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1QFY12 PAT was in line with our estimates. However management stated that GOI has
communicated that Bhagyam production can't commence without its approval. This essentially
implies that Rajasthan production could remain flat at current levels till the royalty and cess issue
are solved to GOI's satisfaction
1QFY12 in line
Cairn India (CIL) reported 1QFY12 net profit of Rs27.3bn (+869% yoy,+ 11% qoq) which was
in line with our expectations. EBITDA was 6% below our estimates as profit petroleum got
triggered during the quarter. In 1QFY12, CIL paid profit petroleum of Rs1.9bn to the
Government of India (GOI). While our annual forecasts assume profit petroleum starting in
FY12, quarterly timing can be a tricky issue. Tax rate of 3.2% was lower than our forecast of
10% which kept PAT in line with our estimates.
Rajasthan crude production run rate of 125kbpd (+6% qoq) was in line with our estimates.
Rajasthan crude realisation during the quarter was US$104.5/bbl, a discount of 10.9% to
Brent (11.7% in 4QFY11) and at the lower end of company's guidance of 10-15%. Cash opex
for Rajasthan remained low at US$2.5/bbl though the company maintained its long term opex
guidance of US$5/bbl.
According to the management, making royalty cost recoverable would impact the revenues
and PAT of the current quarter by Rs12.9bn (including Rs1.3bn for previous periods)
No clarity on Rajasthan production ramp up
CIL management confirmed that it has today received written communication from GOI
regarding the approval to the Cairn-Vedanta deal subject to royalty being cost recoverable
and withdrawal of the ongoing arbitration related to cess payments. Also, the CIL Board has
decided to convene a meeting of shareholders to consider the above conditions as requested
by Cairn Energy Plc. The shareholder's opinion would be sought through postal ballot. This
entire process could take around 1.5months.
Importantly, the management stated that GOI has communicated that notwithstanding the
FDP approval, Bhagyam production can't commence without its approval. Further CIL has not
received management committee (MC) approval for the operating budget and work
programme for Bhagyam for FY12.
With Mangala production already struck at 125kbpd, this essentially implies that Rajasthan
production could remain flat at the current levels till Cairn India agrees to the GOI conditions
on royalty & cess. We has earlier highlighted the uncertainty on CIL's growth plans till the
complete resolution of the royalty/cess issue to the satisfaction of GOI (refer our report 'Still
no end to uncertainty' dated 1 July 2011)
Our current production forecasts assume Bhagyam starting in October 2011 and ramping up
to 40kpd by end of CY11. Assuming a delay of one quarter in start of Bhagyam production
would impact our FY12 EPS estimates by 7.7%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12 PAT was in line with our estimates. However management stated that GOI has
communicated that Bhagyam production can't commence without its approval. This essentially
implies that Rajasthan production could remain flat at current levels till the royalty and cess issue
are solved to GOI's satisfaction
1QFY12 in line
Cairn India (CIL) reported 1QFY12 net profit of Rs27.3bn (+869% yoy,+ 11% qoq) which was
in line with our expectations. EBITDA was 6% below our estimates as profit petroleum got
triggered during the quarter. In 1QFY12, CIL paid profit petroleum of Rs1.9bn to the
Government of India (GOI). While our annual forecasts assume profit petroleum starting in
FY12, quarterly timing can be a tricky issue. Tax rate of 3.2% was lower than our forecast of
10% which kept PAT in line with our estimates.
Rajasthan crude production run rate of 125kbpd (+6% qoq) was in line with our estimates.
Rajasthan crude realisation during the quarter was US$104.5/bbl, a discount of 10.9% to
Brent (11.7% in 4QFY11) and at the lower end of company's guidance of 10-15%. Cash opex
for Rajasthan remained low at US$2.5/bbl though the company maintained its long term opex
guidance of US$5/bbl.
According to the management, making royalty cost recoverable would impact the revenues
and PAT of the current quarter by Rs12.9bn (including Rs1.3bn for previous periods)
No clarity on Rajasthan production ramp up
CIL management confirmed that it has today received written communication from GOI
regarding the approval to the Cairn-Vedanta deal subject to royalty being cost recoverable
and withdrawal of the ongoing arbitration related to cess payments. Also, the CIL Board has
decided to convene a meeting of shareholders to consider the above conditions as requested
by Cairn Energy Plc. The shareholder's opinion would be sought through postal ballot. This
entire process could take around 1.5months.
Importantly, the management stated that GOI has communicated that notwithstanding the
FDP approval, Bhagyam production can't commence without its approval. Further CIL has not
received management committee (MC) approval for the operating budget and work
programme for Bhagyam for FY12.
With Mangala production already struck at 125kbpd, this essentially implies that Rajasthan
production could remain flat at the current levels till Cairn India agrees to the GOI conditions
on royalty & cess. We has earlier highlighted the uncertainty on CIL's growth plans till the
complete resolution of the royalty/cess issue to the satisfaction of GOI (refer our report 'Still
no end to uncertainty' dated 1 July 2011)
Our current production forecasts assume Bhagyam starting in October 2011 and ramping up
to 40kpd by end of CY11. Assuming a delay of one quarter in start of Bhagyam production
would impact our FY12 EPS estimates by 7.7%.
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