These worries have been priced into the stock. The company’s plans for other fields are likely to make up for the dwindling production at Mangala, even as it seeks government nod for its enhanced oil recovery programme’s field development plan (FDP). The company has also commenced natural gas sales, which could go up in future.
The company’s second-biggest field, Bhagyam, will achieve its peak production of 40,000 barrel per day (bopd) in the second half of FY14 from over 20,000 bopd at present, while the smaller Aishwarya field will reach a milestone of 10,000 barrels daily in the first half. Similarly, the company expects to commence production from the Barmer Hill formation this year subject to timely approvals. The company also plans to drill 450 more wells for exploration, appraisal and development purpose over the next three years to support production volumes.
“We expect to exit FY14 with a production rate of 2,00,000 - 2,15,000 bopd at the Rajasthan block, against the current production of 1,75,000 bopd,” said P Elango, interim CEO and wholetime director, Cairn India, during a media conference call after the results. This means the company should be able to maintain or marginally improve its production in FY14 compared with FY13. Also, there is a potential upside available from incremental exploration in the Rajasthan block or the gas discoveries in its Sri Lankan block. Elango said the company is set to get a better price for its crude oil in FY14, which is sold at a discount to the widely followed Brent benchmark in accordance with its quality. “As against the 10-15% discount to Brent crude oil prices till now, we are revising our guidance to 8-13% discount,” he said. The stock’s under-performance has pulled down the company’s valuation — now at a P/E of 4.6 — to the lowest among peers. Faster government decisions in the exploration and production segment, the company’s track record in project implementation and its potential for growth should assuage investors’ worries.
The company’s second-biggest field, Bhagyam, will achieve its peak production of 40,000 barrel per day (bopd) in the second half of FY14 from over 20,000 bopd at present, while the smaller Aishwarya field will reach a milestone of 10,000 barrels daily in the first half. Similarly, the company expects to commence production from the Barmer Hill formation this year subject to timely approvals. The company also plans to drill 450 more wells for exploration, appraisal and development purpose over the next three years to support production volumes.
“We expect to exit FY14 with a production rate of 2,00,000 - 2,15,000 bopd at the Rajasthan block, against the current production of 1,75,000 bopd,” said P Elango, interim CEO and wholetime director, Cairn India, during a media conference call after the results. This means the company should be able to maintain or marginally improve its production in FY14 compared with FY13. Also, there is a potential upside available from incremental exploration in the Rajasthan block or the gas discoveries in its Sri Lankan block. Elango said the company is set to get a better price for its crude oil in FY14, which is sold at a discount to the widely followed Brent benchmark in accordance with its quality. “As against the 10-15% discount to Brent crude oil prices till now, we are revising our guidance to 8-13% discount,” he said. The stock’s under-performance has pulled down the company’s valuation — now at a P/E of 4.6 — to the lowest among peers. Faster government decisions in the exploration and production segment, the company’s track record in project implementation and its potential for growth should assuage investors’ worries.
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