Cairn India - Higher crude realization going ahead - AXIS Securities

Cairn's Q4FY13 adjusted PAT at ~Rs 29 bn was marginally higher than our expectation. Management guided its crude oil realization would now stand higher at 8-13% discount to Brent (vs. 10-15% earlier) due to favorable pricing terms in new crude sale contracts. Also, revised net capex of US$3 bn over FY14-16E (vs ~US$2 bn earlier) would reduce cash allocation concerns. Cairn has proposed FY13 dividend of Rs 11.5/sh (final Rs 6.5+ interim Rs 5), implying ~20% payout.

Additional upside from ongoing enhanced oil recovery (EOR) pilot, expected to be completed in H1CY13 (could result in 300 mnboe of reserve accretion). This, along with aggressive exploration plan (450 wells in 3 years), would provide visibility on 300 kbpd production. Exploratory success in Barmer Hill (Rajasthan), KG-onshore and Sri Lanka are other triggers. Maintain BUY with TP of Rs 425.

Source : Equity Bulls

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