Vedanta group-owned Cairn India is seeing a flat growth in oil production from its flagship Rajasthan block in fiscal 2015 mainly due to expected fall in output from Mangala field. The production outlook brought disappointment to many analysts who were expecting slight uptick in this fiscal.
"While there was some concern over Mangala production going down, the management did not really forecast a flat growth, and it may have come as a disappointment for many," an analyst with a domestic brokerage said.
Cairn India had announced an enhanced oil recovery (EOR) project involving investment of $575 million (around Rs 3,000 crore) to improve oil recovery from its prolific Rajasthan block. However, implementation of this scheme has been delayed and it would impact the production from the block.
"If it (EOR) was done a year back, we would not have faced flat growth," P Elango, chief executive officer, said in a post earnings conference call. As part of the EOR scheme, the oil explorer plans to use first polymer injection in the Mangala field towards the end of this fiscal, post which its production is likely to improve. Of the current production, approximately 150,000 barrels per day (bpd) come from Mangala field, which is the largest among the over two dozen discoveries Cairn India has made in the Rajasthan block.
Giving the production outlook for next three years, Cairn India on Wednesday said it would invest $3 billion on Rajasthan asset with a focus on the key development projects to enhance recovery. "We shall target to achieve reserve replacement ratio of 150% in next three years subject to PSC (production sharing contract) extension till 2030 and a three-year production CAGR of 7-10% from known discoveries with flat production in fiscal 2015," the company said in a statement.
While Cairn did not provide a specific number, analysts are expecting the oil output from Rajasthan to increase to 210,000-220,000 bpd in fiscal 2016. Production from Barmer field which is yet to add any meaningful production is likely to help the company to sustain output in current fiscal.
Gagan Dixit, an analyst from Quant Capital, expects additional 10,000-20,000 output from Barmer Hill in fiscal 2016. He, however, also pointed at possibility output decline in current fiscal. Cairn has already submitted field development plan for Barmer to the government, and as per the new policy can go ahead with production before getting approval.
Cairn India on Wednesday reported an 18% rise in its March quarter net profit as crude oil production from Rajasthan fields soared. Net profit in the January-March quarter rose to Rs 3,035 crore from Rs 2,564 crore, a year ago. Sales climbed 16% to Rs 5,049 crore. Oil production from its Rajasthan fields rose 12% to 189,304 barrels per day in the fourth quarter. In March quarter the company achieved 200,000 bpd target.
During January-March, the company tested three exploration wells, leading to two new discoveries in the block. The Barmer Hill formation was tested through a well, NR-3-2100, which flowed oil at 62 bpd and was established as the 30th discovery. In April 2014, another new discovery has been established, Kaameshwari West 8 in Dharvi Dungar formation, flowing oil at 117 bpd, the company said.