Cairn halves FY16 capex on weak oil price environment

Company says it has cut capex for next fiscal to $500 million

After sacking over 400 employees, Cairn India Ltd today said it has more than halved its capital expenditure in 2015-16 because of drop in oil price.

"In continuation of our communication at the end of third quarter of 2014-15 and in light of the current oil price environment, Cairn is taking a proactive approach to capital allocation and shareholder returns," the company said in a statement.

Stating that it will only undertake projects that are economically viable at current oil prices, Cairn said it has cut capex for next fiscal to $500 million.

"With close to $1.1 billion of capex invested in 2014-15, the company is revising the capex for FY16 from the projected $1.2 billion to $500 million, while deferring the rest," the statement said.

Additionally, the company management's focus will be on re-engineering projects and re-negotiating contracts to improve project economics.

"The company will remain agile to make investments to enhance volumes. Despite the partial deferment of capex, the volumes will yet see growth in the coming fiscal," the statement said.

Cairn had last month sacked over 400 employees as its revenue got hit as falling crude oil price hurts its bottomline.

At that time, the company said, "The past few months have brought significant changes in the global oil and gas space. The reductions in crude oil prices have deleteriously impacted the sector, globally."

"While we continue to focus on our key projects to deliver on our commitment, we are simultaneously working on resource optimization to drive efficiencies for value generation, in the current environment," it had said without specifying the number of employees laid off.

Cairn's statement today said it has received approval for the Raag Deep Gas Project in the predominantly oil-rich Rajasthan block.

"As always, the focus will be on free cash flow after capex and dividend payout," it said.

Cairn India Managing Director and CEO Mayank Ashar said, "We would like to give confidence to our shareholders that we are 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.