Cairn India Notes Consolidated Revenue Increase in Q2 2008
Cairn India Limited (Consolidated) has noted the Company's second quarter results for 2008. The following commentary is provided in respect of the unaudited financial results and operational achievements of Cairn India Limited and its subsidiary companies (referred to as Cairn India) during the second quarter of 2008.
- Rajasthan Upstream development underway and on track for first commercial production H2 2009
- Larsen and Toubro Limited (L&T) has started construction in Gujarat of the export crude oil insulated pipeline, gas pipeline and associated facilities from Barmer, Rajasthan to the Gujarat coast
- Rigs secured for development and exploration drilling in H2 2008
- New acreage in Sri Lanka
- Bids submitted for NELP VII acreage in India
The gross production of the operating units was 71,082 boepd (barrels of oil equivalent per day) in Q2 2008 (77,392 boepd in Q2 2007) and the working interest production was 18,764 boepd in Q2 2008 (19,775 boepd in Q2 2007).
Cash flow from operations, worked out as profit after tax prior to non-cash expenses (non-cash employee cost, depreciation, depletion, amortisation and deferred tax) and exploration cost, was Rupees (Rs). 2,780 million (US$ 66.7 million) for Q2 2008 as compared with Rs. 2,234 million (US$ 54.1 million) for Q2 2007. Cash (net of borrowings) available as at 30 June 2008 was Rs. 35,287 million (US$ 822.7 million).
The consolidated revenue of Cairn India Limited and its subsidiaries for Q2 2008 was Rs. 4,036 million (US$ 96.9 million) as compared with Rs. 2,433 million (US$ 59 million) for Q2 2007. The average oil price realization in Q2 2008 was US$ 125.9/bbl and for Q2 2007 was US $ 69.6/bbl. The gas price realization in Q2 2008 was US$ 4.3 /mscf and for Q2 2007 was 4.3/mscf.
Average price realisation per boe was US$ 95.2 in Q2 2008 and for Q2 2007 was US$ 50.4. The consolidated Profit before tax for Q2 2008 was Rs.2,196 million (US$ 52.7 million) as compared with a loss of Rs. 312 million (US$ 7.6 million) for Q2 2007. The consolidated Profit after provision for tax (including deferred tax and FBT) for Q2 2008 was Rs.1,385.8 million (US$ 33.3 million) as compared with a loss of Rs. 714.4 million (US$ 17.3 million) for Q2 2007.
Tax (including current tax and deferred tax) is calculated at entity level and not on a consolidated basis; losses arising within one jurisdiction are not available for offset against profit arising in another. Amounts shown in US$ are converted based on an average exchange rate for the Q2 2008 of 41.65 for revenue items and at the closing exchange rate as on 30th June 2008 of 42.89 in respect of cash balance (average rate of Q2 2007 was
Rahul Dhir, Chief Executive Officer, said, "The construction of the Rajasthan project is now well underway to provide much needed additional domestic crude supplies in the second half of 2009. The development of both the pipeline and its associated operations along with the processing facilities at Mangala are on track and all the major contracts for vital equipment have been placed in competitive market conditions. In addition Cairn India continues to source new acreage to help build future growth opportunities."
Gross operated production in India for the second quarter of 2008 was 71,082 boepd (18,764 working interest boepd).
RAJASTHAN BASIN - North West India
Development - Upstream (Cairn India 70% (Operator); ONGC 30%)
Oil field development work at the Cairn India’s world class discovery in Rajasthan is in full flow. The integrated upstream and midstream development is on course to produce first oil from Mangala in the second half of 2009.
Development - Midstream (Cairn India 70% (Operator); ONGC 30%)
Cairn India is confident that it will be able to deliver first oil from Mangala by H2 2009. In keeping with the H2 2009 schedule, all major contracts works and construction have been awarded in Rajasthan, and long lead time items have been either ordered or procured. L&T are well advanced with the detailed engineering and procurement and construction has commenced on the 24” Insulated Crude Oil Pipeline, 8” Gas Pipeline and above ground installations (AGI).
The Engineering Procurement Contract for the Viramgam Terminal has been awarded to Indian Oil Tanking Limited after the completion of the initial Land Development works by Janak Construction Limited. Jindal SAW Ltd in association with Perma-pipe Middle East FZE has been awarded the supply contract for the 24" insulated linepipe and 8" linepipe with three layer polyethylene coating. After design and installation of a completely bespoke insulation plant as an extension to the existing pipe mill in Mundra, Gujarat, the fully insulated
pipes are now available for use in the pipeline construction.
32MW of electrical power is required for the heating system along the pipeline in the form of single 1MW gas engine units and GE Jenbacher in Austria have been awarded the full supply contract. The first units have recently undergone functioned load testing in Austria. Obtaining access to the land on which the pipeline will be built is well advanced under the RoU process in Gujarat and Rajasthan. The land for the first 25 heating stations (starting from Barmer) and the Viramgam Terminal has been acquired through direct negotiation with land owners and construction at these locations has started.
The GoI communication of April 30, 2008 accorded their consent to shift the delivery point from the outlet flange of the crude oil processing facility in Barmer to the Gujarat Coast. The proposed routing of the pipeline will allow access to an extensive existing pipeline infrastructure and refinery network, with a final coastal delivery point that also affords access to the majority of India’s refining capacity.
Northern Appraisal Area (Cairn India 100%)
A Declaration of Commerciality (DoC) for the three discoveries made in this area (Kameshwari West 2, 3 and 6) has been approved by the JV partners, along with a proposed new Development Area of 1,178 km2. The DoC is now awaiting approval from the GoI.
Exploration Overview Rajasthan and other assets
The 2008 exploration program is well underway and new acreage has been awarded in Sri Lanka and bids submitted in the NELP VII licensing round in India. The seismic acquisition carried out this year will position Cairn India for an extensive drilling program in 2009.
A rig has been contracted to drill up to five wells in RJ-ON-90/1 starting in Q3 2008, including drilling of under-explored plays within the basin. An important well in GV-ONN-2002/1, in the state of Bihar, which will test the potential of this part of the frontier Ganga Basin, is scheduled for Q4 2008.
The Government of Sri Lanka has awarded an exploration license to explore for oil and natural gas in the Mannar Basin, to Cairn India. The Petroleum Resources Agreement for the offshore block SL 2007-01-001 was signed in July 2008. The block covers approximately 3,000 Km2 in water depths of 200 meters to 1800 meters.
The company has also submitted bids for blocks available in India as part of the NELP VII Round.
Cambay Basin - Western India
Block CB/OS-2: (Cairn India 40% (Operator))
In the CB/OS-2 block the Lakshmi, Gauri and CB-X fields are primarily gas producing, with some oil production. The average gross production for Q2 2008 was 15,830 boepd (comprising average gas production of 49.46 mmscfd and average oil/condensate production of 7,586 bopd. Oil production has commenced from the new wells that were added during the recent infill/development drilling campaign that concluded in Q1 2008.
CB-ONN-2002/1 (Cairn India 30% (ONGC Operator))
A three well drilling program started in the last quarter. The first well has been drilled and currently under testing.
Krishna-Godavari Basin - Eastern India
Ravva (Cairn India 22.5% (Operator))
Average gross production from the Ravva field for Q2 2008 was 55,252 boepd (comprising average oil production of 43,040 bopd and average gas production of 73.27 mmscfd). In the last quarter the JV partners reached the milestone of producing 200 million barrels of oil from the Ravva block.
Production has now commenced from the four new infill wells and the two work over wells. In addition, one water injection well has been put into service to enhance the reservoir water-flood scheme, while one more is planned to start injection after testing the upper zone (LM6) in Q3 2008.
KG-ONN-2003/1 (Cairn India 49% (Operator – exploration phase))
Two seismic programs have been undertaken in this block. The acquisition of a 500 km 2D seismic program commenced in January 2008 followed by the acquisition of a 255km2 3D programme. Planning has commenced in support of drilling between three and five exploration wells from the beginning of 2009.
KG-DWN-98/2 (Cairn India 10% (ONGC Operator))
The Joint Venture has approved a three well appraisal program for 2008, together with additional 3D seismic acquisition. Approval of an appraisal period up to July 2010 under the PSC for appraisal of the discoveries made in the block to date has been given by the GoI.
PR-OSN-2004/1 (Cairn India 35%, (Operator))
The acquisition of an offshore 3,100 km 2D seismic program has been successfully completed. An 800 km2 3D program on the block is planned early in 2009.
- 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)