UPDATE: Cairn India 1Q Net Profit Surges On Mangala Crude Output

27th Jul 2010 13:50

(Adds earnings details, analyst comments, background.) By Eric Yep Of DOW JONES NEWSWIRES MUMBAI (Dow Jones)--Cairn India Ltd. (532792.BY) Tuesday posted a six-fold rise in its fiscal first-quarter net profit, helped by crude output from its field in western India, but missed market expectations as depreciation and interest charges rose sharply. Net profit for the three months ended June 30 rose to INR2.81 billion from INR454.4 million a year earlier, the Indian unit of Cairn Energy PLC (CNE.LN) said. Revenue jumped to INR8.41 billion from INR2.05 billion, while costs almost tripled to INR4.33 billion from INR1.45 billion, it said. Sixteen analysts polled by Dow Jones Newswires on average expected Cairn India to post a net profit of INR4.50 billion. "Cairn India's interest charges and capital costs including depreciation went up much more than expected," analyst Saeed Jaffery of Mumbai-based Ambit Capital said. The company's depreciation, depletion and amortization costs more than quadrupled to INR1.66 billion, while interest charges surged to INR492.6 million from INR7.3 million. Cairn India began output at its Mangala field in the Barmer basin, one of India's largest onshore discoveries, in August 2009. It has a 70% participatory interest in the block, while state-run Oil & Natural Gas Corp. holds the rest. During the first quarter, the company's gross production from its joint venture fields rose to 94,950 barrels of oil equivalent per day from 59,461 barrels a year earlier. Of this, its share of working interest increased to 44,812 barrels a day from 15,917 barrels. The company, which has stakes in exploration and production blocks in India and Sri Lanka, said it received an average price of $72 a barrel of crude in the past quarter, up from $60.20 a year earlier. Average production from the Mangala field in the first quarter was 44,381 barrels a day, it said. Cairn India said it is now producing more than 100,000 barrels a day at Mangala and that the output is expected to rise to 125,000 barrels in the second half of 2010. "Sales arrangements (are) in place for 143,000 barrels a day," the company said. The explorer is using three trains to process the Mangala crude, with a total processing capacity of 130,000 barrels a day. Cairn said it is building a fourth processing train to reach peak production of 175,000 barrels a day in 2011. The company said it had a capital expenditure of $177 million in the past quarter in the Mangala field. "Commissioning of train two and three has been the primary reason for the steep increase in the capital costs and hence lower (than expected) earnings," Ambit Capital's Jaffery said. Last month, Cairn India started selling Mangala crude to refineries via a pipeline, instead of transporting in trucks, to cut costs and increase sales. Cairn India said crude oil sales to state-run companies are now supplemented by sales to private refiners. "To date, more than 7.0 million barrels of crude from Mangala has been delivered to refiners," it added. -By Eric Yep, Dow Jones Newswires; 91-22-6145-6110; [email protected] (END) Dow Jones Newswires July 27, 2010 08:50 ET (12:50 GMT)