VEDANTA RESOURCES Tel: +44 (0) 20 7499 5900
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www.vedantaresources.com
1 August 2016
Production Release for the First Quarter ended 30 June 2016 OperationsOil & Gas:
Production stable; contribution from Mangala EOR, world's largest polymer EOR program, increased to 42kboepd
Rajasthan water flood opex at $4.4/boe, blended cost at $6.4/boe
Zinc India:
Silver production up 20% y-o-y
Lower mined metal production as per plan, H2 production expected to be substantially higher than H1
Maintained first decile cost of production
Copper Zambia: Konkola underground production up 2% y-o-y due to improved equipment availability; overall cost of production 8% lower
Aluminium:
Exit production run-rate of 1.1mtpa
Ramp-up of first line of 1.25mt Jharsuguda-II smelter completed, second line commenced in July; 325kt BALCO-II smelter nearing completion
Iron ore: Production at Goa ramped up; produced 40% of allocated annual capacity at Goa in Q1
Power:
TSPL: Two units operated at 72% availability, third unit to be capitalized in Q2
BALCO: Second 300 MW IPP unit capitalized
Corporate
Gross Debt for the Group reduced by c.US$ 0.3 billion during the quarter
FY 2017 bond maturities at Vedanta Plc paid; focused on future maturities
o Repaid US$ 680 million of 6.75% bonds due in June 2016 and US$ 515 million of 5.5% convertible bonds due in July 2016
Announced revised and final terms for Vedanta Ltd and Cairn India merger on 22 July 2016, transaction expected to complete in the current financial year
Tom Albanese, Chief Executive Officer, Vedanta Resources plc, said: "We have made good progress on the ramp up of capacities at our Aluminium, Power and Iron Ore businesses during the quarter. These would be significant contributors to earnings as the year progresses. Zinc-India was impacted by lower mined metal production as per the mine plan, and the second half is expected to be substantially higher. We are making good progress towards optimising costs at Copper-Zambia. We are focused on generating stronger free cash flow and de-levering the balance sheet, in line with our strategic priorities. Another of these priorities, the simplification of the group structure, is also on track following the recent announcement of the revised and final terms for the Vedanta Ltd-Cairn India merger."
Oil & GasQ1 | Q4 | Full Year | ||||
Particulars | FY2017 | FY2016 | % change YoY | FY2016 | % change QoQ | FY2016 |
OIL AND GAS | ||||||
Average Daily Total Gross Operated Production (boepd) 1 | 206,455 | 217,935 | (5)% | 206,170 | 0% | 212,552 |
Average Daily Gross Operated Production (boepd) | 196,861 | 209,738 | (6)% | 197,039 | 0% | 203,703 |
Rajasthan | 166,943 | 172,224 | (3)% | 167,650 | 0% | 169,609 |
Ravva | 19,637 | 28,556 | (31)% | 19,058 | 3% | 23,845 |
Cambay | 10,281 | 8,958 | 15% | 10,331 | 0% | 10,249 |
Average Daily Working Interest Production (boepd) | 125,391 | 130,565 | (4)% | 125,775 | 0% | 128,191 |
Rajasthan | 116,860 | 120,557 | (3)% | 117,355 | 0% | 118,726 |
Ravva | 4,418 | 6,425 | (31)% | 4,288 | 3% | 5,365 |
Cambay | 4,113 | 3,583 | 15% | 4,133 | 0% | 4,100 |
Total Oil and Gas (million boe) | ||||||
Oil & Gas- Gross | 17.91 | 19.09 | (6)% | 17.93 | 0% | 74.56 |
Oil & Gas-Working Interest | 11.41 | 11.88 | (4)% | 11.45 | 0% | 46.92 |
Brent (US$/bbl) | 45.6 | 61.9 | (26)% | 34.3 | 33% | 47.6 |
Average Price Realisation (US$/boe) | 38.0 | 56.0 | (32)% | 28.2 | 35% | 40.9 |
Oil - US$/bbl | 37.9 | 56.3 | (33)% | 27.8 | 36% | 40.8 |
Gas - US$/mscf | 7.1 | 6.6 | 8% | 7.4 | (4)% | 7.1 |
Revenue(US$ million) | 281.5 | 413.0 | (32)% | 259.2 | 9% | 1,322.3 |
EBITDA(US$ million) | 119.2 | 215.4 | (45)% | 101.2 | 18% | 570.4 |
During Q1 FY2017, average gross production remained stable compared to Q4 FY2016 at 196,861. Production was 6% lower y-o-y primarily due to a natural decline from the Bhagyam field and the offshore Ravva block.
Gross production from Rajasthan averaged 166,943 boepd, supported by increased volumes from Mangala Enhanced Oil Recovery (EOR), and stable performance from Aishwariya. Production optimization and maximization of liquid handling capacity helped maintain strong performance from Aishwariya. Production from Rajasthan was 3% lower y-o-y mainly due to the natural decline and under-performance of the
Bhagyam reservoir, which continues to be addressed through efficient reservoir management activities. Gross production from Development Area-1 and Development Area-2 averaged 150,699 boepd and 16,244 boepd, respectively.
The Mangala EOR is the world's largest polymer injection project, and has been successfully stabilized, yielding positive results. In Q1 FY2017, polymer injection was maintained at planned levels of 400,000 barrels of polymerized liquid per day. The contribution of Mangala EOR increased in Q1 to an average of 42,000 bopd from 32,000 bopd in Q4 FY 2016. Successful execution at Mangala EOR gives us the confidence for the Bhagyam and Aishwariya EOR projects.
Cambay production remained steady q-o-q at an average rate of 10,281 boepd as our effective reservoir management practices and production optimization measures helped offset the natural decline. Cambay block production increased by 15% y-o-y, driven by commissioning of an artificial gas lift system and better reservoir performance.
In Q1 FY2017, Ravva production increased 3% q-o-q to 1.8 mmboe at an average rate of 19,637 boepd on the back of improvement in well productivity after the well stimulation program was carried out in Q4 FY2016. Production were 31% lower y-o-y as strong volumes in Q1 FY2016 was due to bringing in additional wells online through an infill program.
During Q1 FY2017, average gas production from RDG was steady q-o-q at 28 mmscfd. We have made good progress on the phased ramp-up of gas production through a disciplined capital allocation approach while ensuring sustained production growth. As part of Phase-1, 15 wells have been fracced and are being put to production. We expect to increase gas production to 40-45 mmscfd by H1 CY2017 in Phase-1. For Phase-2, tendering for the new gas processing terminal's long lead items, drilling rig and services is progressing as planned. Tendering activity for the EPC contract for the gas evacuation pipeline from Raageshwari to Pali and Pali to Mehsana to be constructed by GSPL India Gasnet Limited is also progressing well. The completion of Phase-2 will further increase the gas production to 100 mmscfd.
The water-flood operating cost at Rajasthan was further reduced to US$ 4.4/boe from US$ 4.8/boe in Q4 FY2016 and US$ 5.2/boe in FY2016. Reduction in well maintenance expenses through continuous optimization of work-over activities and lower crude processing charges due to savings on chemical costs and gas compressor rentals resulted in lower operating cost. The blended operating cost for Rajasthan was also lower at US$ 6.4/boe in Q1 FY2017 from US$ 6.5/boe in FY2016 even with the polymer injection being maintained at the target level of 400 kblpd. Continuous interventions to reduce the polymer cost resulted in 25% lower polymer injection cost.
A routine operational and statutory maintenance shutdown at the Mangala Processing Terminal is planned in the latter half of September. While this will have an impact on production, the opportunity will be used to create tie-ins for ongoing facility enhancements, development projects and future growth projects.
In Q1 FY2017, revenue increased by 9% q-o-q due to a significant rise in Brent prices. Brent was up 33% during the quarter, resulting in a 35% q-o-q increase in the overall realization to US$ 38.0/boe. A relatively lower increase was due to a higher amount of profit petroleum. EBITDA was 18% higher q-o-q due to improved oil prices, lower operating cost and lower cess charges on an ad-valorem basis (cess earlier was Rs. 4,500 per tonne).
FY2017 production at Rajasthan is expected to be broadly at FY2016 level.
Zinc IndiaParticulars | Q1 | Q4 | Full Year | |||
FY2017 | FY2016 | % change YoY | FY2016 | % change QoQ | FY2016 | |
Zinc India(kt) | ||||||
Mined metal content | 127 | 232 | (45)% | 188 | (33)% | 889 |
Refined Zinc - Total | 102 | 187 | (45)% | 154 | (34)% | 759 |
Refined Zinc - Integrated | 101 | 187 | (46)% | 154 | (34)% | 759 |
Refined Zinc - Custom | 1 | - | - | - | - | - |
Refined Lead - Total 2 | 25 | 31 | (20)% | 38 | (36)% | 145 |
Refined Lead - Integrated | 25 | 27 | (11)% | 38 | (36)% | 140 |
Refined Lead - Custom | - | 3 | - | 0 | - | 5 |
Silver - Total (in mn ounces) 3 | 2.85 | 2.42 | 18% | 3.92 | (27)% | 13.65 |
Silver- Integrated (in mn ounces) | 2.85 | 2.38 | 20% | 3.92 | (27)% | 13.56 |
Silver- Custom (in mn ounces) | - | 0.05 | - | - | - | 0.09 |
Average LME - Zinc ($/t) | 1,918 | 2,190 | (12)% | 1,679 | 14% | 1,829 |
Average LME - Lead ($/t) | 1,719 | 1,942 | (11)% | 1,744 | (1)% | 1,768 |
Average Silver Prices ($/oz) | 16.8 | 16.4 | 2% | 14.9 | 13% | 15.2 |
Revenue (US$ million) | 364.8 | 558.2 | (35)% | 451.8 | (19)% | 2,111.0 |
EBITDA (US$ million) | 160.3 | 255.4 | (37)% | 195.3 | (18)% | 995.0 |
Mined metal production in Q1 was significantly lower at 127,000 tonnes, in line with the mine plan of the Rampura Agucha open cast mine as more waste was excavated than ore, in accordance with the waste-ore sequence, resulting in lower mined metal production. This was marginally offset by higher production from all the underground mines especially Sindesar Khurd and Kayad. The production plan for the year envisages that second half volumes will be substantially higher than in the first half; Q2 will be much stronger than Q1.
Refined zinc and lead volumes during the quarter were lower in line with the mined metal production.
Integrated silver production was up 20% y-o-y as a result of higher volumes from the silver-rich Sindesar Khurd mine. Production was 27% lower q-o-q due to accretion of inventories and lower volumes from the Rampura Agucha mine.
Ore production from the Sindesar Khurd decline reached the original designed capacity of 3.75mtpa during the quarter. The main shaft sinking work has already been completed to the final depth of 1,052 metres and off shaft development work
Vedanta Resources plc published this content on 01 August 2016 and is solely responsible for the information contained herein.
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