Oil firm Cairn Energy has seen 2004 pre-tax profits fall to £29.4m ($56m) from £69m the previous year.
Cairn is continuing to look for oil in South Asia
Shares in Cairn rose by 300% last year after the firm reported oil finds in Rajasthan, India. The company entered the FTSE 100 but later dropped out.
Cairn hopes to start production at its key Mangala field in late 2007.
It said the profits fall was due to production problems in western India, and increased profits from other fields being taken by the Indian government.
"2004 was an exceptional year for Cairn and our operational success has continued in 2005," said Cairn chief executive Bill Gammell.
"To have discovered, appraised and evaluated half a billion barrels of oil reserves in Rajasthan within 15 months is a tremendous achievement by the Cairn team."
Before Christmas, Cairn revealed drilling results from fields to the north of Rajasthan had been disappointing, which caused its shares to fall 18% in one day and helped cause its FTSE fall-out.
On Tuesday, Cairn said it remained excited by "the growth opportunities within its existing portfolio and the prospects for growth across South Asia".
"The Mangala oil discovery in the Rajasthan desert in January 2004 highlights the vision and perseverance with which this South Asian strategy has been pursued," said Mr Gammell.
Most of Cairn's value is based on its Rajasthan assets, with Mangala the largest oil discovery by any company in India within the last 22 years.
Edinburgh-based Cairn estimates "life-of-field" reserves of 500 million barrels in total at Mangala and two other fields in the north of its Rajasthan development area, known as Bhagyam and Aishwariya.
Chief Executive Bill Gammell said the firm could add another 148 million barrels to the total if recovery methods were successful.
"It truly is a transformational moment for the group... good fields get better," he said.
A total of 77 wells have been drilled by Cairn in Rajasthan and another 30 are expected in 2003. It has also applied to the Indian government to widen its development area.
"It's looking like there's a lot more oil there than I think the market was assuming in the first place," Finlay Thomson at ABN AMRO said.
Cairn Energy shares closed up 4.73% at 1,152 pence on Tuesday as investors welcomed the group's improved production outlook.