Cairn India

With crude prices down, it was expected that current Q2 quarter would be a tough one for Cairn India, just like the Q1. And it was disappointing; it posted a 70% (YoY) slump in net profit while revenue fell 44% at Rs.2242 crore. The main reason was lower crude price – during Q2, the company sold crude oil at an average price of $43.7/barrel v/s $92.1/barrel (YoY), a 52% drop while gas was sold at $5/mscf v/s $7.3/mscf.  EBITDA was down 66% at Rs.966 crore and margin fell from 68% to 43%.

Other income declined by 68% QoQ to Rs.120 crore due to timing difference in the maturity of its investments and mark-to-market losses on bond investments.  There was reversal of tax expense by Rs.130 crore v/s a charge of Rs.141 crore in Q1. Cash flow from operations for the quarter was at Rs.986 crore. Its closing cash and cash equivalent position was at Rs.17,943  crore of which 68% is invested in rupee funds and 32% in dollar funds.

Despite prevailing low oil prices and substantial cut in capex, the company expects to minimum maintain Rajasthan production in current year at FY15 levels. Planned capital investment is for a net capex of US$ 500 million; 45% in Core MBA fields, 40% in Growth projects of Barmer Hill, Satellite Fields & Gas and 15% in Exploration. The company retains the flexibility to invest balance US$ 1.4 bn as oil prices improve and costs bottom out. The company aims to have healthy cash flows post capex so as to retain the ability to pay dividends.