Cairn India announces 58% cut in FY16 capex projection to $500 million

Despite the partial deferment of capex, the volumes will yet see growth in the coming fiscal, the company says

Battered by the historic decline in global crude oil prices, Cairn India, the petroleum exploration arm of London-listed metals and mining giant Vedanta Resources, has announced a 58 per cent cut in its projected capital expenditure for the next financial year to $500 million from the earlier projection of $1,200 million.

"The Company is revising the capex for FY16 from the projected $1.2 billion to $500 million while deferring the rest. Despite the partial deferment of capex, the volumes will yet see growth in the coming fiscal," the company said in a statement.

Cairn India said its capex in the current financial year stands at $1.1 billion and "in light of the current oil price environment", it is taking a proactive approach to capital allocation and shareholder returns. The company's Managing Director and Chief Executive Mayank Ashar said the company is more focused than ever to "drive operational efficiencies" in the current crude price environment.

"Our cash-rich balance sheet and best-in-class cost profile provide a solid foundation to operate our high margin core fields. This gives us the optionality to be selective about growth projects in these challenging times," the statement quoted Ashar as saying.

The company also said it will undertake projects that are economically viable at current oil prices, its management's focus is on "re-engineering projects and re-negotiating contracts" to improve project economics and it will remain agile to make investments to enhance volumes.

According to a media report, Cairn had last month sacked over 400 employees as its revenue got hit as falling crude oil price hurts its bottomline. A company spokesperson said Cairn India contests that figure of lay-offs.

The company also said today it has received approval for the Raag Deep Gas Project in the oil-rich Rajasthan block and it will focus on free cash flow after capex and dividend payout.