BackCairn India pegs Rajasthan gas reserves at 1 tcf
Firm says potential of significantly higher reserves should current exploration activities yield commercially viable reserves
Premium
Mumbai: Cairn India Ltd, the oil and gas arm of Anil Agarwal-controlled Vedanta Resources Plc, has estimated its Rajasthan gas reserves at 1 trillion cu. ft (tcf), with the potential of significantly higher gas reserves should the current exploration activities yield commercially viable reserves, the company management said at its eighth annual meeting on Wednesday.
Later in the day, in its first quarter earnings note, the company announced that it also plans to double gas output from its Barmer basin in Rajasthan by the end of the fiscal.
This is, however, not expected to add to the revenue and profit in the current year, analysts say.
Cairn India had been aggressively developing gas deposits in the Barmer basin as higher gas reserves can strengthen the chances that the company gets a 10-year extension to operate the fields after the current production-sharing contract (PSC) with the government ends on 14 May 2020.
So far, the company is only entitled to a five-year extension, but under the terms of the PSC, if it can establish potential commercial gas sales beyond 2020, it can also be awarded a 10-year extension.
While addressing the shareholders, Navin Agarwal, chairman of Cairn India, said, “While we had commenced commercial sale of gas from the block last year, there is potential for significant expansion. This represents a unique opportunity to establish Rajasthan as a major player in the Indian natural gas market. We have now identified the Raageshwari Deep Gas (RDG) field that has significantly higher gas resources."
Sudhir Mathur, the interim chief executive officer of the company, said the current estimates show that the gas reserves of Cairn India in the Barmer basin in Rajasthan could be at 1 tcf with potential to go even higher.
“There are two parts to the gas, one which we are exploring and one that we are discussing with our joint venture partner ONGC (Oil and Natural Gas Corp. Ltd), which is close to 1 tcf. We are looking at putting that into production before end of fiscal 2016," he said.
According to data available with the Petroleum Planning and Analysis Cell (PPAC), a statistical body under the ministry of petroleum and natural gas, 1 tcf of reserve could produce up to 4 million standard cu. m per day (mscmd), which is almost half of 8 mscmd produced from the D1 and D3 fields of Reliance Industries Ltd (RIL) in the D6 block in the Krishna-Godavari basin.
Currently, the company is producing just over 230,000 standard cu. m per day and it will go up to 450,000 standard cu. m per day by fiscal 2015 end, according to the company.
Analysts say if the entire 1 tcf is monetized by fiscal 2016, the company can earn an additional revenue of ₹ 2,300 crore and a profit of ₹ 1,000 crore annually.
The company’s net profit for the quarter ended 30 June fell 65% to ₹ 1,092.92 crore, a drop from ₹ 3,127 crore in the year-ago period.
This was mainly attributed to the change in method of depreciation from straight-line method to unit of production as specified by the Companies Act, 2013, which was implemented from 1 April, said the company in the results note.
Its revenues for the quarter increased 10.3% to ₹ 4,482.85 crore from ₹ 4,063 crore posted in the corresponding period last year.
The company posted an operating profit or Ebitda (earnings before interest, tax, depreciation and amortization) of ₹ 3,052.1 crore and operating margin of 68% for the quarter compared with ₹ 2,910 crore and margin of 71.6% reported in the first quarter of last fiscal.
A Bloomberg poll of 33 analysts expected revenue at ₹ 4,600.6 crore and net profit at ₹ 2,756 crore.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
