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Minor production delays
RESULTS REVIEW
2QFY12: No surprises, one-time royalty charge as expected
Cairn India reported 2QFY12 results with earnings expectedly weaker due
to it paying royalty retrospectively. Royalty impact, net to Cairn, up to
2QFY12 was USD545m. The profit petroleum for the quarter came in at
USD33m. Cairn plans to file a revised FDP to enable it to ramp-up
production to 240,000bpd (including Bhagyam & Aishwarya fields).
SUMMARY
Production delays = GoI approvals + infrastructure contraints
Cairn has shifted its production guidance of 175,000bpd from December
2011 to March 2012. Also, pipeline bottleneck production will be
restricted to 175,000bpd for the large part of CY12 as Cairn needs to get
the necessary approvals to raise pipeline capacity. Overall, we see 20kbpd
impact on our FY13 estimates and will revisit our estimates.
VALUATION
Current crude prices and macro environment to limit upside
We reiterate our HOLD rating on Cairn India with an unchanged TP of
INR325. Currently, the shares of Cairn appear to be factoring in long-term
crude prices of USD90/bbl. Events for Cairn: 1) approval for Mangala
ramp-up to 150K, 2) approval for Bhagyam production, 3) revised FDP for
higher production from Bhagyam and Aishwarya, and 4) budget approval
for increase in pipeline capacity. The conclusion of the last event would
result in production increasing above 175,000 bpd. Production delay is a
result of delays in approvals from ONGC, GoI and pipeline bottlenecks. We
estimate a 3% impact on our fair value from the delay; sentiment impact
might be higher. Risks: Lower production or spike in crude prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Minor production delays
RESULTS REVIEW
2QFY12: No surprises, one-time royalty charge as expected
Cairn India reported 2QFY12 results with earnings expectedly weaker due
to it paying royalty retrospectively. Royalty impact, net to Cairn, up to
2QFY12 was USD545m. The profit petroleum for the quarter came in at
USD33m. Cairn plans to file a revised FDP to enable it to ramp-up
production to 240,000bpd (including Bhagyam & Aishwarya fields).
SUMMARY
Production delays = GoI approvals + infrastructure contraints
Cairn has shifted its production guidance of 175,000bpd from December
2011 to March 2012. Also, pipeline bottleneck production will be
restricted to 175,000bpd for the large part of CY12 as Cairn needs to get
the necessary approvals to raise pipeline capacity. Overall, we see 20kbpd
impact on our FY13 estimates and will revisit our estimates.
VALUATION
Current crude prices and macro environment to limit upside
We reiterate our HOLD rating on Cairn India with an unchanged TP of
INR325. Currently, the shares of Cairn appear to be factoring in long-term
crude prices of USD90/bbl. Events for Cairn: 1) approval for Mangala
ramp-up to 150K, 2) approval for Bhagyam production, 3) revised FDP for
higher production from Bhagyam and Aishwarya, and 4) budget approval
for increase in pipeline capacity. The conclusion of the last event would
result in production increasing above 175,000 bpd. Production delay is a
result of delays in approvals from ONGC, GoI and pipeline bottlenecks. We
estimate a 3% impact on our fair value from the delay; sentiment impact
might be higher. Risks: Lower production or spike in crude prices.
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