Cairn India’s numbers for the quarter to September were in line with market expectations. Investors will now focus on the maiden dividend the exploration firm will announce on October 31.
The company’s ability to secure government approvals to raise production will be the key for it to improve its market value over the next few years.
The company, in its dividend policy announced earlier this year, had indicated a minimum 20% payout ratio — which would mean at least 20% of book profits to be distributed as dividend every year. If the profits of FY12 are taken into account, the dividend would work out to Rs 8 per share, which, according to some experts, will be the minimum the company will announce. However, if the company decides to reward shareholders more generously, it can dig into its cash pile of Rs 12,443 crore — or Rs 65 per share on its books. No wonder, shareholders are eagerly awaiting the announcement on the pay-out ratio.
Cairn’s production for the September quarter at 1,29,431 barrels of oil equivalent daily was 2% higher than in June quarter, but average realisations were down 2.6% to $96.7 per barrel. This resulted in a flat turnover at Rs 4,443 crore quarter on quarter. But, year on year, the turnover was up 67% thanks to growing production. The company had written off one-time expenditure of Rs 1,355 crore on the prior period royalty and cess in the September quarter in 2011. That is why its net profit for this quarter was expected to be significantly higher on y-o-y basis.
The profit figure should have been in line with the June quarter but for the forex loss of Rs 786 crore. Cairn India’s future growth will hinge on how swiftly it can ramp up its production further from its Rajasthan asset, for which timely government approvals will be critical. The company’s pilot project of Enhanced Oil Recovery, or EOR, through polymer flooding is progressing well and it has submitted a field development plan, or FDP, for a full field application of this technique.
The company also plans to invest $2 billion in two years in the Rajasthan field subject to government approvals, and it envisages a possible peak production rate of 3,00,000 barrels daily.
The company’s ability to secure government approvals to raise production will be the key for it to improve its market value over the next few years.
The company, in its dividend policy announced earlier this year, had indicated a minimum 20% payout ratio — which would mean at least 20% of book profits to be distributed as dividend every year. If the profits of FY12 are taken into account, the dividend would work out to Rs 8 per share, which, according to some experts, will be the minimum the company will announce. However, if the company decides to reward shareholders more generously, it can dig into its cash pile of Rs 12,443 crore — or Rs 65 per share on its books. No wonder, shareholders are eagerly awaiting the announcement on the pay-out ratio.
Cairn’s production for the September quarter at 1,29,431 barrels of oil equivalent daily was 2% higher than in June quarter, but average realisations were down 2.6% to $96.7 per barrel. This resulted in a flat turnover at Rs 4,443 crore quarter on quarter. But, year on year, the turnover was up 67% thanks to growing production. The company had written off one-time expenditure of Rs 1,355 crore on the prior period royalty and cess in the September quarter in 2011. That is why its net profit for this quarter was expected to be significantly higher on y-o-y basis.
The profit figure should have been in line with the June quarter but for the forex loss of Rs 786 crore. Cairn India’s future growth will hinge on how swiftly it can ramp up its production further from its Rajasthan asset, for which timely government approvals will be critical. The company’s pilot project of Enhanced Oil Recovery, or EOR, through polymer flooding is progressing well and it has submitted a field development plan, or FDP, for a full field application of this technique.
The company also plans to invest $2 billion in two years in the Rajasthan field subject to government approvals, and it envisages a possible peak production rate of 3,00,000 barrels daily.
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