A change in the method of depreciation on its oil and gas assets made Gurgaon-based Cairn India’s net profit slide by 65 per cent for the first quarter of FY-15 ended June to ₹1,092.90 crore against ₹3,127.23 crore in the year-ago period.
This change in the depreciation method from ‘Straight Line’ to ‘Unit of Production’ method following the implementation of the new Companies Act from April 1, cost the company ₹1,627.39 crore and was counted as an ‘exceptional item’ in its quarterly balance sheet.
“The change has been made with retrospective effect and the additional charge due to the same for the period up to March 31, 2014, net of tax credit of ₹500.41 crore has been disclosed as an exceptional item,” said the company in a note at the end of the result filing with the exchange.
The company’s net income from operations, however, increased by 10 per cent in Q1 to ₹4,482.85 crore against ₹4,062.93 crore in the corresponding period last year.
Sudhir Mathur, Interim CEO, Cairn India said: “we are confident of not only achieving the stated exploration target of 3 billion barrels of hydrocarbons in place, ahead of schedule, but also adding another 3 billion barrel to our unrisked prospect inventory.”
“With multi trillion cubic feet (tcf) potential, we expect gas to be a significant contributor in our product mix. Before end of financial year 2015, we anticipate doubling of gas production from Rajasthan,” he added.
The average crude price realisation for the quarter was $97.5 a barrel at an 11.1 per cent discount to dated Brent. The chairman Navin Agarwal maintained the company’s commitment to its $3 billion capex plan for three years.
“This will lead to a reserve replacement ratio of 150 per cent and help us deliver a growth of 7 per cent to 10 per cent in production over the next three years from the Rajasthan block," he added. He stated that the company targets a total of 7 billion barrels of oil equivalent hydrocarbons in place.