Cairn India Triples Profit, Bumps Production by 74%
Cairn India reported its second quarter operational and financial results for the financial year 2010-11. Please note that the financial year 2010-11 (FY 2010-11) refers to the period April 2010 - March 2011.
- Revenue up by more than 220% Quarter on Quarter (QoQ) at INR 26,864 million (USD 577 million); revenue represents a ten fold increase over Q2 FY 2009-10 driven by Rajasthan production
- Profit after tax (PAT) up more than five times QoQ at INR 15,851 million (USD 341 million)
- QoQ Cash flow from Operations up more than three times at INR 15,692 million (USD 337 million)
- Raised INR 22,500 million (USD 500 million) through INR Unsecured Non-convertible Debentures; reduced domestic financing to align with the current cash needs
- Gross cumulative Rajasthan development capital expenditure INR 120,855 million (USD 2,625 million) of which INR 6,992 million (USD 156 million) was spent during Q2 FY 2010-11
- Sales (working interest) more than doubled QoQ at 93,097 barrels of oil equivalent per day (boepd) (Q1 FY 2010-11, 34,181 boepd) and higher by more than 500% compared to 15,275 boepd in the Q2 FY 2009-10
- Gross operated production up 74% QoQ at 165,385 boepd (Q1 FY 2010-11, 94,950 boepd) and higher by 173% compared to 60,480 boepd in the Q2 FY 2009-10
- Working Interest production up 110% QoQ at 94,304 boepd (Q1 FY 2010-11, 44,812 boepd) and higher by more than 400% compared to 18,638 boepd in the Q2 FY 2009-10
- Rajasthan gross field revenue crossed USD 1 billion in Q2 FY 2010-11
- Completed one year of successful production from the Mangala field; sold more than 16 million barrels (mmbbls) to domestic refiners to date
- Rapid and safe Mangala field production ramp-up to its currently approved plateau rate of 125,000 barrels of oil per day (bopd); average gross production for Q2 FY 2010-11 was 116,058 bopd
- Safe delivery of more than 10 mmbbls of Mangala crude through the pipeline to private and PSU refineries in Q2 FY 2010-11
- Record setting high production rate horizontal wells and Mangala reservoir performance supports higher plateau levels; surface facilities and midstream infrastructure ready to support production of 150,000 bopd from Mangala, subject to Joint Venture (JV) and Government of India (GoI) approval
- Mangala development drilling progresses as planned across the field; 107 development wells drilled to date of which 74 are complete
- Mangala Enhanced Oil Recovery (EOR) pilot production and injection wells drilled and completed; start-up injection testing has commenced
- Bhagyam development and infrastructure extension commenced; contracts for construction of Train Four at Mangala Processing Terminal (MPT), extension of pipeline and marine terminal awarded
- Nagayalanka-1z Discovery in block KG-ONN-2003/1; preparation for further exploration and appraisal drilling in progress
- Ravva development and appraisal drilling to commence in Q3 FY 2010-11; processing of 4D seismic data underway
- Petroleum Exploration Licenses obtained for the two blocks, KG-OSN-2009/3 and MB-DWN-2009/1, awarded under New Exploration Licensing Policy (NELP) - VIII bidding round
- Preparation for drilling campaign in Sri Lanka and Palar during H1 CY 2011 progressing well
Rahul Dhir, Managing Director and Chief Executive Officer, Cairn India said, "The first full quarter of sales through the pipeline to refineries has generated significant revenues from the Mangala field in Rajasthan.
Cairn India's development and operational efficiency has allowed it to quickly ramp up production to the currently approved plateau of 125,000 bopd with the potential to produce oil at an even higher rate from the Mangala field for our nation."
The consolidated revenue of Cairn India for Q2 FY 2010-11 was INR 26,864 million (USD 577 million); higher by 1069% as compared to INR 2,298 million (USD 47 million) in Q2 FY 2009-10.
"Cash flow from operations", worked out as profit after tax (excluding other income and forex revaluation gain/loss) prior to non-cash expenses (non-cash employee cost, depreciation, depletion, amortization, MAT and deferred tax) and exploration cost was INR 15,692 million (USD 337 million) for Q2 FY 2010-11; higher by 1,952% as compared to INR 765 million (USD 16 million) for Q2 FY 2009-10.
The consolidated profit after tax (PAT) for Q2 FY 2010-11 was INR 15,851 million (USD 341 million); higher by 238% as compared to INR 4,695 million (USD 97 million) for Q2 FY 2009-10.
Cash available as at 30 September 2010 was INR 26,415 million (USD 588 million) and the loan drawn down to 30 September 2010 was INR 34,139 million (USD 760 million).
Cairn India completed an innovatively structured financing by raising INR 22,500 million (USD 500 million) through INR Unsecured Non-convertible Debentures, at competitive commercial terms. The proceeds of this financing will be used to fund the repayment of the existing INR loan and other general corporate expenses. This access to the Indian Debt Capital Market is a first for Cairn India, which received subscription from a wide range of investors consisting of mutual funds and insurance companies.
Amounts shown in USD are converted based on average exchange rate for the Q2 FY 2010-11 of INR 46.53 for revenue items and at the closing exchange rate as on 30 Sep 2010 of INR 44.90 in respect of cash balance (average rate for Q2 FY 2009-10 was INR 48.43).
The holding company of Cairn India Limited, Cairn UK Holdings Limited, along with its holding company, Cairn Energy PLC (Company's ultimate holding company) has agreed to sell a substantial part of its investment in the Company to Vedanta Resources Plc. This transaction has been approved by shareholders of Cairn Energy PLC. The transaction continues to progress in a consensual way to secure the necessary consents and approvals from the various government authorities and stakeholders.
In Q2 FY 2010-11, the gross production of the operating units was 165,385 boepd (60,480 boepd in Q2 FY 2009-10) and working interest production was 94,304 boepd (18,638 boepd in Q2 FY 2009-10).
The average oil price realization in Q2 FY 2010-11 was USD 69.5 per bbl compared to USD 69.1 per bbl in Q2 FY 2009-10. The gas price realization in Q2 FY 2010-11 was USD 4.5 per thousand standard cubic feet (mscf) compared to USD 3.9 per mscf in Q2 FY 2009-10.
Average price realization per boe was USD 67.8 in Q2 FY 2010-11 compared to USD 59.6 in Q2 FY 2009-10.
The Rajasthan per barrel operating cost continues to decline as volumes increase.
Rajasthan (Block RJ-ON-90/1) (Cairn India 70% (Operator); ONGC 30%)
Average gross production from the Rajasthan block for Q2 FY 2010-11 was 116,058 bopd and working interest production was 81,241 bopd.
The Mangala field, discovered in January 2004, commenced production a year ago. With the safe completion of Trains Two and Three, it has ramped up ahead of schedule to its currently approved peak plateau rate of 125,000 bopd. During one year of efficient and safe operations, the MPT has produced more than 16 mmbbls crude from the Mangala field, which has been sold to different domestic refiners.
Cairn India is committed to maintaining the highest Health, Safety and Environment (HSE) standards as well as building local capacity and top quartile HSE standards have been achieved against global benchmarks.
Development - Upstream
The MPT is designed to process crude from the Rajasthan fields and has a capacity to handle 205,000 bopd of crude with scope for further expansion. Trains One, Two and Three are currently producing and the contracts for construction of Train Four have been awarded with work expected to commence soon.
Cairn India and its JV partner ONGC, continue to develop the hydrocarbon resources within the state of Rajasthan with a sustained focus on cost and the application of innovative technology. The use of high density 3D seismic surveys has enhanced the understanding of the reservoir and helped to precisely identify well locations leading to reduced finding costs.
The use of pad-based drilling coupled with mobile drilling rigs has allowed a large number of wells to be drilled in a short time with a reduced environmental footprint and lower infrastructure and drilling costs.
The focused effort on drilling of high capacity horizontal wells in Mangala and the reservoir performance from the field supports higher plateau levels. Surface facilities and midstream infrastructure are ready to support production of 150,000 bopd from Mangala, subject to JV and GoI approval.
Development drilling and the well completion activities are progressing with three drilling rigs and one completion rig operating in the Mangala development area. 107 Mangala development wells have been drilled of which 74 wells have been completed and made ready for production.
The application of new fracture stimulation and completion technology proven in the Raageshwari wells will not only aid greater production from fewer wells but also allow the opportunity to replicate the same in the lower permeability Barmer Hill formation.
Cairn has successfully drilled and completed 11 horizontal wells in Mangala of which nine have been put on production. A total of 48 Mangala wells are currently producing and the other wells will be brought on stream in a staged manner. Work on the development of the Bhagyam field, the second largest field in Rajasthan, has commenced.
Resource base including enhanced oil recovery (EOR)
The Mangala, Bhagyam and Aishwariya (MBA) fields have gross recoverable oil reserves and resources of over 1 billion barrels, which includes proven plus probable (2P) gross reserves and resources of 694 million barrels of oil equivalent (mmboe) with a further 300 mmboe or more of EOR resource potential. The MBA fields will contribute more than 20% of domestic crude production when they reach the currently approved peak plateau rate of 175,000 bopd in 2011.
Start-up injection tests have commenced in the EOR pilot project that started earlier this year. The first phase of EOR pilot consisting of four injectors, one producer and three observation wells has been drilled, completed and hooked up to the facilities.
A pilot hydraulic fracturing program to test the potential of the Barmer Hill Formation is planned in FY 2010-11, subject to GoI approval. The pilot program will allow evaluation of the appropriate cost effective technology for a fully optimized development of this resource base. A declaration of commerciality for the Barmer Hill was submitted to the GoI in March, 2010 and a Field Development Plan is under preparation.
Exploration - Cairn India - Producing Assets
RJ-ON-90/1 (Cairn India - 70% holding in the Mangala, Bhagyam and Kaameshwari West Development Areas, Operator)
Technical evaluation work continues to assess existing and new plays in the basin to generate further prospects in Rajasthan.
Krishna-Godavari Basin - Eastern India - Block PKGM-1 - Ravva field (Cairn India - 22.5%, Operator)
Average gross production from the Ravva field for Q2 FY 2010-11 was 38,102 boepd (comprising an average oil production of 29,413 bopd and average gas production of 52 million standard cubic feet per day (mmscfd)). The production was higher in comparison to last quarter due to better well performance resulting from workover programs.
Cairn India and its joint venture partners have completed a 4D seismic campaign to identify bypassed oil zones and locate infill well locations. Drilling is expected to commence in Q3 FY 2010-11.
Cambay Basin - Western India - Block CB/OS-2: (Cairn India - 40%, Operator)
Average gross production from the CB/OS-2 block for Q2 FY 2010-11 was 11,227 boepd (comprising an average oil / condensate production of 6,601 bopd and average gas production of 28 mmscfd).
To enhance oil production from the field, an infill drilling campaign is planned in the Lakshmi fields. The Term Sheet agreement executed in December, 2009 to produce Gauri's share of GBA (Gas Balancing Agreement - for sharing gas from the shared reservoir) gas through the Hazira facilities has now been extended to March, 2012.
Cairn India - Exploration - Other Assets
In addition to the ongoing exploration activities in the three producing blocks, Cairn India currently has exploration interests in seven blocks in India and one in Sri Lanka, five of which are operated by the Company.
The Production Sharing Contracts for the two NELP-VIII blocks, KG-OSN-2009/3 and MB-DWN-2009/1, signed on 30 June, 2010 became effective from August, 2010, with the grant of the Petroleum Exploration Licenses.
Two wells Nagayalanka-1z and Krishna-1 were drilled in block KG-ONN-2003/1 (Cairn India - 49%, operator) during Q2 FY 2010-11. Flow of oil at the rate of 75 bopd and gas at the rate of 0.27 mmscfd was established in the Nagayalanka-1z well and a Discovery declared. Preparations are ongoing for further exploration and appraisal drilling.
In PR-OSN-2004/1 (Cairn India - 35%, operator), a geotechnical survey and pore pressure studies have been completed. The drilling of three wells is expected to commence in H1 CY 2011.
In Sri Lanka, SL 2007-01-001, logistical preparations and detailed studies are ongoing in preparation for the exploration drilling of three wells planned to commence in H1 CY 2011.
- Sri Lanka Launches Tender To Develop Natural Gas Site In Mannar Basin (Feb 13)
- Mangala Field Hits 300 Million Barrels of Cumulative Production (Oct 20)
- Vedanta Wins Cairn Nod For BHP-Style Resources Conglomerate (Sep 13)