Cairn India to invest in existing projects

Cairn India, the petroleum exploration arm of London-listed Vedanta Resources, plans to continue investing in its existing projects to enhance domestic hydrocarbon production despite tough operating conditions and uncertain economic environment mainly because of strong demand outlook for the commodities.

Based on the International Energy Agency's World Energy Outlook, by the year 2040, 91% of India's demand for oil and 49% demand for gas would be met by imports. This high dependence would entail significant cost to the economy, it said.

"We will continue to invest in our existing assets to increase production and maximize economic recovery. I remain confident that your company will play a pivotal role in India's quest for energy security," said Cairn India's FY16 annual report quoting chairman Navin Agarwal.

The key enablers for Cairn India's growth would be strength in 'execution', technology along with a strong balance sheet, he added.

Cairn India's Rajasthan block has significant national importance as it has considerably helped reduce country's crude oil imports.

The company operates over 27% of domestic crude oil production. During the year, Cairn India's operations helped reduce India's import bill by over Rs 21,000 crore and its gross contribution to the government exchequer was over Rs 10,000 crore.

Cairn India's success, over the years, has been reinforced by innovative application of technology. This has enabled early adoption of technology including enhanced oil recovery in the Rajasthan field.

One of the world's largest polymer flood projects at Mangala, continued to yield positive results and contributed an average of 14,000 barrels of oil equivalent per day, during FY2016, said the report.

During the year, amid low oil price environment, Cairn India has focussed on optimising costs, building talent and capabilities from within, and keeping employees focussed on goals and priorities of the organisation, said the report. This enabled the company to generate free cash flow over $637 million, it said.

Despite steep drop in crude oil prices, Cairn India adhered to its stated dividend policy with a pay-out amounts to 31.6% of the company's annual consolidated normalized net profit, informed Agarwal.

Regarding merger of the oil company with Vedanta, Agarwal said Cairn India continues to work towards completion of merger which would generate value for the shareholders and de-risk the company. Upon the merger, Cairn India will get access to Vedanta's tier-one metal and mining assets, which are well-invested, low cost and have a long life.

On Thursday, Cairn India reported a 28 per cent fall in its June quarter net profit at Rs 360 crore against Rs 501 crore in the corresponding period a year earlier. Revenues dipped to Rs 1,885 crore from Rs 2,627 crore due to slump in crude oil prices.