Cairn India today reported a steep 99 per cent drop in its third quarter net profit as it suffered double blow of falling oil prices and high taxes.
Consolidated net profit of Rs 8.69 crore, or Rs 0.05 per share, in October-December was 99.3 per cent lower than Rs 1.349/64 crore, or Rs 7.20 per share, in the same period a year ago, the company said in a statement.
Cairn got USD 34.5 per barrel price for the oil it produced from its flagship Rajasthan fields as compared to about USD 68 per barrel in the third quarter of previous fiscal.
The rate in October-December was 21 per cent lower than the prevailing Brent price due to the discount to international rate that have been provided in the pricing formula approved by the Government. Of this price, Cairn paid USD 9.6 per barrel in oil cess alone. Other statutory levies like royalty and profit petroleum were separate.
Companies like Cairn and ONGC have to pay Rs 4,500 per ton cess on domestic crude oil produced. They have been demanding that the rate be made ad valorem so that it falls when oil prices dip.
Cairn India said revenue dipped 42 per cent to Rs 2,039.49 crore in October-December.
The Mangala enhanced oil recovery (EOR) programme, which aims to boost output by injecting polymers in the field, has yielded 19,000 barrels per day of additional production.
“To ensure timely investment decision in Rajasthan block and realise fair price for our crude, we have approached the High Court to expedite the PSC extension process and allow us to export the crude. The matters are subjudice,” the statement said.
The High Court has directed the parties to exchange the requisite information/documents and to communicate, in a time bound manner.
“In an encouraging development, Government has also supported the industry’s view on rationalising the Cess charges given prevailing low oil prices,” it said.
Cairn India’s exploration and production licence for the Rajasthan block expires in 2019 and the company is seeking a 10 year extension. The government is considering its request for extension of the Production Sharing Contract (PSC).
Chief executive Mayank Ashar said, “We maintain our strategic objective of generating healthy free cash flow which has been successfully guiding us through the constantly deteriorating oil pricing scenario.
“Our unwavering commitment to improve cost efficiency continues to help us to navigate through the weak oil price situation and to generate free cash flow.”
He said the world’s largest EOR project at Mangala field in Rajasthan is yielding results. “We continue to pursue pre-development activities for our growth projects to make them future ready for rapid development on oil prices rebound.”
Cairn said gross production from Rajasthan block was 170,444 barrels of oil and oil equivalent gas, up 1.4 per cent over previous quarter due to ramp-up in Mangala EOR and additional volumes from new infill wells coming online at Aishwariya field.
During the quarter, a total of 15.1 million barrels of oil was sold, at an average rate of 163,869 barrels per day. Raageshwari field continued the gas production at an average of 28 million standard cubic feet per day in the third quarter of 2015-16.
During the quarter, Salaya Bhogat Pipeline (SBPL), storage terminal and marine export facilities at Bhogat were commissioned and consequently first cargo of Rajasthan crude oil was successfully loaded through the terminal for Mangalore Refinery and Petrochemical Ltd (MRPL).
“We are generating superior realisation through this sale,” the statement said.
Cairn said it had a cash and cash equivalents of Rs 18,470 crore (USD 2.8 billion) at the end of the third quarter.
On merger of the company with its parent Vedanta Ltd, the statement said, “the company is seeking directions of the Bombay High Court for convening meeting of all our relevant stakeholders.”
“Cairn India continues to remain committed to creating long term shareholder value. Planned net capital investment for FY16 is USD 300 million; 62 per cent in core Mangala, Bhagyam and Aishwariya (MBA) fields (in Rajasthan),” the statement said.