Cairn India Q3 net drops 14% on forex losses

Cairn India posted a drop in net profit for the quarter to December 13, surprising the market. But its announcements on further discoveries and commencement of an ambitious enhanced oil recovery programme in Rajasthan sound positive. With its buyback programme to get underway soon, the stock is expected to hold steady.

Cairn India’s net profit for the quarter was down 13.8% year-on-year at Rs 2884 crore, inspite of a 8% higher operating profit at Rs 2997 crore. The drop in profits was mainly because of a lower other income, foreign exchange losses and a three-fold spurt in tax provisioning. It didn’t help either that the company’s year ago profits were boosted by Rs 188.8 crore of extra-ordinary income.

Yet, the quarterly numbers were accompanied by some good news on the operations front. The company sought to allay investor concerns that its enhanced oil recovery ( EOR) programme in the Rajasthan field could get delayed. “With strategic focus on increasing ultimate recovery from operating fields, we have commenced execution of Polymer Flood Enhanced Oil Recovery project at Mangala,” P Elango, chief executive officer of the company, said in a press release. Besides, Cairn has made progress with further exploration in Rajasthan which is adding to recoverable reserves.

Out of the 9 new exploratory wells it drilled since March 2013, 3 resulted in discoveries “…with an estimated addition of 500-600 million barrels of oil in place resources in the low permeability reservoir to the existing 4.2 billion barrels of oil equivalent,” says the company.

It has now mobilised four rigs for exploratory drilling, compared to just one in Oct ’13, which will considerably speed up the exploration process.