Cairn India Q2 net dips 51%

Cairn India today said it will hike Rajasthan crude oil output by 40% to 175,000 barrels per day by the end of this fiscal as it sees strong support from partner ONGC and government post resolution of the royalty issue.

The company, which had a tough time ever since its parent Cairn Energy Plc announced sale of majority stake to London- listed mining group Vedanta Resources, made a one-time payment towards royalty on the Rajasthan block that pulled down its quarterly profit for the first time in two years.

Net profit fell 51% to Rs 763 crore in July- September quarter against Rs 1,585.1 crore in the same period a year ago, the company said in a press statement here.

Cairn made a one-time royalty payment of $294 million on its 70% share of crude oil produced from Rajasthan fields. The company had agreed to make payments cost recoverable. The company does not pay royalty on Rajasthan crude and Oil and Natural Gas Corp (ONGC) on Cairn's behalf.

Cost recovery of royalty -- deducting royalty payments, like other project costs, from revenues earned from crude oil sales before profits are split between partners -- was one of the pre-conditions that the government had set for approving Cairn Energy's sale of 40% stake to Vedanta.

Having agreed to that, Cairn saw strong support from ONGC in raising output from Rajasthan and clearance for pending regulatory approvals from the government.

Cairn produces 125,000 bpd from the Mangala oilfield in Rajasthan block, the largest field in the prolific area. This output can be hiked to 150,000 bpd or 7.5 million tonnes a year while the rest will come from the block's second biggest oilfield, Bhagyam.

Bhagyam has an approved plateau production rate of 40,000 barrels per day but Cairn believes it can produce 60,000 bpd. Aishwariya field can do 25,000 bpd instead of 10,000 bpd envisaged earlier, and the company hopes to file revised field development plans (FDPs) for these shortly.

Cairn is likely to achieve at least 235,000 bpd of output or 30% of the nation's current domestic production by 2013.

Company CEO Rahul Dhir said: "With strong support from the Government of India and alignment with our partner ONGC, we are now poised to optimise development of the Rajasthan resource in the best interests of our nation."

The impact of royalty being made cost recoverable would be 15% on the company's revenues. Earnings per share fell to Rs 11 in the second quarter from Rs 14 per share in the first quarter because of the one-time charge for past payments.

Revenues dipped marginally to Rs 2,652.2 crore from Rs 2,686.4 crore.