Interim Management Statement

RNS Number : 2711M

Cairn Energy PLC

19 January 2016

 



For Immediate Release                                                                                                19 January 2016

CAIRN ENERGY PLC

Pre-close Update

("Cairn" or "the Company")

Cairn intends to announce its preliminary results for the year to 31 December 2015 on Tuesday 15 March 2016. In advance of these results, Cairn is providing information on recent operations and guidance in respect of the Group's trading performance in 2015. This information is unaudited and is subject to further review.

Simon Thomson, Chief Executive, Cairn Energy PLC said:

"Cairn is delighted with the positive flow tests on the SNE-2 appraisal well confirming the commercial deliverability of the SNE discovery. Further appraisal activity this year will test the overall scale and extent of the resource base in Senegal, and is expected to lead to revision of the resource estimates.  Drilling operations on the next appraisal well, SNE-3, are now underway.

The Company remains fully funded from existing financial resources to deliver its exploration and appraisal programme, as well as to take its North Sea developments through to free cashflow generation in 2017.

International arbitration proceedings to resolve the retrospective tax issue in India have now formally commenced following the agreement between Cairn and the Government of India on the appointment of a panel of three international arbitrators under the terms of the UK-India Investment Treaty."

Corporate and Finance

Ø Group net cash at 31 December 2015 of US$603 million (m)

Ø Reserve Based Lending bank facility remains undrawn, with availability to fund North Sea development capex currently estimated at US$300m, subject to six monthly redeterminations in March and September

Ø Total cash expenditure for 2H 2015 was US$174m, principally comprising US$85m development expenditure and US$77m exploration and appraisal (E&A) expenditure including pre-award costs (US$50m E&A expenditure was in Senegal). A US$52m tax rebate in respect of previous Norwegian E&A activity was received in 2H 2015

Ø Forecast development expenditure for 2016 and 2017, taking the UK development projects through to cashflow generation, is US$492m; and remaining currently committed drilling and seismic E&A expenditure 2016 is estimated at US$122m, predominantly in Senegal. Outstanding Norwegian tax rebate receivables are US$32m

Ø Cairn remains unable to access the value in its ~10% residual shareholding in Cairn India Limited (CIL) valued at US$384m at 31 December 2015

Exploration - Atlantic Margin

Senegal

Ø Presidential Decree received in Q4 2015, extending current Petroleum Sharing Contract by requested three years from Q1 2016

Ø Working closely with the Government of Senegal and JV partners, Cairn is operating a multi- well evaluation programme consisting of appraisal and exploration drilling in 2016 (Cairn Operator 40% WI , ConocoPhillips 35%, FAR Limited 15%, PETROSEN 10%)         

Ø Successful testing of SNE-2 appraisal well with positive results announced in early January

Ø SNE-3 has commenced operations to test the southern extent of the field

Ø The third committed well, exploration well BEL-1, will test the Bellatrix prospect and then be deepened as an appraisal well to evaluate the northern extent of the SNE field, commencing operations in Q1/Q2 2016

Ø Resource estimates for the SNE field to be fully revised and announced after results of further appraisal activity

Ø 3D seismic acquisition programme of ~2,400km² over Sangomar Offshore block and south west part of Rufisque block completed in December 2015

Morocco

Ø The Foum Draa and Juby Maritime Permits were relinquished in Q3 and Q4 2015 respectively

Mauritania

Ø Block C19, additional technical studies are currently being conducted during an extension period to the first exploration phase, in order to further de-risk the prospects prior to a decision on entering the next phase, which has drilling commitments (Cairn 35% WI, Chariot Oil & Gas Operator)

Republic of Ireland

Ø The planned appraisal/exploration well on FEL 2/04 offshore West of Ireland has been deferred pending discussions with partners and the Government of Ireland

North West Europe

Ø Laverda, UK North Sea (Premier Operator, Cairn 36% WI) exploration well planned for Q2 2016

Ø Q3 2015, submitted application for the APA 2015 in Norway

Ø Q4 2015, pre-qualified as an Operator in Norway

Ø Q4 2015, submitted applications for acreage available in the 23^rd Licensing Round in Norway

Developments

Ø Catcher and Kraken developments in the UK North Sea on track for first oil from 2017; peak net targeted production to Cairn of ~22,500 boepd

Ø Catcher remains on schedule and on budget; successful 2015 subsea programme completed with encouraging initial development drilling results

Ø Kraken is progressing well, on schedule and under budget with capex costs reduced by more than 10%, bringing the expected gross capex to US$2.86 billion (~US$522m net to Cairn). Kraken FPSO vessel continues to be on track for delivery in 2016

Ø Keddington K-5 onshore well commenced drilling Q1 2015 (Operator Edgon Resources, Cairn 10%)

Cairn India

Ø Proceedings against the Government of India under the UK-India Investment Treaty seeking resolution of the retrospective tax dispute have now formally commenced following agreement with the Government of India on the appointment of the arbitration panel

Ø Cairn has a high level of confidence in its case under the UK-India Investment Treaty, and in addition to resolution of the retrospective tax dispute, its statement of claim to the arbitration panel will seek damages equal to the value of Cairn's residual shareholding in CIL at the time it was attached (approximately US$1 billion)

Ø In March 2015, Cairn UK Holdings Limited (CUHL) received a draft assessment order from the Indian Tax authorities in the amount of approximately US$1.6 billion plus interest and penalties, relating to the group's 2006 internal reorganisation prior to the IPO of CIL. The only material asset in CUHL is the group's residual shareholding in CIL currently valued at US$384m

 

Enquiries to:

Analysts / Investors

David Nisbet, Corporate Affairs                                                                              Tel: [phone]

Media

Patrick Handley, David Litterick

Brunswick Group LLP                                                                                           Tel: [phone]

NOTES TO EDITORS

Cairn Energy PLC ("Cairn") 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 now focused on frontier exploration acreage in North West Europe, North West Africa, North Atlantic and 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 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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