CAIRN INDIA

This oil and gas exploration company posted better than expected set of numbers for Q2FY17. Revenue for the quarter increased 8% QoQ to Rs.2,039 crore as discount to Brent for Rajasthan crude declined substantially from US$ 8.2/bbl to US$ 4.3/bbl, implying a reduction in discount from 18% to 9.3%. An improvement in differential between Bonny Light and Brent, and strong refining crack for fuel oil and waxy residue helped reduce the discount. Overall realization was up by 10% QoQ to US$ 41.8/boe as Rajasthan crude realization increased by 11% to US$ 41.6/bbl. Brent price was relatively flat on average basis at US$ 45.8/bbl. Consequent to higher revenue, net profit petroleum increased by 19% to Rs.771 crore including Rs.662 crore for Rajasthan block. Net royalty was Rs.417 crore with Rajasthan share of Rs.414 crore.

EBITDA margin improved further from 42% in Q1 FY17 to 51% in Q2 FY17 due to higher revenue and reduction in operating cost. EBITDA for the quarter also increased by 31% QoQ to Rs.1,039 crore. DD&A charges accounted on entitlement interest basis were lower by 4% QoQ. Forex gain was recorded at Rs.64 crore due to 1.4% appreciation in Rs v/s $ on closing basis.

Net profit after tax was highest in the last six quarter as it increased significantly by 117% QoQ to Rs.779 crore on account of higher EBITDA, lower depreciation and forex gain. A higher profit resulted into. EPS was at Rs.4.1 for Q2 FY17. Cash EPS was also up 17% QoQ to Rs.7.9 due to higher EBITDA.

Total free cash flow for Q2 FY17 was at Rs1,565 crore. Net capital investment was Rs.45 crore with 86% spent on development work and 14% on exploration activities. Positive free cash generation further strengthened the cash and cash equivalent position to Rs.24,339 crore (US$ 3.7 billion), of which 68% is invested in rupee funds and 32% in dollar funds.

A net capital investment of US$ 100 million is estimated for FY17, including 20% for exploration activities and 80% for development of RDG Gas project and completion activities of Mangala EOR. The gross production from Rajasthan for FY17 is expected to be maintained at FY16 level.