Cairn India's consolidated net profit for the second quarter of the current fiscal has registered a drop of 51 per cent year-on-year. This was because of provisions for royalty which Cairn had to bear for its 70 per cent share in the Rajasthan oilfields.
For the quarter, Cairn reported a net profit of Rs 763 crore against Rs 1,585 crore for the same quarter last fiscal. The company reported a marginal one per cent dip in revenue at Rs 2,652.2 crore (Rs 2,686.4 crore).
Mr Rahul Dhir, Managing Director and Chief Executive Officer, said: “Post-current quarter, net royalty is estimated at Rs 2,118.2 crore ($461 million).”
Last month, shareholders of Cairn India accepted the pre-conditions laid down by the Government for the proposed Cairn Energy-Vedanta Resources stake sale deal. The two conditions were – making royalty paid for Rajasthan oilfields cost recoverable and withdrawal of arbitration cases by Cairn India.
The company has provided for royalty estimate in the current quarter including the past period one-time adjustment since the start of the production in August 2009. The cumulative royalty estimate up to the second quarter of the current fiscal was $545 million. The royalty is estimated at approximately 15 per cent of the revenue.
“With strong support from the Government of India and alignment with our partner ONGC, we are now poised to optimise development of the Rajasthan resource in the best interests of our nation,” Mr Dhir said.
Profit petroleum (Government's share of profit from the oilfields) from Rajasthan oilfields for the second quarter after the royalty adjustment is Rs 158.4 crore ($33 million). The profit petroleum reduced by Rs 502.9 crore ($109 million) on account of royalty becoming cost recoverable.
Cumulative crude sales to domestic refiners from Rajasthan fields stood in excess of 60 million barrels, generating gross revenues of over $5 billion to date. The company has maintained crude sales at 125,000 barrels of oil a day (bopd) levels to PSU and private refiners. Sales arrangements are in place for 155,000 bopd and discussions continue with the Government for further nominations, Mr Dhir said.
The Rajasthan crude is sold at 10-15 per cent discount to Brent on the basis of the prevailing prices for the 12 months to September 30. The Brent averaged at $108 a barrel.
The company expects to close fiscal 2011-12 at a production rate of 175,000 bopd from the Rajasthan fields. It envisages a basin potential of 240,000 bopd (equivalent to a contribution of approximately 30 per cent of India's total domestic current crude production).
After hitting a high of Rs 297, Cairn India shares closed at Rs 293.9 on the BSE on Thursday.