Segment profit from India includes the results from the Dhirubhai 1 and 3 natural gas fields and the MA crude oil and natural gas field in the D6 Block, the Hazira crude oil and natural gas field and the Surat gas field.
The Company's oil and gas revenues for the year-to-date decreased from the prior year's periods, primarily due to natural production declines and reservoir management activities in the D6 Block. Production from the Surat block ceased in November 2012 as the cap on cumulative production in the approved field development plan was reached.
The decrease in royalties is a result of the decreased revenues described above. Royalties applicable to production from the D6 Block are five percent for the first seven years of commercial production and gas royalties applicable to the Hazira Field and Surat Block are currently 10 percent of the sales price.
Pursuant to the terms of the Indian PSCs, the Government of India is entitled to a sliding scale share in the profits once the Company has recovered its investment. Profits are defined as revenue less royalties, operating expenses and capital expenditures. An additional $6 million of the government share of profit petroleum for the Hazira Field was recognized and reduced crude oil and natural gas revenue in the period. The adjustment, related to crude oil and natural gas revenues earned in prior years, was the result of a court ruling finding that the 36-inch natural gas pipeline that Niko and GSPC constructed to connect the Hazira Field to the local industrial area was not eligible for cost recovery.
For the D6 Block, the Company is able to use up to 90 percent of revenue to recover costs. The Government of India was entitled to 10 percent of the profits not used to recover costs during the year. The government share of profit petroleum will continue at this level until the Company has recovered its costs. The Government of India was entitled to 25 percent and 20 percent of the profits from the Hazira Field and the Surat Block, respectively.
Operating costs at the D6 Block decreased mainly because of significant reduction in logistics costs due to reduced movement of material and inventory as compared to the prior year.
Depletion and depreciation expense for the current year was consistent with the prior year as the impact of increased depletion rates for the D6 Block in India resulting from the revision to the reserve volumes and future costs included in the March 31, 2012 reserve report was virtually offset by the impact of lower production.
In the current year, as a result of increased reserves volumes assigned to the D6 Block in the March 31, 2013 reserve report, the Company recognized a $102 million reversal of the asset impairment recorded in the prior year related to the D6 Block in India. In the prior year, as a result of reduced reserves volumes assigned to the D6 Block in the March 31, 2012 reserve report, the Company had recognized a $133 million impairment related to the Company's producing assets in the D6 Block.
There was a current income tax recovery in the current year, primarily as a result of the adjustment to the government share of profit petroleum described above, which is deductible for tax purposes.
The Company currently pays minimum alternate tax based on Indian-GAAP accounting income for the D6 block. For the current year, the D6 Block did not generate positive accounting income under Indian GAAP, resulting in a no minimum alternative tax expense in the current year.
Most Popular Stories
- 15 Myths That Could Ruin Your Hispanic Ad Campaign
- AIG to Create 230 Jobs in Charlotte
- General Motors Names Mary Barra as First Female CEO
- Russia Says Nyet to Canada North Pole Claim
- Bipartisan Negotiators Reach Modest Budget Agreement
- Justin Bieber Visits Typhoon Victims, Plays Concert
- Senate Dems Move Forward With Obama Nominees
- New Obama Aide to Focus on Climate Change
- MasterCard to Split Shares, Raise Dividend
- Obama Nominee Confirmed for D.C. Appeals Court