Vedanta Resources : Cairn India Ltd Q2FY17 Results

• Revenue at ₹ 2,039 crore; up 8% QoQ

• EBITDA at ₹ 1,039 crore; up 31% QoQ; highest in the last 5 quarters

• Net profit at ₹ 779 crore; up 117% QoQ; highest in the last 6 quarters

• Strong free cash flow of ₹ 1,565 crore even at low oil price; solid Cash and Cash Equivalents position of ₹ 24,339 crore

  Operational Highlights

• Average gross oil and gas production across assets steady at 196 kboepd

• Additional production from Mangala EOR up from ~42 kboepd to ~52 kboepd; RJ production marginally up by 0.5% QoQ to 167,699 boepd

• RJ water-flood operating cost at 10 quarters low, reduced by 12% QoQ to US$ 3.9/boe; blended operating cost also reduced by 10% QoQ to US$ 5.8/boe

  Development / Exploration Highlights

• RDG - 8 new wells brought online after completion of the 15-well hydro-frac campaign; Implementation of Phase-1 to increase the gas production to 40-45 mmscfd by mid CY17, Phase- 2 to increase it further to upwards of 100 mmscfd and condensate to ~5,000 boepd

• Aishwariya EOR - 21% reduction in spend from US$19/bbl to $15/bbl as a result of Opex and Capex optimization; IRR improved from 10% to 20% even with reduced Brent assumption from US$ 45 to US$ 40/bbl

• Bhagyam EOR - 17% reduction in spend from US$ 18/bbl to US$ 15/bbl as a result of Opex and Capex optimization; IRR improved from 10% to 15% even with reduced Brent assumption from US$ 45/bbl to US$ 40/bbl

• Aishwariya Barmer Hill - >30% reduction in well completion cost to sub US$ 4.5 million per well; 15-20% reduction in capex of US$ 300 million for EUR of 30 mmbbls; Production from stage-1 expected in current fiscal year

• Palar-Pennar - The program for drilling the commitment wells is being advanced and drilling is now planned to commence in Q4 FY17

• Rajasthan - Focus on identification of new plays, appraisal of new discoveries, and processing of the new 3D seismic data over high priority areas within the RJ block

  Corporate and Regulatory Developments

• On July 22, 2016, Cairn India Limited and Vedanta Limited revised the terms of the proposed merger between Cairn India Limited and Vedanta Limited which was initially announced on June 14, 2015. As per the revised terms, upon the merger becoming effective, non-controlling i.e. public shareholders of Cairn India will receive for each equity share held, one equity share in Vedanta Limited of face value ₹1 each and four 7.5% Redeemable Preference Shares in Vedanta Limited with a face value of ₹10 each. No shares will be issued to Vedanta Limited or any of its subsidiaries for their shareholding in Cairn India Limited.

  NSE and BSE have provided their 'No Objection' to the proposed merger and shareholders of Cairn India Limited, Vedanta Limited and Vedanta Resources Plc and the secured and unsecured creditors of Vedanta Limited have approved the Scheme with requisite majority. The Scheme is now subject to the approval of the jurisdictional High Courts and other regulatory approvals and is expected to be effective by the end of this financial year. Vedanta Limited will continue to be listed on the BSE Limited and National Stock Exchange of India Limited, with American Depositary Shares listed on the New York Stock Exchange. The Redeemable Preference Shares to be issued to the public shareholders of Cairn India Limited will also be listed on the NSE and BSE.

• The PSC extension writ is sub judice in the Hon'ble High Court of Delhi.

• In respect of crude export writ, the High Court while setting aside the writ, has noted that the parties are at liberty to refer the matter to dispute resolution as per contract.

"I thank our shareholders on approving the planned merger with Vedanta Limited to which the market has responded very positively.

The Cairn India team has delivered a net profit of ₹ 779 crore for the quarter ended September 2016 in a challenging oil price environment. This is the highest quarterly profit for the company over the past six quarters and is reflective of our industry leading technological and operational capabilities.

Our efforts to monetize our world class resource base through improved economics have resulted in the key projects - RDG Gas, Bhagyam and Aishwariya EOR becoming viable by achieving the desired IRR even at Brent at US$ 40 per barrel."

During Q2 FY17, Cairn had a gross production of 18.1 mmboe across all the assets, of which working interest production was 11.6 mmboe. Gross Sales was 17.6 mmboe averaging at 191,579 boepd.

* Includes internal gas consumption

Operations

Gross production from Rajasthan block was marginally up by 0.5% QoQ to an average rate of 167,699 boepd, aided by continued strong volumes from Mangala EOR and inline performance from Bhagyam and Aishwariya. Total production for the quarter was 15.4 mmboe and the cumulative production was at 369 mmboe by the end of the quarter. Encouraging results from Mangala EOR, driven by enhanced well productivity and new wells coming online, increased the additional production from EOR to an average of 52,000 boepd in Q2 FY17 from 42,000 boepd in Q1 FY17. Continued reservoir management including production optimization and maximization of liquid handling capacity helped maintain strong performance from Bhagyam and Aishwariya. Satellite Fields delivered an improved performance as

production increased ~10% QoQ to an average of ~3.9 Kbopd in Q2 FY17. Total oil sales for the quarter

was 14.9 mn barrels, at an average rate of 162,207 bopd.

Gas production from RDG increased from 28 mmscfd in Q1 FY17 to 33 mmscfd in Q2 FY17, amounting to 3 bcf, helped by superior initial well productivity post conclusion of the hydro-frac campaign. An additional 8 wells were brought online during the quarter after completing the fraccing of 15 wells in Q1 FY17. Total gas sales were 1.6 bcf, at an average rate of 17.2 mmscfd.

The water-flood operating cost in Rajasthan was further reduced to the lowest level in last 10 quarters at US$ 3.9/boe in Q2 FY17 from US$ 4.4/boe in Q1 FY17 through optimization of facility maintenance and work-over activities. Blended operating cost was also reduced significantly to US$ 5.8/boe from US$ 6.4/boe through contracts renegotiation and higher captive power generation while maintaining the injection of polymer at the target level of 400 kblpd.

Maintaining a strong focus on safe operations and asset integrity, the average facility uptime was over 99% in Q2 FY17. Lost Time Incident (LTI) free man-hours for Rajasthan Projects crossed 30.6 million since last LTI.

A routine operational and statutory maintenance shutdown at the Mangala Processing Terminal has been rescheduled in November from the earlier plan of September. The opportunity will be used to create tie-ins for ongoing new facility enhancements, development projects and future growth projects.

Ravva continues to deliver strong performance with a cumulative production of 280 mmbbls of crude and 347 bcf of gas, demonstrating a good reservoir management practices helping achieve ~50% recovery, far in excess of the initial resource estimates. In Q2 FY17, the production from Ravva declined by 4.1% QoQ to an average rate of 18,823 boepd, amounting to 1.7 mmboe. Incremental opportunities are being targeted to sustain the production rates. Optimization of gas lifted wells, addition of new zones, network optimization to reduce back pressure and water shut-off by zone isolations have helped arrest the natural decline. For Q2 FY17, 1.3 mmbbls of crude and 1.2 bcf of gas were sold, averaging 13,963 bopd of crude oil and 13 mmscfd of gas, respectively.

With a continued emphasis on asset integrity, Ravva recorded an uptime of 99.9% in Q2 FY17. Maintaining its high safety standards, Ravva asset recorded over 5.3 million LTI free man-hours since last LTI.

Cambay has also maintained an in-line performance having produced ~27 mmbbls of crude and ~228 bcf of gas, with an overall recovery of ~30% since inception in 2002. In Q2 FY17, the production was lower by 3.9% QoQ at an average rate of 9,877 boepd, amounting to 0.9 mmboe. Continued reservoir management practices and production optimization activities helped offset the natural decline impact. During the quarter, 0.8 mmbbls of crude and 0.9 bcf of gas were sold, averaging 8,883 bopd of crude oil and 9.4 mmscfd of gas, respectively.

Facilities recorded an excellent uptime of ~100% in Q2 FY17 and LTI free man-hours of 3.7 million.