New Delhi / Mumbai: Cairn India Ltd, a unit of UK-based explorer Cairn Energy Plc, reported an 84% decline in quarterly profit following a drop in oil prices.
Profit in the three months ended 31 March, including that of units, fell to Rs18.68 crore from Rs116 crore a year earlier, Cairn India said in a statement on Wednesday. Income from operations declined 43% to Rs181 crore.
“The decline in oil prices will affect Cairn’s operations in the quarter,” Sandeep Randery, a Mumbai-based analyst at Brics Securities Ltd who recommends investors sell the stock, said before the earnings were announced.
“What investors are looking forward to is the start of production at their Rajasthan fields, which will determine future revenue,” he said.
The explorer’s earnings from its biggest field in Rajasthan, which is ready to start production, may be capped by oil’s 51% decline in a year as the global recession saps fuel consumption. India imports around 75% of its crude.
Crude oil for July delivery rose as much as 1.6% to $63.45 (Rs3,026.5) a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest since 13 November. Oil was at $61.92 at 8pm India time.
Cairn is ready to start oil production from its Mangala terminal in Rajasthan, according to the statement. Output of 30,000 barrels a day will begin in the June-August period and will increase to 80,000 barrels in the last three months of the year. Peak production of 175,000 barrels a day will be reached in 2011.
The initial output from Rajasthan will be sold to state-run refiners Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and Mangalore Refinery and Petrochemicals Ltd, which have been nominated by the Union government. Discussions on the selling price of the crude are under way, Cairn India said.
Mangalore Refinery is close to settling a price with Cairn India, R.S. Sharma, chairman of the refiner, said on Wednesday. Cairn’s crude is to be benchmarked to the Bonny Light variety and may be sold at a discount to it, Sharma said.
Cairn’s Ravva field averaged production of 52,539 barrels of oil equivalent a day in 2008-09, while output at its Cambay area was 13,607 barrels of oil equivalent a day.
The explorer has changed its financial year to end on 31 March from 31 December, according to the statement.