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Cairn India, which is a pure play crude oil company, was impacted by a sharp fall in crude oil prices which averaged $77.07 per barrel during the December quarter. Photo: Bloomberg
Cairn India, which is a pure play crude oil company, was impacted by a sharp fall in crude oil prices which averaged $77.07 per barrel during the December quarter. Photo: Bloomberg

Cairn India’s Q3 profit drops 53.2% on falling oil prices

Net profit fell to Rs1,349.64 crore, missing analysts' projections by a wide margin

Mumbai: Cairn India Ltd, India’s biggest private onshore crude oil producer, posted a 53.2% drop in profit for the third quarter of the current fiscal year as falling crude oil prices took a toll on the company’s profits.

Net profit fell to 1,349.64 crore, compared with 2,884 crore in the same period last year, missing analysts’ projections by a wide margin. However, revenue for the quarter fell by a lower than expected 29.9% to 3,504.10 crore compared with 5,000 crore in the third quarter of the previous fiscal.

A Bloomberg poll of 27 analysts had estimated Cairn India’s net profit at 1,602.4 crore. A poll of 26 analysts had estimated the revenue at 3,291.1 crore.

Cairn India, which is a pure play crude oil company, was impacted by a sharp fall in crude oil prices, which averaged $77.07 per barrel during the December quarter. The company sells its crude at almost $9-10 per barrel less than the Brent crude oil price.​

According to the numbers posted by the oil exploring subsidiary of London Stock Exchange-listed Vedanta Resources Plc, earnings before interest, tax, depreciation and amortization (Ebitda)—a measure of the operating profit of a company—fell by 43% to 2,026.87 crore from 3,555 crore in the year ago period.

Ebitda margin stood at 57.84% as against 71.1% in the third quarter of the last fiscal.

Ahead of the results, on Thursday, shares of the company closed 0.27% higher at 238.70 per share on BSE, while the benchmark Sensex index gained 0.41% to close at 29,006.02 points.

For the quarter ended December, Cairn India posted an average crude oil price realization of $68.7 per barrel, a fall of 28.8% from $96.5 per barrel posted in December 2013 quarter.

Cairn India, which contributes 28% to India’s total crude oil production, also posted a year-on-year (y-o-y) drop of 2% in gross daily production of oil and gas at 218,900 barrels of oil equivalent per day (boepd) while its flagship basin in Rajasthan—Barmer—registered a 4% y-o-y crude oil production drop to 178,400 barrels per day (bpd) as against 184,982 bpd in the same period last year.

However, the production on a sequential basis rose by almost 10% from 162,000 bpd.

The Barmer basin, with three main producing fields—Mangala, Bhagyam and Aishwariya, produce 99% crude oil and 1% natural gas.

Analysts said the company has actually shown healthy growth from last quarter’s production figure, which means that Bhagyam, which had been showing a fall in production, has been plugged.

Gagan Dixit, am analyst with brokerage Quant Capital Ltd, also said that while production has fallen on a year-on-year basis, a sequential rise shows that the company is not curtailing production due to a fall in crude prices. However, the stock continues to have several overhangs.

“There is no major trigger for the company’s share price which has underperformed the Sensex since the beginning of the year. Crude price is expected to stay low, no major uptick in production guidance, no clarity on cash utilization and investors lack confidence in the stock," he said.

According to Bloomberg, from the beginning of the fiscal, Cairn India lost 28.3% on the BSE while the benchmark Sensex gained 29.57% and the BSE Oil & Gas Index gained 4.14%.

Cairn India is the worst performing oil and gas stock on the stock exchange in this fiscal.

Other income for the quarter fell by 32% to 81.70 crore from 255.28 crore in the preceding quarter.

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