Cairn India - Is it the right time to buy?

Stock Opportunities Untested - but worth a good look
21

Key Shareholding Categories*%

  • Vedanta Group (Promoter)59.886

  • Cairn UK Holdings Limited9.821

  • Other Institutions9.819 (MAINLY LIC )

  • Foreign Institutional Investors16.826

  • Others3.648

  • Total100

Only 3.6 % available for small shareholders.

Is this significant?

22

Cairn India is available for very good valuations it seems. Any one following this stock ? Can it be bought for longterm ?

Disc : Planning to Invest

23

Hi All,

It still looks attractive. Is it good to buy at the current price of 240 with oil still going down ?.

Thanks,

Hari

24

Please read this thread carefully. The management is notorious for its unfriendly attitude towards retail shareholders and shady corporate governance. That along with the crashing oil prices makes this a prime “AVOID” if not a shorting candidate.

Discl: Do not plan to invest in Sterlite/Vedanta group cos at any price.

25

Highlights of the Concall by Capital Mkt;

  • Average price realisation stood at USD 68.1 per barrel in Q3FY’15 down 28% on a YoY basis. Average gas price realisation stood at USD 6.3 per mscf up by 6% compared to corresponding previous year period. Average oil price realisation stood at USD 68.7 per boe down by 29% compared to corresponding previous year period due to significant drop in crude oil prices globally, with an implied 10.8% discount to Dated Brent.The overall operating expense in Rajasthan was at US$ 5.7 /bbl, one of the lowest in the world.

  • Average price realisation was down 10% at USD 85.2 per barrel in 9MFY’15 on a YoY basis. Average gas price realisation stood at USD 6.4 per mscf up by 17% compared to corresponding previous year period. Average oil price realisation stood at USD 86.2 per boe down by 10% compared to corresponding previous year period.

  • Average daily gross operated production stood at 228622 barrels of oil equivalent per day (boepd) in Q3FY’15 down by 2% on a year on year basis (working Interest production stood at 136701 boepd down by 3%)

  • Average daily gross operated production stood at 219757 barrels of oil equivalent per day (boepd) in 9MFY’15 down by 2% on a year on year basis primarily on account of planned routine operational and statutory maintenance activity at the Mangala processing terminal in Q2FY15. (working Interest production at 132576 boepd down by 2%)

  • The Rajasthan Block produced around 16.6 million barrels of oil equivalent in the quarter at an average of 180,010 boepd, achieving a cumulative total production of 266 mmboe until the end of Q3 FY15 with facility uptime at 98.3%

  • During the quarter, an average of 179,305 bopd was sold to PSU and private refiners across India. Gas sales during the quarter were ~10 mmscfd, amounting to total sales of ~0.9 Bscf.

  • Gas development continues in line with the target to double gas production through existing gas pipeline by Q4FY15.Mangla EOR polymer injection started on 31st Oct 2014 and is expected to be concluded by Q4 FY15. The company expects gradual increase in production in FY16

  • During the quarter, the production volume from Aishwariya field ramped up to 30 kbopd.During the quarter, NE field in DA2 has started production taking the total number of producing satellite fields to six

  • Gas development continues in line with the target to double gas production through existing gas pipeline by Q4 FY15.Cairn India expects production to grow at a CAGR of 7-10% over next 3 years

  • The company expects overall net capex of $3 billion including exploration till FY17.

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Highlights of the Concall by Capital Mkt;
  • Average daily gross operated production stood at 174206 barrels of oil equivalent per day (boepd) in Q4FY'15 down by 9% on a year on year basis (working Interest production stood at 121944 boepd down by 9%.Average price realisation stood at USD 48.4 per barrel in Q4FY'15 down 49% on a YoY basis. Average gas price realisation stood at USD 6.2 per mscf up by 2% compared to corresponding previous year period. Average oil price realisation stood at USD 48.6 per boe down by 49% compared to corresponding previous year period.Average daily gross operated production stood at 175144 barrels of oil equivalent per day (boepd) in FY'15 down by 3% on a year on year basis (working Interest production at 122601 boepd down by 4%)
  • Average price realisation was down 20% at USD 76 per barrel in FY'15 on a YoY basis. Average gas price realisation stood at USD 6.4 per mscf up by 14% compared to corresponding previous year. Average oil price realisation stood at USD 76.8 per boe down by 20% compared to corresponding previous year period
  • Exploration cost was higher at Rs 1098 crore in FY'15 compared to Rs 412 crore in FY'14 due to write off of Rs 260 crore on account of the HPHT well RX-11 in Ravva, Rs 111 crore on account of Nagayalanka-NW-1z well in KG Onshore and Rs 99 crore on account of write off of dry wells in Rajasthan.Exceptional items for the year amounted to Rs 2663 crore, of which Rs 2127 crore was on account of the change in accounting policy to unit of production method and Rs 505 crore was on account of impairment of the Sri Lanka asset
  • Deferred tax expenses was higher in FY'15 on account of increased exploration spend during the year
  • Gas production is expected to improve by FY17.The company is keen on participating in 69 marginal fields auction if found attractive.The company expects net capex of US$ 500 million in FY'16- 45% of which will be spent in Core MBA fields, 40% in Growth projects of Barmer Hill, Satellite Fields & Gas and 15% in Exploration.The company expects to maintain Rajasthan production at FY15 levels in FY'16 despite record low oil prices and substantial cut in capex.The company aims to have healthy cash flows post capex to retain the ability to pay dividends

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experts, Is CAIRN the ideal proxy to PLAY CRUDE ?

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Highlights of the Concall by Capital Mkt
Total consolidated income from operations fell 41% on a YoY basis in Q1FY’16 to Rs 2627 crore while EBITDA decreased 48% to Rs 1854 crore. Bottomline of the company decreased 24% to Rs 835 crore.On a QoQ basis Total income from operations fell 2% on account of increase in the share of Profit Petroleum payable to the government of India while EBITDA increased 90%
Average daily gross operated production in Rajasthan block stood at 172224 barrels of oil equivalent per day (boepd) in Q1FY’16 down by 6% on a year on year basis (working Interest production stood at 120557 boepd down by 6%.Average price realisation stood at USD 56 per barrel down 42% on a YoY basis while up by 16% on a QoQ basis. Average gas price realisation stood at USD 6.6 per mscf up by 17% compared to corresponding previous year period and 6% when compared to previous quarter. Average oil price realisation stood at USD 56.3 per boe down by 43% compared to corresponding previous year period but up by 16% compared to previous year.The average crude price realization for the quarter significantly improved to US$ 55.8/bbl from US$ 48.4/bbl, 16% higher QoQ. The quarter saw an improvement in the discount to Dated Brent, which reduced from 10.5% in Q4FY15 to 9.9% in Q1FY16, fetching 0.8% higher realization per barrel of Rajasthan
In Mangala EOR, Injection has been increased from 25,000 barrels of polymer solution per day to 80,000 barrels in Q1FY16. The injection ramp up plan is on track and progressive production impact will begin in the second half of this fiscal.The company expects to maintain Rajasthan production in current year at FY15 levels despite low oil prices and substantial cut in capex.Planned capital investment is for a net capex of US$ 500 million; 45% in Core MBA fields, 40% in Growth projects of Barmer Hill, Satellite Fields & Gas and 15% in Exploration. The Company retains the flexibility to invest balance US$ 1.4 bn as oil prices improve and costs bottom out and also aim to have healthy cash flows post capex so as to retain the ability to pay dividends subject to Board
Total cashflow from operations for the quarter was Rs 1268 crore. This quarter saw a net capex spend of US$ 104 million. The company closed the quarter with a healthy cash and cash equivalent position of Rs 16,467 crore; of which 72% is invested in rupee funds and the rest in dollar funds

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CONFERENCE CALL - from Capital Markets

Cairn India

Expects to maintain production in FY17 at FY16 levels

Cairn India held a conference call to discuss the financial results for the quarter ended March 2016 and future prospects of the company. Senior management of the company were present in the conference call

Highlights of the Concall

  • Average daily gross operated production in Rajasthan block stood at 167650 barrels of oil equivalent per day (boepd) in Q4FY’16 down by 4% on a year on year basis (working Interest production stood at 117355 boepd down by 4%).
  • Average price realisation stood at USD 28.2 per barrel down 42% on a YoY basis. Average gas price realisation stood at USD 7.4 per mscf up by 19% compared to corresponding previous year period. Average oil price realisation stood at USD 27.8 per barrel down by 42% compared to corresponding previous year period.
  • Average daily gross operated production stood at 169609 barrels of oil equivalent per day (boepd) in FY’16 down by 3% compared to FY’15 (working Interest production at 118726 boepd down by 3%).
  • Average price realisation was down 46% at USD 40.9 per barrel on a YoY basis. Average gas price realisation stood at USD 7.1 per mscf up by 11% compared to corresponding previous year period. Average oil price realisation stood at USD 40.8 per barrel down by 47% compared to corresponding previous year period.
  • Cash flow from operations for FY16 was Rs 4,134 crore. Net capital expenditure incurred for the year was Rs1,626 crore with 78% of the investment made in development activities and 22% on exploration work. Closing cash and cash equivalent position was robust at Rs19,521 crore, of which 69% is invested in rupee funds and 31% in dollar funds.
  • Employee cost was lower during the quarter mainly due to lower employee strength compared to last year and revision of the stock options.
  • Cairn India is awaiting date from High Court for stake holders meeting. It would take around 3 months to get the date from High Court.
  • The company expects capex of US$100 million in FY’17- 80% in Development including RDG Gas and Mangala EOR completion activities, and 20% in Exploration.
  • The company continues to invest in pre-development activities of key projects in Core MBA fields, Barmer Hills and Satellite fields to ensure their readiness for development on rebound in oil prices and grant of extension of PSC.
  • The company aim to have healthy cash flows post capex to retain the ability to pay dividends subject.
  • RDG Gas – Encouraging Upside from Hydro-Fraccing – Around 30% increase in reservoir coverage with less number of stages while 100% increase in initial productivity observed in new wells as compared to wells fracced during 2009-10 campaign Rajasthan Production.
  • The company expects that the tax rate hereon would be 38% on account of 7yrs Tax holiday completion. But company has total MAT credit of Rs 78 billion which can be utilise over next 10 years.
  • The company expects to maintain production in FY17 at FY16 levels.
  • Cess amount came down during the quarter in tandem with change in Cess rate from fixed to ad valorem (20% to crude oil price) w.e.f. 1st March 2016.

Vedanta

FY 2017 aluminium production is expected to be around 1.2 million tonne

Vedanta held a conference call to discuss the financial results for the quarter ended March 2016 and future prospects of the company. Senior management of the company were present in the conference call

Highlights of Concall

  • The company highlighted about Non-cash charge of Rs. 12,304 crore which was largely due to impairment of goodwill that the company had recorded post acquisition of the stake in Cairn India. This has been undertaken in the light of steep fall in crude oil price. Value of goodwill may also change post completion of the merger with Cairn India depending on the market conditions
  • The company is undertaking several cost saving initiative wherein it has been able to save around $250 million in FY16 and is targeting to save another $250-30 million in FY17
  • Taxes have been lower in Q4FY16 on account investment income in HZL set off against carried forward tax losses. Going forward company expects tax rate to be around MAT rate
  • The company highlighted that reduction in oil cess from Rs. 4,500 per tonne to 20% advalorem and increase in aluminium import duty from 5% to 7.5% to positively impact its business segments respectively
  • Out of $3.3 billion debt obligation, company highlighted that $1.2 billion is to be funded through rolled over short term debt, $1 billion will be funded through internal operation and other sources and for the balance $1 billion the company is negotiating with various banks.
  • Company has increased duration of its debt portfolio which is expected to reduce interest burden going forward.

Oil & Gas

  • Rajasthan FY2017 production is expected broadly at FY2016 level
  • Routine maintenance shutdown is planned in Q2FY2017
  • FY2017 net capex guidance of $100m- 80% in development including RDG and Mangala EOR projects and 20% in Exploration

Zinc India

  • FY2017 mined metal expected to be marginally higher -H2 to be higher than H1, with Q1 significantly lower
  • FY2017 refined integrated lead production expected to be higher than FY2016, zinc production to be stable
  • FY2017 Silver production expected to be 475-500 tonnes
  • Zinc C1 CoP to remain stable at $800 – 850 per tonne, H1 CoP to be higher in line with volumes

Zinc International

  • FY2017 volume expected at around170-190kt
  • COP expected at $1200-$1,300/t: continued focus on cost reduction initiatives, including labour and equipment productivity improvements

Aluminium

  • FY 2017 production is expected to be around 1.2 million tonnes
  • 1.25 million tonne Jharsuguda smelter (4 x 313kt): 1st pot line started-up on 1st April 2016, to ramp-up in
  • 3-6 months, 2nd line to commence ramp up from end-Q2; will subsequently ramp up 3rd line from Q4; ramp up of 4th line to be evaluated
  • 325ktpa Korba–II smelter commenced ramp-up in April 2016
  • Lower hot metal COP estimated at below $1,400 for FY 2017
  • Lanjigarh: Alumina COP estimated at $250/t; ramp up from current 0.8mt to 1.4mt
  • Laterite mining: to commence from Q3 FY2017
  • Power cost: Favourable coal mix along with optimizing on coal sourcing and logistics

Power

  • FY2017 estimated coal requirement would be around 36 million tonne for 9000MW portfolio. Coal sourcing for FY 2017 would be through linkages, e-auctions, imports. Coal India is expected to auction linkages
  • Chotia coal block commenced mining in FY2016
  • Coal supply scenario improving gradually. Coal India offered forward auctions, special auctions for CPPs & IPPs and spot auctions for all consumers
  • Increase in clean energy cess by Rs. 200/t has increased coal cost by 5-6%

Iron Ore

  • Goa and Karnataka production expected at 5.5mt and 2.3mt respectively, further mining allocation being pursued

Copper - India

  • Maintenance shutdown of 10 days expected in FY2017
31

Hi ,

I have received 4 redeemable preference shares for each one share of Cairn after merger with Vedanta. Can any one please tell me what are these redeemable preference shares and how we can redeem it.