Annual Financial Report and Circular

RNS Number : 5009C

Cairn Energy PLC

16 April 2013

 



FOR IMMEDIATE RELEASE                                                                                         16 April 2013

CAIRN ENERGY PLC ("Cairn" or "the Company")

Report and Accounts and Circular

The Company's annual report and accounts for the year ended 31 December 2012 (the "Report and Accounts") and a circular (the "Circular") were posted to shareholders today. The Circular contains a notice convening the 2013 Annual General Meeting (the "AGM") and details of the proposed renewal of the existing authority to dispose of the Company's residual interest in Cairn India. The AGM will be held in the Castle Suite of The Caledonian, a Waldorf Astoria Hotel, Princes Street, Edinburgh, EH2 2EQ at 12.00 noon on Thursday 16 May 2013.

A copy of the Report and Accounts and Circular have also been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm. The Report and Accounts and Circular are also available on the Company's website at www.cairnenergy.com.

Defined terms used in this announcement shall, unless otherwise specifically defined herein, have the same meanings as in the Circular.

Circular - Residual Cairn India Interest Disposal Authority

Cairn intends to retain flexibility to realise shareholder value from its residual interest in Cairn India, if and when it considers it appropriate to do so, and to continue to focus on exploration, appraisal and development led opportunities. The Company's residual interest of approximately 10 per cent of Cairn India represents a substantial proportion of the Group's assets and therefore, due to its size, the sale of all, or a substantial part of, the residual interest currently requires shareholder approval under the Listing Rules.

At last year's annual general meeting held on 17 May 2012, Shareholders authorised the Board to dispose of all or part of the Company's then residual interest. During the course of 2012, through market sales, Cairn twice sold a proportion of its holding in Cairn India, reducing its residual interest in Cairn India from approximately 22 per cent to approximately 10 per cent. Part of the cash proceeds have been used to fund Cairn's ongoing capital requirements, which include pre-development in the North Sea as well as Cairn's wider exploration led growth strategy, with the balance retained by the Company.

The Board continues to believe that, in order to obtain the best terms when disposing of all or part of its residual shareholding in Cairn India, it needs to be able to sell or agree to sell those shares on normal market terms without the sale being subject to prior approval by Shareholders. The Board is therefore seeking to renew the existing authority from Shareholders for the Company to be able to sell its residual interest in Cairn India at or as close as reasonably possible to the prevailing market price if and when the Company considers it appropriate to make such disposals via on-market transactions.

The Company only intends to utilise the Residual Interest Disposal Authority where it believes that a sale is in the best interests of Shareholders as a whole and in the meantime the Company will continue to benefit from the growth and success of the discoveries in Rajasthan and elsewhere through the retained interest in Cairn India. Unless renewed, the Residual Interest Disposal Authority will expire on the earlier of 30 June 2014 (the last date on which the Company's annual general meeting for 2014 could be held) or at the end of the Company's annual general meeting for 2014 (prior to that date the Company will assess the necessity and desirability of renewing the authority).

Cairn India is primarily engaged in the business of oil and gas exploration, production and transportation. It is based in India and has a strong institutional shareholder base both within India and internationally. As at 31 December 2012, the fair value of the Company's residual interest in Cairn India was US$1.1384 billion (extracted without material adjustment from the Group's audited consolidated financial accounts for the year ended 31 December 2012).

Report and Accounts - Information required by Disclosure and Transparency Rule 6.3.5

The information set out below, which is extracted from the Report and Accounts, is included in this announcement for the sole purpose of complying with Disclosure and Transparency Rule 6.3.5 and the requirements it imposes on issuers as to how to make annual financial reports public.  It should be read in conjunction with the Company's preliminary results announcement, released on 19 March 2013 (the "Preliminary Results Announcement").  This material is not a substitute for reading the full Report and Accounts. Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Report and Accounts.

Responsibility statement

The following statement is extracted from page 63 of the Report and Accounts. This statement is repeated here solely for the purposes of complying with Disclosure and Transparency Rule 6.3.5. This statement relates to and is extracted from the Report and Accounts. It is not connected to the extracted information presented in this announcement or in the Preliminary Results Announcement.

'Directors' Responsibility Statement

The directors are responsible for preparing the annual report and the Group and Company financial statements in accordance with applicable laws and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements and have elected to prepare the Company financial statements in accordance with United Kingdom law and those IFRSs as adopted by the European Union.

Under Company Law the directors must not approve the Group and Company financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company for that period. In preparing those financial statements, the directors are required to:-

·      select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

·      present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·      provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

·      state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; and

·      make judgements and estimates that are reasonable and prudent.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation and the Company's financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors' Statement Pursuant to the Disclosure and Transparency Rules

Each of the directors, whose names are listed in the Board of Directors section on pages 50 and 51 confirms to the best of his knowledge that:

·      the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company; and

·      the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces."

The names of the directors who have given this responsibility statement are:

Sir Bill Gammell (Non-Executive Chairman)

Todd Hunt (Non-Executive Director)

Iain McLaren (Non-Executive Director)

Dr James Buckee (Non-Executive Director)

M. Jacqueline Sheppard QC (Non-Executive Director)

Alexander Berger (Non-Executive Director)

Simon Thomson (Chief Executive)

Dr Mike Watts (Deputy Chief Executive)

Jann Brown (Managing Director and Chief Financial Officer)

Principal risks and uncertainties

The following description of the principal risks and uncertainties is extracted from page 40 of the Report and Accounts. Further detailed information in relation to business risk management at Cairn is included on pages 41 to 47 of the Report and Accounts:-

"Principal Risks and Uncertainties

Following the completion of the disposal of a majority shareholding in CIL and the return of cash to shareholders in H1 2012, the Company entered a new phase; the building of a balanced portfolio with exploration opportunities in frontier and mature basins plus development assets which, when onstream will provide the cash flow to fund future exploration. During 2012, this included the acquisition of two companies and the integration of their assets and staff and the evaluation of a number of other new investment opportunities. As the Company continues its strategy of targeting and realising value from exploration success, the principal risks and uncertainties facing the Group at the end of 2012 in relation to the Group's financial and operational performance are as follows:-

·      Lack of near-term 'drillable' frontier exploration opportunities

·      Lack of exploration success

·      Failure to monetise CIL shareholding at the right price and the right time

·      Negative stakeholder reactions to operations"

Related party transactions

The following description of related party transactions is extracted from page 123 of the Report and Accounts:

"6.6 Related Party Transactions

The Company's principal subsidiaries are listed in Appendix 1. The following table provides the Company's balances which are outstanding with subsidiary companies at the Balance Sheet date:

	At 31 December		At 31 December
	2012		2011
	$m		$m
Amounts owed from subsidiary undertakings	1,059.8		677.3
Amounts owed to subsidiary undertakings	(21.0)		(76.1)
	1,038.8		601.2

The amounts outstanding are unsecured, repayable on demand and will be settled in cash. Interest, where charged, is at market rates. No guarantees have been given.

During the year ended 31 December 2011, the Company made a provision for doubtful debts relating to amounts owed by related parties. See Section 3.4 for further details.

The following table provides the Company's transactions with subsidiary companies recorded in the profit (2011: profit) for the year, all of which were carried out on an arm's length basis:

	2012		2011
	$m		$m
Amounts invoiced to subsidiaries	8.7		21.5
Amounts invoiced by subsidiaries	6.4		6.6
Dividend received from subsidiary	1,313.6		-

Remuneration of Key Management Personnel

The remuneration of the directors of the Company and of the members of the Management and Corporate teams who are the key management personnel of the Group is set out below in aggregate. Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration Report on pages 66 to 83.

	2012		2011
Company	$m		$m
Short-term employee benefits	10.0		10.3
Termination benefits	-		5.8
Pension contributions	0.6		0.6
Share-based payments	0.7		11.3
	11.3		28.0

In addition, employer's national insurance contributions for key management personnel in respect of short-term employee benefits were $0.6m (2011: $2.2m).

Other Transactions       

During the year the Group did not make any purchases in the ordinary course of business from an entity under common control (2011: $nil). There were no amounts owed to the party at the year end (2011: $nil)."

Forward looking statements

This announcement contains or may contain forward-looking statements regarding Cairn, our corporate plans, future financial condition, future results of operations, future business plans and strategies. All such forward-looking statements are based on our management's assumptions and beliefs in the light of information available to them at this time. These forward-looking statements are, by their nature, subject to significant risks and uncertainties and actual results, performance and achievements may be materially different from those expressed in such statements. Factors that may cause actual results, performance or achievements to differ from expectations include, but are not limited to, regulatory changes, future levels of industry product supply, demand and pricing, weather and weather related impacts, wars and acts of terrorism, development and use of technology, acts of competitors and other changes to business conditions. Cairn undertakes no obligation to revise any such forward-looking statements to reflect any changes in Cairn's expectations with regard thereto or any change in circumstances or events after the date hereof.

 

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