Cairn India - Restarting exploration – can the option value increase? - Edelweiss

Cairn India's (Cairn) Q3FY13 revenue at INR42.7bn (-4% QoQ) was in line with our INR43.3bn estimate. Rajasthan oil production at 170kbpd was down 1% QoQ with a slight dip in Bhagyam. Crude realization was USD95.6/bbl (13.3% discount to Brent). Core profit at INR31.5bn was higher than our estimate of INR30.4bn due to lower tax rate. With GoI clarity on carrying out exploration in existing development blocks, Cairn plans to restart exploration in February and drill 100 wells over 3 years.

We maintain FY14/15 Rajasthan production at 200/210kbpd noting that long term increase to 300kbpd needs exploration success and reserves upgrade.

Maintain 'HOLD' with a revised Mar'13 target of INR375 (INR362 earlier).

Source : Equity Bulls

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