Cairn India could move to slippery grounds with capex cut

A host of bad news has descended upon Cairn India Limited (CIL), after a disappointing third quarter, the oil major has decided prune its capex for the current fiscal from a project $1.2 billion to $500 million in 2014-15.

This, experts say, is likely to further hit its production and profitability going forward. The cut has come after the company made highest-ever annual capital expenditure of $1.1 billion in the last fiscal.

The company, in its statement issued this week, said the remaining capex has been “deferred” but it will “remain agile to make investments to enhance volume”.

“Despite partial deferment of capex, the volumes will yet see growth in the coming fiscal,” the oil company said in its statement.

The company has also received management committee nod to operationise Raag Deep Gas project.

“We would like to gve confidence to our shareholders that we are more focused than ever to drive operational efficiencies in the current crude price environment. Our company’s rich balance sheet and best-in class cost profile provide a solid foundation to operate out high margin core fields. This gives us the optionality to be selective about growth projects in these challenging times,” said Mayank Ashar, managing director and CEO of Cairn India Limited.

CIL’s operational profitability slipped 11 percentage points to 60% in the third quarter of the current fiscal from 71% last fiscal. Its revenues fell 40% during the same period to Rs 3500 crore from Rs 5000 crore and net profit to Rs 1350 crore from Rs 2884 crore.