Interim Management Statement

RNS Number : 6502V

Cairn Energy PLC

30 October 2014

 



For Immediate Release                                                                                  30 October 2014

CAIRN ENERGY PLC

("Cairn" or "Company" or "Group")

Interim Management Statement

Cairn Energy PLC is today issuing its Interim Management Statement, in accordance with the reporting requirements of the EU Transparency Directive, which provides an update on its recent operations and guidance in respect of the Group's trading performance. This information is unaudited and subject to further review.

Simon Thomson CEO Cairn Energy PLC said;

"Cairn remains focused on maximising value for shareholders from disciplined capital allocation across a balanced asset base.

Operations are now underway on our second well in Senegal after oil was discovered in the basin opening FAN-1 well.  We have a large acreage position and are in the process of evaluating the initial well information and determining potential follow up activity which we are currently targeting for 2015.

The Company continues its efforts to seek resolution of the tax issue in India."

Highlights

Corporate and Finance

Ø Group cash at 30 September 2014 of US$953 million (m)

Ø US$575m Reserve Based Lending facility remains undrawn

Ø The company is fully funded through to free cash flow in 2017

Ø Catcher farm-down reduces Group capital expenditure by ~US$380m and will create significant financial flexibility

Ø While interactions are ongoing with the Indian Income Tax Department, Cairn is currently unable to access the value in its ~10% residual shareholding in Cairn India Limited (CIL) valued at US$927m at 30 September 2014.  Cairn is continuing to take all necessary steps to protect shareholders' interests

Ø Implementation of the Group reorganisation started following staff consultation process

Exploration

Ø The first of two planned exploration wells offshore Senegal (FAN-1) discovered oil (Cairn Operator, 40% WI)

Ø Drilling underway on second well offshore Senegal, SNE-1 (Cairn Operator, 40% WI)

Ø One exploration well planned to commence on the Cap Boujdour contract area December 2014 (Cairn non operator, 20% WI)

Ø Two firm wells scheduled for drilling in North Sea; a number of further contingent wells in North West Europe envisaged for 2015 remain subject to a final investment decision by partners

Developments

Ø The Catcher and Kraken developments in the UK North Sea are progressing with first oil targeted for 2016/2017

 

Enquiries:

Analysts/Investors David Nisbet, Corporate Affairs	Tel: [phone]
Media Patrick Handley, David Litterick Brunswick Group LLP	Tel: [phone]

Corporate and Finance

With group net cash as at 30 September 2014 of US$953m and debt facilities of US$575m in place, the Group remains fully funded to deliver its current exploration programme and its core development projects through to anticipated sustainable free cash flow generation from 2017 with peak net production of ~20,000 boepd.

In September 2014 Cairn entered into a farm out agreement for the sale of a 10% interest in the Catcher development and adjacent acreage in the UK North Sea, retaining a 20% interest in the Catcher licence. With effect from 1 January 2014 Dyas UK Limited (Dyas) shall acquire 10% in UK Continental Shelf licences P1430, P2040, P2070, P2077 and P2086 by funding Cairn's exploration and development costs in respect of the licences up to a cap of $182m.  As a result of the transaction Cairn will reduce its capital expenditure to the end of 2017 in the Catcher area by approximately US$380m (from US$580m to US$200m), providing the Group with significant additional operational flexibility to deliver its strategy.  The transaction remains subject to customary DECC, partner and third party approvals.

Cairn continues to be restricted from accessing the value of its ~10% residual shareholding in CIL valued at US$927m at 30 September 2014 or the related dividend income of US$35m to date whilst interaction with the Indian tax authorities continues. The Group has not received a tax assessment or demand from the Indian Income Tax Department, and continues to seek resolution and to take all necessary steps to protect shareholders' interests.  Cairn has re-confirmed with its advisers that throughout its history of operating in India the Company has been fully compliant with and paid applicable taxes under the legislation in force at the time.

Operations

Exploration - Atlantic Margin - North West Africa

Senegal

The recently completed basin opening FAN-1 well discovered oil offshore Senegal. Cairn has now re-entered the second well in the Senegal exploration programme, SNE-1, where the top hole had already been drilled. This second well targets the Shelf Edge Prospect which is a dual objective of stacked Cretaceous clastics and deeper karstified and fractured Lower Cretaceous shelf carbonates, in 1,100m water depth.  The upper clastic objective is of similar age to oil bearing sands found in FAN-1.  The two objectives in SNE-1 are estimated by Cairn to have a gross mean unrisked prospective resource of 182mmbbls and 256mmbbls respectively, and the well is anticipated to complete before the end of the year.

The first well FAN-1, drilled using the Cajun Express, discovered high quality, light oil in multiple stacked deepwater fans.  Evaluation is now under way to calibrate the well with the existing 3D seismic in order to decide future activities and potential optimal follow up locations to determine the extent of the discovered resource and additional activity which is targeted for 2015 onwards.

Preliminary analysis indicates:

Ø 29m of net oil bearing reservoir in Cretaceous sandstones  

Ø No water contact was encountered in a gross oil bearing interval of more than 500m

Ø Distinct oils types ranging from 28° API up to 41° API  indicated so far from a number of oil samples recovered to surface

Ø Initial gross STOIIP estimates for the FAN-1 well range from P90: 250 mmbbls, P50: 950 mmbbls to P10: 2,500 mmbbls, broadly in line with pre-drill STOIIP estimates

Morocco

Plans are underway to drill one exploration well, CB-1, in the Cap Boujdour permit commencing in December 2014 (Kosmos operator, 55%; Cairn, 20% WI; ONHYM, 25%).  The Cap Boujdour permit is located ~50km offshore and covers an area of 22,265km² in the Aaiun Basin in water depths of 1,000 - 3,000m.

Kosmos has identified a number of plays and several prospects using existing 3D data and CB-1 targets the largest of these. The acquisition of 5,100km² of new 3D seismic data over the southern part of the block has now been completed and will be analysed over the coming months.  

Evaluation of the Foum Draa (Cairn operator, 50% WI) and Juby Maritime (Cairn operator, 37.5% WI) licences continues and will direct any forward work programmes.  Within the region a number of other operators are actively drilling and results are being incorporated into an improved regional understanding before making further commitments. 

Exploration - Atlantic Margin - North Atlantic

Republic of Ireland

Acquisition of 913km² of 3D seismic data has now been completed over acreage adjacent to the Spanish Point discovery in the Porcupine Basin and evaluation of the data is now underway.  

Plans continue to source a rig for the Spanish Point appraisal well (Cairn Operator, 38% WI) offshore Republic of Ireland in 2015.

Exploration - North West Europe

Two non operated exploration wells are planned in the coming months:

Ø West of Kraken, UK  North Sea (EnQuest operator, Cairn 25% WI) due to commence Q4 2014

Ø Crossbill, Norwegian North Sea (Wintershall operator, Cairn 20% WI) due to commence Q1 2015

A number of further contingent exploration wells envisaged for 2015 remain subject to a final investment decision by partners.

Cairn has started the process to become pre-qualified as Operator in Norway and is evaluating potential acreage in the Barents Sea for possible applications in the 23^rd licence round, leveraging the Group's Arctic operational experience and the Norwegian presence.

Costs associated with the unsuccessful Aragon and Ensis wells completed during the quarter will be written off.

Development - North West Europe

Work continues on the Catcher development (Cairn non operator 20% WI, subject to completion of the farm-down to Dyas) execution phase activities, with further contracts being placed, detailed design and well planning ongoing, and fabrication progressing on the drilling templates.

The Kraken development (Cairn non operator 25% WI) is progressing on schedule with first oil expected 2016/2017.  The first two drilling templates have been installed which will allow development drilling to commence in 2015 and a drilling rig has been secured to carry out the development drilling. BUMI is continuing to carry out detailed engineering of the FPSO and work is underway on the vessel in the shipyard in Singapore. 

NOTES TO EDITORS

Cairn Energy PLC ("Cairn" or the "Group" or the "Company") is one of Europe's leading independent oil and gas exploration and development companies and is listed on the London Stock Exchange. Cairn has discovered and developed oil and gas reserves in a variety of locations around the world.

Cairn's business operations are focused on exploration acreage in North West Europe, North West Africa, North Atlantic and the Mediterranean, underpinned by interests in development assets in the North Sea. Cairn has its headquarters in Edinburgh, Scotland supported by operational offices in London, Norway, Spain and Senegal. 

Cairn and Corporate Responsibility

Ø Cairn is a signatory to the UN Global Compact and our core values of respect, responsibility, relationships and our commitments towards people, the environment and society are enshrined in our Business Principles, which are available on the Cairn website at http://www.cairnenergy.com/index.asp?pageid=282

Ø Cairn became a participating company in the Extractive Industry Transparency Initiative (EITI) in September 2013. The EITI is a coalition of governments, companies and civil society, who have adopted a multi-stakeholder approach to applying the EITI global standard promoting transparency of payments in the oil, gas and mining sectors http://eiti.org/

For further information on Cairn please see: www.cairnenergy.com

 

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