Cairn powers itself through low global oil prices to record good Q4 results

Cairn India on Thursday reported its biggest loss of Rs 241 crore in the fourth quarter ended March 31 mainly on account of one-time impairment loss in Sri Lanka, low oil prices and forex loss.

Net loss of Rs 241 crore, or negative earning per share of Rs 1.28, was against net profit of Rs 3,035 crore, or Rs 15.85 a share in the same period a year ago, the company said in a statement. This is the first loss that the company suffered since reporting Rs 13.9 crore loss in October-December quarter of 2007.

Sequentially, it had reported Rs 1,350 crore profit for the third quarter of 2014-15 fiscal. “Exceptional item in Q4 FY15 pertained to impairment loss of Sri Lanka amounting to Rs 505 crore (Gross of tax) leading to a negative profit after tax for the quarter,” it said. Also, it wrote off Rs 552 crore in exploration cost for failed wells in KG basin. 

These were marginally set off by lower Admin and Employee benefit expenses. Besides, rupee appreciation led to a forex loss of Rs 168 crore. Cairn said crude oil prices halved to $48.4 per barrel in the January-March quarter. Revenue fell 47 per cent to Rs 2,677 crore. Oil production from its prime Rajasthan fields dipped 9 per cent to 172,683 barrels per day. Cairn India Board recommended a final dividend of Rs 4 per share, entailing an outflow of about Rs 900 crore including dividend distribution tax.

This along with the interim dividend paid in September 2014 cumulatively amounts to around 44.57 per cent of annual consolidated net profit. “During Q4 FY15, the company received an order from the Income Tax Department for an alleged failure to deduct withholding tax on alleged capital gains arising during 2006-07 in the hands of Cairn UK Holdings Ltd (CUHL), our erstwhile parent company, a subsidiary of Cairn Energy Plc. 

“This was in respect of the transaction of CUHL transferring the shares of Cairn India Holdings Ltd (CIHL) to Cairn India Ltd as part of internal group reorganisation in 2006-07 to facilitate the IPO of Cairn India Ltd,” Cairn said. A demand of Rs 20,495 crore (comprising tax of Rs 10,248 crore and interest of Rs 10,247 crore) is alleged to be payable. “The company does not agree with this alleged demand and is pursuing all possible options to protect its interest. A writ petition has been filed before Delhi High Court,” it said. “Cairn India has always been fully compliant with all Indian Income tax laws. Income tax assessments including transfer pricing assessment were duly completed for FY 2006-07, earlier.”

Also, Vedanta Resources, its new owner, has filed a Notice of Claim against the Government of India under the UK-India bilateral investment treaty. For the full 2014-15 fiscal, Cairn reported 64 per cent drop in net profit at Rs 4,480 crore. Turnover dipped 22 per cent at Rs 14,646 crore. “This decline was primarily due to a 20 per cent lower rate of realisation (from sale of oil) and 3 per cent lower volumes but was also partially offset by a 1.2 per cent depreciation of average rupee,” it said. Brent crude oil averaged $85.4 per barrel in 2014-15, driven by demand/supply imbalances. The result was lower oil realisation at $76.8 per barrel last fiscal as compared to $95.8 a barrel the previous year, it said.