNG March 2014 production statistics
Corporate Glossary
Disclaimer
This material contains forward-looking statements regarding Cairn India and its affiliates, our corporate plans, future financial condition, future results of operations, future business plans and strategies. All such forward- looking statements are based on our management's assumptions and beliefs in the light of information available to them at this time. These forward-looking statements are by their nature subject to significant risks and uncertainties; and actual results, performance and achievements may be materially different from those expressed in such statements. Factors that may cause actual results, performance or achievements to differ from expectations include, but are not limited to, regulatory changes, future levels of industry product supply, demand and pricing, weather and weather related impacts, wars and acts of terrorism, development and use of technology, acts of competitors and other changes to business conditions. Cairn India undertakes no obligation to revise any such forward-looking statements to reflect any changes in Cairn India's expectations with regard thereto or any change in circumstances or events after the date hereof. Unless otherwise stated the reserves and resource numbers within this document represent the views of Cairn India and do not represent the views of any other party, including the Government of India, the Directorate General of Hydrocarbons or any of Cairn India's joint venture partner.
About Sesa Sterlite Limited
Sesa Sterlite Limited ("Sesa Sterlite") is one of the world's largest diversified natural resources companies. Our business primarily involves exploring, extracting and processing minerals and oil & gas. We produce oil & gas, zinc, lead, silver, copper, iron ore, aluminium and commercial power and have a presence across India, South Africa, Namibia, Ireland, Australia, Liberia and Sri Lanka. Sesa Sterlite has a strong position in emerging markets with over 80% of its revenues from India, China, East Asia, Africa and the Middle East.
Sustainability is at the core of Sesa Sterlite's strategy, with a strong focus on health, safety and environment and on enhancing the lives of local communities.
Sesa Sterlite is a subsidiary of Vedanta Resources plc, a London-listed company. Sesa Sterlite is listed on the Bombay Stock Exchange and the National Stock Exchange in India and has ADRs listed on the New York Stock Exchange.
Disclaimer
This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behavior of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
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Sesa Sterlite Limited
(Formerly known as Sesa Goa Limited)
Vedanta, 75, Nehru Road,
Vile Parle (East), Mumbai - 400 099
http://www.sesasterlite.com
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