Vedanta Resources PLC Q3 Production Release - Correction (5011N)

TIDMVED

RNS Number : 5011N

Vedanta Resources PLC

29 January 2016

Q3 Production Release - Correction

Please note the correction on net debt in line 5 on page 13: the correct figure is US$7.9bn, instead of the previous US$8.6bn.

29 January 2016

Vedanta Resources plc

Production Release for the Third Quarter Ended 31 December 2015

Q3 Highlights

-- EBITDA of US$494 million and 23% EBITDA margin(1) in a weak commodity price environment

-- Zinc-India: Strong refined metal production; record quarterly refined silver production of 3.7 million ounces

-- Oil & Gas: Stable production q-o-q with 19 kboepd contribution from Mangala EOR; Rajasthan water flood operating costs continue to improve

   --    Copper : 

o Zambia: Strong mined metal production at 32,000 tonnes with improvement of hoisting capacity and equipment availability at Konkola; continued improvement in cost of production despite higher power costs

o India: 89% utilization, affected by floods and unplanned shutdowns

-- Aluminium: Record metal production; 7% lower cost of production q-o-q driven by the cost optimisation programme; received approval for conversion of 3 units of 2,400 MW Jharsuguda IPP to CPP

-- Power: Second 660 MW unit of 1,980 MW Talwandi Sabo plant capitalised; 85% availability for unit - I and II

-- Iron ore: Stable operations in Karnataka; slower ramp up in Goa due to transportation issues

-- Actively managing balance sheet, with a focus on optimizing opex and capex to maximize free cash flow; refinancing and terming out maturing debt; and simplifying the group structure

o Robust financial position with total cash and liquid investments of US$8.9 billion and undrawn committed facilities of US$0.8 billion

Tom Albanese, Chief Executive Officer, Vedanta Resources plc, said: "In the weak commodity price environment, we remain committed to optimising our operations, leveraging our high quality asset base, and proactively managing our balance sheet. I am encouraged to see the positive results of our cost reduction programme gaining momentum, and believe that this relentless focus on efficiency will not only make our business more resilient through the cycle but position us favourably for any future improvement in market conditions. Despite challenging market conditions, these efforts have allowed us to generate a robust EBITDA margin of 23%."

Oil & Gas

 
                                                                                       Nine months 
                                       Q3                        Q2                       period 
-----------------------  -----------------------------  -------------------  ------------------------------- 
                                              % change             % change                         % change 
 Particulars              FY2016    FY2015       YoY     FY2016       QoQ      FY2016     FY2015       YoY 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 OIL AND GAS (boepd) 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Average Daily 
  Total Gross Operated 
  Production(2)           211,843   228,622       (7)%   214,247       (1)%    214,663    219,757       (2)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Average Daily 
  Gross Operated 
  Production (boepd)      202,668   218,900       (7)%   205,361       (1)%    205,909    210,399       (2)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Rajasthan              170,444   180,010       (5)%   168,126         1%    170,258    175,451       (3)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Ravva                   21,703    27,783      (22)%    26,064      (17)%     25,430     24,107         5% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Cambay                  10,521    11,107       (5)%    11,172       (6)%     10,221     10,842       (6)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Average Daily 
  Working Interest 
  Production (boepd)      128,402   136,701       (6)%   128,021         0%    128,991    132,576       (3)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Rajasthan              119,311   126,007       (5)%   117,688         1%    119,180    122,815       (3)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Ravva                    4,883     6,251      (22)%     5,864      (17)%      5,722      5,424         5% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Cambay                   4,208     4,443       (5)%     4,469       (6)%      4,089      4,337       (6)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Total Oil and 
  Gas (million boe) 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Oil & Gas- Gross         18.65     20.14       (7)%     18.89       (1)%      56.62      57.86       (2)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
   Oil & Gas-Working 
    Interest                11.81     12.58       (6)%     11.78         0%      35.47      36.46       (3)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Brent ($/boe)                 44        77      (43)%        50      (12)%         52         96      (46)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Average Price 
  Realisation ($/boe)        35.2      68.1      (48)%      43.7      (19)%       45.0       85.2      (47)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Oil - $/bbl                 35.0      68.7      (49)%      43.7      (20)%       45.1       86.2      (48)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Gas - $/mscf                 7.2       6.3        14%       7.0         3%        6.9        6.4         8% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 Revenue (US $ 
  million)                  307.8     565.0      (46)%     342.3      (10)%    1,063.1    1,968.7      (46)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 EBITDA (US $ million)       95.5     346.0      (72)%     158.4      (40)%      469.2     1358.2      (65)% 
-----------------------  --------  --------  ---------  --------  ---------  ---------  ---------  --------- 
 

Third quarter FY 2016 vs. second quarter FY 2016

Average gross production for Q3 FY2016 was 202,668 barrels of oil equivalent per day (boepd), 1% lower, primarily due to lower volumes from offshore assets. Rajasthan production increased 1.4% to 170,444 boepd as volumes from Mangala Enhanced Oil Recovery (EOR) continue to ramp up, as expected. Aishwariya recorded strengthening of volumes on account of five more infill wells coming online. Bhagyam production was largely steady as execution of work-over activities in the last quarter helped us arrest the natural decline.

The Mangala Polymer injection ramp-up is on track as it has been increased from 200,000 barrels of polymer solution per day in Q2 FY2016 to 330,000 barrels of polymer solution per day in Q3 FY2016. A further increase in injection volume to 400,000 barrels per day is expected by March 2016. In-line with our plan, average production from Mangala EOR increased to 19,000 boepd in the quarter and is expected to ramp-up further to support Rajasthan production in Q4.

During the quarter, the Salaya Bhogat Pipeline (SBPL), storage terminal and the marine export facilities at Bhogat were commissioned and consequently the first cargo of Rajasthan crude oil was successfully loaded through the terminal for Mangalore Refinery Petroleum Ltd, realizing superior pricing.

Rajasthan water flood operating cost reduced by 6% from US$5.5 per boe to US$ 5.1 per boe through improvement in operational efficiency and re-negotiations with vendors. Ramp-up in the polymer injection volumes has increased the blended operating cost including the cost of polymer injection by 7.8% to US$ 6.9 per boe, in line with guidance.

EBITDA for the quarter was lower by 40% at US$ 96 million, primarily due to the lower oil price and a higher discount of 19%.

Third quarter FY 2016 vs. third quarter FY 2015

Gross production from Rajasthan declined 5%, primarily due to underperformance of the Bhagyam reservoir and natural decline in the Mangala and Aishwariya fields. This has been partly offset by the ramp up of volumes from the Mangala EOR, infill wells at Aishwariya and reservoir management initiatives at Bhagyam. Production from Ravva and Cambay declined by 22% and 5% respectively, due to natural decline in the respective fields.

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January 29, 2016 09:55 ET (14:55 GMT)