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UBS Investment Research
Cairn India Limited
3QFY11: Results in line with expectations
Production ramp up boosts profits
Cairn India reported a PAT of Rs 20.1bn for 3QFY11 (+27% QoQ). Profits were
driven by higher production, primarily from the Rajasthan block (+7% QoQ).
EBITDA at Rs 25.4bn (UBS estimate Rs 25.2bn) grew 19% QoQ and almost 8
times YoY. The average price realisation in the quarter was US$ 74.3/bbl, a 13.5%
discount to average Brent price for the quarter.
Costs under control
The opex for the quarter was $2.7/bbl (2$/bbl for upstream + 0.7$/bbl for pipeline)
vs. the $2.4/bbl (1.9$/bbl+0.5$/bbl) in 2QFY11. We assume opex of $5/bbl for
base production and $10/bbl as additional cost of EOR in the steady state as per
company guidance & assume ramp up to 175 kbopd by FY12.
Operationally on track but need govt. approvals for production ramp up
Production for the quarter was at the Mangala approved plateau of 125 kbopd (had
averaged 116 kbopd last quarter). Bhagyam development drilling has also
commenced, and can be put online to produce 40kbopd by end CY11, but
government approval is required for this and any other ramp ups.
Valuation: Maintain SOTP based PT of Rs375 and Neutral rating
We believe the market sentiment on the stock will remain dampened until signs of
government decision making on pending issues are visible. The company reiterated
that any solution, pertaining to royalty or other issues, to expedite the Cairn
Energy-Vedanta deal that will impact the core profitability of the business will not
be acceptable to the board.
Results in Line
Cairn India reported a PAT of Rs 20.1bn for 3QFY11 (+27% QoQ). Profits were
driven by higher production, primarily from the Rajasthan block (+7% QoQ).
EBITDA at Rs 25.4bn (UBS estimate Rs 25.2bn) grew 19% QoQ and almost 8
times YoY. The average price realisation in the quarter was US$ 74.3/bbl, a
13.5% discount to average Brent price for the quarter.
The company is at the water flood stage for EOR and will move to the polymer
flood stage next and then do an ASP flood; Overall this is a two year program.
Cairn India Limited
Cairn India is a subsidiary of Cairn Energy PLC, a UK-based crude oil and
natural gas E&P company. Cairn India owns 11 oil and gas blocks that include
producing, development and exploration assets. Rajasthan block RJ-ON-90/1, in
which it has a 70% stake contributes a significant proportion of Cairn India's
total production. In August 2010, the Vedanta Group made a bid to buy
management control of Cairn India by buying Cairn Energy's stake in the
company. The Vedanta Group is waiting for government approval.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Cairn India Limited
3QFY11: Results in line with expectations
Production ramp up boosts profits
Cairn India reported a PAT of Rs 20.1bn for 3QFY11 (+27% QoQ). Profits were
driven by higher production, primarily from the Rajasthan block (+7% QoQ).
EBITDA at Rs 25.4bn (UBS estimate Rs 25.2bn) grew 19% QoQ and almost 8
times YoY. The average price realisation in the quarter was US$ 74.3/bbl, a 13.5%
discount to average Brent price for the quarter.
Costs under control
The opex for the quarter was $2.7/bbl (2$/bbl for upstream + 0.7$/bbl for pipeline)
vs. the $2.4/bbl (1.9$/bbl+0.5$/bbl) in 2QFY11. We assume opex of $5/bbl for
base production and $10/bbl as additional cost of EOR in the steady state as per
company guidance & assume ramp up to 175 kbopd by FY12.
Operationally on track but need govt. approvals for production ramp up
Production for the quarter was at the Mangala approved plateau of 125 kbopd (had
averaged 116 kbopd last quarter). Bhagyam development drilling has also
commenced, and can be put online to produce 40kbopd by end CY11, but
government approval is required for this and any other ramp ups.
Valuation: Maintain SOTP based PT of Rs375 and Neutral rating
We believe the market sentiment on the stock will remain dampened until signs of
government decision making on pending issues are visible. The company reiterated
that any solution, pertaining to royalty or other issues, to expedite the Cairn
Energy-Vedanta deal that will impact the core profitability of the business will not
be acceptable to the board.
Results in Line
Cairn India reported a PAT of Rs 20.1bn for 3QFY11 (+27% QoQ). Profits were
driven by higher production, primarily from the Rajasthan block (+7% QoQ).
EBITDA at Rs 25.4bn (UBS estimate Rs 25.2bn) grew 19% QoQ and almost 8
times YoY. The average price realisation in the quarter was US$ 74.3/bbl, a
13.5% discount to average Brent price for the quarter.
The company is at the water flood stage for EOR and will move to the polymer
flood stage next and then do an ASP flood; Overall this is a two year program.
Cairn India Limited
Cairn India is a subsidiary of Cairn Energy PLC, a UK-based crude oil and
natural gas E&P company. Cairn India owns 11 oil and gas blocks that include
producing, development and exploration assets. Rajasthan block RJ-ON-90/1, in
which it has a 70% stake contributes a significant proportion of Cairn India's
total production. In August 2010, the Vedanta Group made a bid to buy
management control of Cairn India by buying Cairn Energy's stake in the
company. The Vedanta Group is waiting for government approval.
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