2011 Half Yearly Results
EMBARGOED FOR RELEASE AT 0700 23 August 2011
CAIRN ENERGY PLC ("Cairn")
Half-yearly Report Announcement
HIGHLIGHTS
Ø Sale of 40% shareholding of the fully diluted share capital in Cairn India Limited (CIL) to Vedanta Resources plc (Vedanta) to be completed in two stages:
o the first tranche of 10% which realised ~$1.4 billion completed July 2011
o the second tranche of 30%, approved by the Government of India (GoI) in June, subject to certain conditions, will realise ~$4 billion
Ø Two of the GoI conditions - Cess and Royalty payable - are currently with CIL shareholders for approval, Cairn has voted to accept these conditions, with voting results due on 14 September 2011
Ø The Mangala field is currently producing at a rate of 125,000 barrels of oil per day (bopd): Bhagyam development on track; scheduled to commence production in Q4 2011
Ø Multi well, multi basin Greenland exploration campaign ongoing, using two rigs
Ø Gross operated production: 166,527 boepd (H1 2010: 87,523 boepd)
Ø Average net entitlement production: 77,056 boepd (H1 2010: 32,866 boepd)
Ø Group revenue on a continuing basis $1.3 billion (H1 2010: $333 million)
Ø At 30 June 2011, the Group had net cash of $1,003 million (H1 2010: $267 million). CIL had net cash of $1,048 million, comprising $1,452 million cash and $404 million debt. PLC/Capricorn had net debt of $45 million, comprising $75 million cash and $120 million debt.
Simon Thomson, Chief Executive, Cairn Energy PLC said:
"Cairn is encouraged that the Vedanta transaction is moving towards completion. Following approval from the Government of India, all parties are now working to satisfy the consents and conditions to complete the sale to Vedanta as soon as possible.
The sale of Cairn's 40% stake will allow a return of substantial funds to shareholders and will also provide the Group with the balance sheet strength and financial flexibility to explore new opportunities in line with its consistent strategy of seeking transformational growth.
We are excited about the exploration potential of the multiple frontier basins offshore Greenland. Cairn's entrepreneurial approach to exploration has allowed it to build a leading early entry position in Greenland where we look forward to further results from the 2011 season."
Enquiries:
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Analysts/Investors Jann Brown, Managing Director & CFO Mike Watts, Deputy Chief Executive David Nisbet, Corporate Affairs |
Tel: 0131 475 3000 |
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Media Brunswick Group LLP |
Tel: 0207 404 5959 |
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Cairn Energy Live Audio Webcast
The webcast of the 2011 half-year results presentation will be available at 09:00am (UK time) on Tuesday 23 August 2011 on the Cairn Energy PLC website: www.cairnenergy.com. Also at 9:00am, you may listen to the conference call via telephone by calling 0871 700 0345 (within the UK) or +44 (0)1452 555 566 (outside the UK). The call will remain in listen only mode throughout.
A recording of the conference call will be available by 2:00pm, Tuesday 23 August 2011 until 6 September 2011 by dialing 0800 953 1533 from the UK or +44 (0)1452 550 000 internationally and using the access number: 907 310 10#
A transcript will be available on the website as soon as possible after the event.
These materials 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.
CHAIRMAN'S STATEMENT
Corporate Overview
Highlights of 2011 to date include:
i. Completion of the first 10% tranche of the 40% sale of Cairn's shareholding in CIL to Vedanta Resources Plc (Vedanta)
ii. The approval from the Government of India (GoI) for the second tranche of 30% of Cairn's shareholding in CIL to Vedanta, subject to certain conditions
Rajasthan crude is now transported to a number of Indian refineries by the world's longest continuously heated pipeline. This infrastructure is strategically important as it means all the remaining fields and discoveries can be tied-in to the pipeline as they are developed. The total discovered resource base supports a combined potential production of more than 240,000 bopd, subject to further investment and GoI and joint venture (JV) partner approvals. Such levels of production would provide more than 30% of India's domestic crude production.
The multi-basin and multi-year exploration campaign in the frontier areas offshore Greenland is now in its fourth year of operations. Cairn is the largest acreage holder offshore Greenland and the most active operator in this region. Following last year's exploration campaign and the current drilling exploration campaign, Cairn has amassed considerable knowledge affording the Company a leading position in terms of data, operational experience and our geological understanding of this frontier area.
India
The Initial Public Offering (IPO) of CIL in 2007 provided a return of $1 billion cash to Cairn shareholders and gave the Company sufficient additional financial flexibility to allow fast-track development of the world-class discoveries in Rajasthan and the creation of a material exploration position in Greenland. Cairn's long-stated objective has been to add value for its shareholders through exploration and to realise value at the appropriate time.
In the summer of 2010, Cairn was approached by Vedanta with an offer to purchase the majority of Cairn's equity in CIL. The proposed transaction was agreed by the shareholders of Cairn and Vedanta by the end of last year.
In June this year, ten months after the transaction was first announced, Cairn and Vedanta agreed to certain adjustments to the transaction sale and purchase agreement, involving the removal of the non-compete arrangements and associated fee, which is expected to result in a 5.3% reduction in post-tax proceeds. Cairn and Vedanta also agreed that completion of the transaction would take place in two stages: an initial tranche of a 10% stake in Cairn India, which completed on 11 July 2011, and a subsequent tranche of 30%, which was approved on 30 June by the GoI subject to certain conditions, including the acceptance of the cost recovery of Royalty and the withdrawal of Cess arbitration in respect of the Rajasthan block (RJ-ON-90/1) and ONGC consent. Cairn currently holds 52.11% of the issued share capital of CIL and Vedanta holds an aggregate 28.5% of the issued share capital of CIL.
Without the active support of the GoI and ONGC, it will not be possible for Cairn India to achieve the full potential of the resource base in this block. While CIL and its JV partner ONGC are currently producing 125,000 bopd from the Rajasthan Block and have approved Field Development Plans (FDPs) from the Mangala Bhagyam and Aishwariya (MBA) fields to produce up to 175,000 bopd, our current understanding of the resource base in the Rajasthan Block supports a vision to produce more than 240,000 bopd. This is equivalent to a contribution of more than 30% of India's current crude production and remains subject to further investments, partner and regulatory approvals including exploration rights in the development areas. CIL has written to all shareholders to seek their approval on whether to accept the conditions put in place by the GoI and the voting results will be declared on 14 September 2011. Cairn has voted in favour of acceptance of the cost recovery of Royalty and withdrawal of Cess arbitration in respect of RJ-ON-90/1.
Greenland
The Group's strong financial position and entrepreneurial exploration focus has allowed it to build a strategic and leading early entry position in multiple frontier basins offshore Greenland, a country which Cairn believes has the necessary geological ingredients for exploration success. Cairn currently operates 11 blocks, with a combined area of 102,000km2, which is equivalent to 15 quadrants or 450 blocks in the UK North Sea.
Cairn is now in its fourth year of active operations and the 2011 drilling programme and two 3D seismic surveys are currently underway.
Cairn is excited about the prospects and opportunities presented by exploration offshore Greenland. Having drilled four of the ten wells drilled offshore Greenland to date, Cairn's multi-year, multi-basin campaign in this frontier location ensures that we have a considerable amount of exclusive data and knowledge which we are building upon every day as the programme continues.
Board Changes
Following 12 years on the board and nine as Chairman of Cairn, Norman Murray decided to stand down and turn his energies and attention to new challenges. Norman has contributed enormously to the growth of Cairn during this time, providing constructive challenges, wise counsel and valuable guidance. Malcolm Thoms, Chief Operating Officer and Philip Tracy, Group Engineering and Operations Director also stepped down from the board. Both Malcolm Thoms and Phil Tracy have made substantial contributions to the success of Cairn over the last 22 years.
In Norman's place, the board decided that I should become Chairman and that Simon Thomson should be appointed as Chief Executive Officer (CEO).
Simon has been with Cairn for over 15 years and has played an instrumental role in delivery of Cairn's strategy including accessing the opportunities that Greenland offers the Company as well as in the delivery of value from Cairn's interests in India. I am delighted that he has agreed to lead the Company in the next stage of its development.
Simon's abilities are of outstanding value to Cairn and are properly recognised by this promotion. Together with Jann Brown as Managing Director and Chief Financial Officer (CFO) and Dr Mike Watts, who remains as Deputy CEO, Cairn has an exceptionally able and experienced executive team to lead the Group in the future. These board changes took effect from 1 July and do not change the strategic focus of the Group.
The Cairn board continues to pursue the goal of diversity among its directors and senior executives: currently two of its nine board members are female.
Outlook
Cairn is excited by the potential its multi basin acreage in Greenland offers. Elsewhere the team is focused on accessing new opportunities that provide material growth for the Company and its stakeholders.
The conclusion of the Vedanta transaction in the coming months is a key focus for the Group and we believe there remains significant growth to come from production in Rajasthan.
Sir Bill Gammell
Chairman, 22 August 2011
CHIEF EXECUTIVE'S REVIEW
Cairn has a consistent strategy of focusing on exploration opportunities with material growth potential to create and deliver shareholder value. The Company's balance sheet strength provides it with the financial flexibility to pursue additional opportunities. In Greenland we have created the leading early entry acreage position and will continue to build on the extensive knowledge and experience the Company has acquired.
Following completion of the Vedanta transaction, Cairn will maintain a ~22% minority interest in Cairn India (on a fully-diluted basis at completion). The principal focus for the Group will be to continue to offer investors significant growth potential both from the existing portfolio and by actively seeking out and establishing new opportunities elsewhere.
India
The major Mangala oil discovery in Rajasthan was made over seven years ago in January 2004. The field is currently producing ~125,000 bopd and the Rajasthan block has the potential, subject to necessary investment approvals and consents, to increase this production total to more than 240,000 bopd, accounting for more than 30% of India's overall domestic oil output.
We look forward to completing the second and final tranche of 30% of the 40% sale of our shareholding in CIL to Vedanta. The transaction provides the Group with financial and operational flexibility, enables Cairn to return a substantial proportion of the proceeds to its shareholders, while also continuing an active exploration and appraisal programme in Greenland, albeit within a farm-out focused strategy, and to consider other possibilities.
Greenland
Drilling in the Arctic is not new - recent studies by IHS (Information Handling Services) show that more than 2,500 exploration wells have been drilled since the 1940s in this region with eight wells drilled so far this year, including five offshore Norway. Cairn has, however, always recognised that drilling offshore Greenland would present logistical challenges and has approached the campaign with a focus on safety, in terms of people, the environment and equipment.
The Greenland 2011 exploration campaign is underway. The LF7-1 well in the Lady Franklin block encountered a thick Upper Cretaceous section with tight (cemented) sandstones. Although the anticipated stratigraphically deeper reservoir section was absent at this location, initial geochemical analysis of the background gas composition indicates the presence of pre-Tertiary oil prone source rocks in the basin. While this was not a technical or commercial discovery, the results demonstrating the presence of a working hydrocarbon system in this basin are encouraging. The results from the remaining three or possibly four wells are expected later this year. If time allows, and the necessary approvals granted, adding a fifth well to the programme in the Atammik block is being considered based on re-evaluation of the area currently underway, due to the results so far. Revised stratigraphic interpretation following the LF7-1 and the temporarily suspended AT7-1 wells suggest that other prospects may have the Upper Cretaceous section which encountered world class reservoir sands (water bearing) in the Qulleq-1 well, drilled by Statoil in 2000.
The results from the remaining three, or possibly four, wells in the multi-well exploration campaign are expected later this year.
New Opportunities
Cairn continues to review opportunities that may fit with its aim of offering shareholders transformational exploration growth potential within a balanced portfolio.
One such frontier exploration opportunity is offered by the potential of the offshore Levant Basin of the Eastern Mediterranean, where, in the coming year several countries in the region are all expected to hold competitive exploration bid rounds. Cairn has formed and operates a three company consortium which is seeking to participate in the anticipated Lebanon licencing round (and possibly some other rounds elsewhere in the region), subject to final technical evaluation and commercially suitable terms.
Cairn's consortium partners are CC Energy Development S.A.I (an associated company of CCC, a Lebanese private company) and Cove Energy PLC.
In the western Mediterranean Cairn now has five blocks offshore the Gulf of Valencia area in Spain.
Outlook
The Group is fully funded to complete its exploration programme offshore Greenland this year and is investigating possible new opportunities.
The Vedanta transaction represents a key milestone for the Group. The resulting reduction in equity base will re-gear the Group to future exploration success and continues Cairn's strategy of creation, realisation and return of value to shareholders. By retaining a significant stake in CIL, Cairn will lock in the value of both current and future production from Rajasthan. This positions the Group to take advantage of its asset base in Greenland and to consider further opportunities, that will enhance and sustain its portfolio model and strategy, maintaining its focus on material growth potential and hidden value.
Simon Thomson
Chief Executive, 22 August 2011
OPERATIONAL REVIEW
Group Production
The Group's average entitlement production for H1 2011 was 77,056 boepd net to Cairn compared to 32,866 boepd in H1 2010. The main reason for the increase is due to the increase in production of Rajasthan.
The figures in the table below show Group production for H1 2011 on a gross, working interest and entitlement basis.
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Production (boepd)
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Ravva |
CB/OS-2 |
Rajasthan |
Total |
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Gross field |
35,477 |
9,392 |
121,658 |
166,527 |
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Working interest |
7,982 |
3,757 |
85,161 |
96,900 |
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Entitlement interest |
4,194 |
2,621 |
70,241 |
77,056 |
Group entitlement production during H1 2011 was 2% gas: 98% oil.
Group Booked 2P Reserves
The table below shows reserves information at 30 June 2011 on an entitlement interest basis for the Group. For accounting and reserves purposes, the Group has used an oil price assumption of $85/barrel for 2011 (real). The reserves at 31 December 2010 are stated at $75/barrel (real).
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Reserves 31.12.10 mmboe |
*Revisions due to Royalty and CESS in mmboe |
Produced in mmboe |
Additions in mmboe |
Revisions in mmboe |
Reserves 30.06.11 mmboe |
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India |
225.0 |
(19.2) |
(13.9) |
0 |
(6.4) |
185.5 |
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Total |
225.0 |
(19.2) |
(13.9) |
0 |
(6.4) |
185.5 |
* Expected revision due to Royalty becoming cost recoverable and the withdrawal of Cess arbitration.
The 2011 mid-year entitlement proven plus probable (2P) reserves position has decreased by 39.5 mmboe to 185.5 mmboe (31 December 2010: 225.0 mmboe)
The effect on net entitlement reserves of different future oil prices is summarised below:
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Oil Price ($/boe) |
Net Entitlement Reserves (mmboe) |
Increase/(reduction) compared to $85/ boe base case (mmboe) |
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$50 |
213.0 |
27.5 |
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$120 |
169.1 |
(16.4) |
On a direct working interest basis, 2P reserves as at 30 June 2011 have decreased by 16.7 mmboe to 299.0 mmboe (31 December 2010: 315.7 mmboe) mainly due to production.
Figures include 100% of CIL's production and reserves.
Rajasthan - Block RJ-ON-90/1 (Cairn India 70% (Operator); ONGC 30%)
The Mangala field is currently producing at the approved plateau of 125,000 bopd. Since production start-up, the Mangala Processing Terminal (MPT) has had efficient and safe operations and has processed more than 50 mmbbls of crude oil, which has been sold to Public Sector Undertaking (PSU) and private refiners. The plant uptime has been 99% since operations started.
Production commenced from the Saraswati oil field on 29 May 2011. The field is currently producing 250 bopd and the oil is being trucked to the MPT for sale through the pipeline.
Development - Upstream
Development drilling and well completion activities are progressing according to plan. A total of 148 Mangala development wells have been drilled, of which 96 are complete. Currently, 64 wells are producing and 25 injector wells are injecting water into the reservoirs. The other wells will be brought on stream in a staged manner. The focused effort on drilling of high capacity horizontal wells in the Mangala field combined with the excellent reservoir performance supports higher plateau levels. Surface facilities and midstream infrastructure are ready to support production of 150,000 bopd from the Mangala field, subject to JV and GoI approval.
Work on the development of the Bhagyam field, the second largest discovery in Rajasthan, is ongoing. The construction work is nearing completion for the initial phase and testing is underway. Production is on schedule to commence in Q4 2011 and to achieve the currently approved FDP plateau rate of 40,000 bopd by the end of 2011. A total of 33 Bhagyam development wells have been drilled. Well results from the Bhagyam development drilling have been as per expectations and the surface facility development work is progressing as planned. The construction work for the trunk line to connect the Bhagyam field with the MPT is also nearing completion.
Post assessment of higher production potential and design optimisation of the Aishwariya field, due to increased reserves and resources, additional development work is currently underway. Production is expected to commence in H2 2012, subject to JV and GoI approval. Civil works in the field have commenced. The tendering for both the long lead main equipment items and the main engineering, procurement and construction contracts are at an advanced stage.
Development - Midstream (Pipeline)
The MPT to Salaya section of the pipeline together with its delivery infrastructure continues to safely deliver crude oil to various buyers and has recorded more than 2.4 million Lost Time Incident free man-hours to date.
Of the total pipeline length of approximately 670km to Bhogat on the Arabian Sea coast, approximately 590km to Salaya is operational. The pipeline system availability since start up of operations is more than 99%.
While there are increased execution challenges, the construction work is ongoing on the remaining 80km Salaya to Bhogat section of the pipeline including the Bhogat terminal and marine facility. This is expected to be completed during H2 2012.
Once the entire pipeline from MPT to Bhogat is operational, the oil pipeline will have access to more than 75% of India's refining market. Sales to other coastal refineries will then also be possible, subject to GoI approval.
Crude - Sales
Crude sales are at 125,000 bopd levels to PSU and private refiners.
In accordance with the RJ-ON-90/1 Production Sharing Contract (PSC), the pricing is based on Bonny Light, comparable low sulphur crude that is frequently traded in the region, with appropriate adjustments for crude quality. The implied crude price realisation represents an average 10-15% discount to Brent on the basis of the prices prevailing for the twelve months to 30 June 2011.
Sales arrangements are in place for 155,000 bopd with PSU and private refiners and discussions continue with GoI for further nominations.
Resource Base including Enhanced Oil Recovery (EOR)
The MBA fields have gross oil reserves and resources of around 1 billion barrels. This includes 2P gross reserves (396.5 mmboe) and resources (250 mmboe) with in excess of 300 mmboe of EOR resource potential. The MBA fields will contribute more than 20% of current domestic crude production when they reach the currently approved plateau rate of 175,000 bopd.
In line with the objective of monetising the EOR potential, the first phase of the EOR pilot in the Mangala field, consisting of four injectors, one producer and three observation wells are drilled, completed and hooked up to the facilities. The water injection phase commenced in December 2010 and continues to perform as per expectations. The EOR pilot of the trial polymer injection started in August. The data gathered during the pilot will help implement EOR on a larger scale across the MBA fields.
A pilot hydraulic fracturing programme to test the potential of the Barmer Hill Formation is planned, subject to GoI approval. The pilot programme will allow evaluation of the appropriate cost effective technology for a fully optimised development of this low permeability oil resource base. A declaration of commerciality for the Barmer Hill Formation was submitted to the GoI in March 2010 and a Field Development Plan is under preparation.
The total resource base in Rajasthan supports a vision to produce more than 240,000 bopd (equivalent to a contribution of approximately 30% of India's total domestic current crude production), subject to further investments and regulatory approvals.
GREENLAND
Cairn has contracted a sixth generation drill ship (the Ocean Rig Corcovado) and a fifth generation semi-submersible drilling unit (the Leiv Eiriksson) to drill up to four, possibly five, wells this drilling season. In Greenland and wherever it is active, Cairn seeks to operate in a safe and prudent manner. In recognition that offshore Greenland is a logistically remote area, one of the key features of Cairn's risk mitigation programme was its decision to contract two drilling rigs, which in the event of a requirement for a relief well, allows a second rig with its associated services to be immediately available.
Cairn welcomes the decision by the Greenlandic Government to revise its exploration framework, a move which has led to relevant oil spill response plans recently becoming publicly available.
As a result, Cairn's oil spill response plan, which has been reviewed by the appropriate government bodies and has satisfied independent experts, will now also be accessible to the people of Greenland.
Cairn's plan has been reviewed by third parties including the Greenland authorities, who are satisfied that the plan is robust. In addition the plan has been reviewed by Denmark's National Environmental Research Institute (NERI) and Oil Spill Response Limited (OSRL), who are also comfortable with the plan.
LF7-1 Well: Lady Franklin Block, South Ungavva Area
The LF7-1 exploration well, located in 1,002 metres (m) of water approximately 300km offshore Nuuk, reached target depth (TD) in basement strata and has been plugged and abandoned. The well encountered a thick Upper Cretaceous section with tight (cemented) sandstones although the anticipated older stratigraphy with reservoir section was absent at this location. Initial geochemical analysis of the background gas composition indicates the presence of pre-Tertiary oil prone source rocks in the basin.
AT7-1 Well: Atammik Block, South Ungavva Area
The AT7-1 exploration well in the Atammik Block, located in 909m of water 200km offshore Nuuk, has been temporarily suspended by the Ocean Rig Leiv Eiriksson. The AT7-1 well is currently suspended above the prognosed target objectives and is scheduled to be re-entered and drilled to planned TD at a later date in the current programme. The Leiv Eiriksson subsequently moved 750km north to commence operations on the Delta prospect in the Napariaq Block.
Delta-1 Well: Napariaq Block, West Disko Area
The Delta-1 well has spudded on the Delta prospect, located in a water depth of 293m approximately 100km off the Greenland coast and 110km northeast of the Alpha-1S1 well drilled in the Sigguk Block in 2010 and is being drilled using the Leiv Eiriksson.
Gamma-1 Well: Eqqua Block, West Disko Area
The Gamma-1 well has spudded on the Eqqua block, located in 1,520m of water and 110km southwest of the Alpha-1S1 well and is being drilled using the Ocean Rig Corcovado.
AT2 Prospect: Atammik Block, South Ungavva Area
If sufficient time is available in the current exploration programme, and the necessary approvals granted, an additional well to target the AT2 prospect is being considered.
SPAIN
The Spanish Government has awarded Cairn two hydrocarbon exploration permits comprising five contiguous offshore blocks in the Gulf of Valencia area. The total combined area covered by these licences is approximately 3,992km2 and the water depths range from 50m to more than 1,000m. Cairn has a 100% interest in these blocks which were officially awarded on 23 January 2011.
Cairn is in the early stages of the exploration process in Spain and during the current two year initial period is evaluating existing data and considering implementing offshore research.
NEPAL
There are one and a half years remaining in the initial exploration period in Nepal: the planning for field operations continues.
FINANCIAL REVIEW
The financial strategy of the Group remains focused on maintaining balance sheet strength.
At 30 June 2011, the Group had net cash of $1,003 million (H1 2010: $267 million). CIL had net cash of $1,048 million, comprising $1,452 million cash and $404 million debt. PLC/Capricorn had net debt of $45 million, comprising $75 million cash and $120 million debt.
On 11 July 2011 Cairn received ~$1.4 billion from Vedanta on completion of the first 10% tranche of the 40% sale in CIL and subsequently cancelled its $900 million loan facility after repaying $200 million already drawn.
Presentation of Results - Vedanta Transaction Adjustments
The transaction with Vedanta to sell a 40% stake in CIL requires the financial results of CIL to be shown as discontinued operations in the Group Income Statement and its assets and liabilities reflected as held-for-sale in the Group Balance Sheet.
As more fully explained in our Annual Report and Accounts for the year ended 31 December 2010, as a consequence of our interest in CIL being classified as held-for-sale, two accounting adjustments are required which have had an impact on the Income Statement:
· From the date on which the transaction was announced, no depletion, decommissioning, depreciation and amortisation charges have been made, the impact of which is to increase reported profits by $247 million in the first half of 2011.
· Deferred tax is provided on the basis that the carrying value of the net assets will be recovered through the sale of our interest in CIL. As the accounting carrying value was significantly lower than the tax base of the assets deductible against the sale proceeds, a deferred tax asset was recognised as at 31 December 2010. Profits generated in the current period have increased the accounting carrying value of the assets resulting in a reduction to this deferred tax asset and, therefore, a charge to the Income Statement of $181 million.
The overall impact on the Income Statement is an increase in reported profit after tax of $66 million.
While the accounting adjustments noted above are required to comply with our financial reporting obligations, the board continues to monitor the performance of the Group by reference to the underlying results of each operating segment, i.e. as if CIL was a continuing business of the Group and so ignoring the adjustments to depletion, decommissioning, depreciation, amortisation and deferred tax set out above.
For clarity, the table on the next page shows the results of the Group on a consolidated continuing basis and before exceptional items. The adjustments noted above and the exceptional items are shown separately and reconcile profit after tax on a continuing basis and profit after tax as reported. The commentary in this financial review is provided on the continuing operations basis, unless stated otherwise.
Following completion of the Vedanta transaction CIL will no longer be consolidated into the results of the Group. The shareholding retained will be held as an investment on the Group's Balance Sheet and marked to market at each reporting date.
Key Financial Performance Indicators
|
|
H1 2011 |
H1 2010 |
|
Production (boepd)* |
77,056 |
32,866 |
|
Production sold (boepd)* |
75,471 |
28,877 |
|
Average price per boe ($) |
97.78 |
63.48 |
|
Average production costs per boe ($)** |
13.79 |
14.72 |
|
|
|
|
|
Revenue ($m) |
1,336 |
333 |
|
Gross profit ($m) |
797 |
147 |
|
Operating profit ($m) |
750 |
94 |
|
Profit before tax ($m) |
733 |
88 |
|
|
|
|
|
Profit after tax ($m) |
584 |
57 |
|
Exceptional items ($m) |
(7) |
(30) |
|
Vedanta transaction adjustments ($m) |
66 |
- |
|
Reported profit after tax ($m) |
643 |
27 |
|
|
|
|
|
Cash flow from operating activities ($m) |
1,049 |
125 |
|
Net assets ($m) |
3,803 |
2,741 |
|
Net cash ($m) |
1,003 |
267 |
|
|
|
|
* on an entitlement interest basis
** excluding stock movement
Production, Revenue and Gross Profit
All numbers are stated before the impact of exceptional items.
As more fully explained in the Chairman's Statement, the GoI have approved the Vedanta transaction subject to a number of conditions. Two of these conditions are relevant to the financial performance and position of the Group.
The first and most significant condition requires the Rajasthan production Royalty, borne wholly by ONGC as licensee under the PSC, to be allowable for cost recovery. Cairn has voted its shareholding in favour of accepting this condition in the postal ballot being held by CIL. Consequently, these half-year financial statements have been prepared on the basis that the Royalty is treated as cost recoverable. The impact of accepting this condition on the current period's results is to reduce average entitlement production by 14,351 bopd and revenue by $284 million, of which $14 million relates to production in prior periods. Current tax is also reduced by $56 million.
The second condition requires CIL to withdraw arbitration proceedings in respect of Cess payable on Rajasthan production. To date, Cess has been paid at the current rate under protest and charged to the Income Statement. Accepting this condition would mean that, if the arbitration found in their favour, CIL would not be able to pursue recovery of this amount. No adjustment to the financial statements is necessary as this potential recovery had not previously been recognised as an asset.
Group oil and gas revenues for the period were $1,336 million, compared with $333 million in H1 2010. Average entitlement production increased to 77,056 boepd (H1 2010: 32,866 boepd), of which oil production accounted for 98% (H1 2010: 88%). Production costs also rose to $199 million from $68 million.
The increases in revenue, production and production costs reflect the contribution of the Rajasthan field which produced on average ~122,000 bopd for the period to June 2011. For the H1 2010, where production through the pipeline commenced in May 2010, gross production averaged ~31,000 bopd.
The Group's blended average price realised was $97.78 compared to $63.48 in H1 2010. Rajasthan crude realised an average price of $98.95 per bbl for the period (H1 2010: $67.48 per bbl). This represents a discount of ~12% to Brent during the period.
Unsuccessful well costs of $98 million for the period principally relate to the LF7-1 well in Greenland which was declared unsuccessful in July. The final well cost for LF7-1 is currently forecast to be ~$150 million. At 30 June exploration costs totalling $195 million, relating to the well drilled on the Alpha prospect during the 2010 Greenland campaign, remain capitalised. The primary objectives of the Alpha prospect were not reached, the well has been suspended and any future re-entry work depends on the results of further evaluation.
Depletion and decommissioning charges have increased from $73 million to $236 million and the charge per boe has also increased from $12.30 per boe to $16.91 per boe. Both increases are as a result of Rajasthan production.
Gross profit for the period was $797 million (H1 2010: $147 million).
Results for the Period
All numbers are stated before the impact of exceptional items.
Administrative expenses include non-cash charges for share-based payments of $11 million (H1 2010: $10 million) and for depreciation and amortisation of $5 million (H1 2010: $3 million). Net of these charges, administrative expenses have fallen to $32 million (H1 2010: $36 million).
Net finance costs for the period were $17 million (H1 2010: $6 million) and include arrangement and commitment fees associated with the $900 million loan facility.
The Group's current tax charge for the period is $188 million (H1 2010: $33 million) and mainly reflects Indian corporate tax on profits from the Mangala field.
Before taking account of the adjustments associated with the presentation of discontinuing operations, the Group made a profit after tax before exceptional items of $584 million (H1 2010: $57 million). This increases to $650 million after these adjustments are included.
Exceptional Items
Share-based Payments
In December 2009, Cairn's shareholders approved the conversion of notional "Units" in the Capricorn Group awarded in 2007 and 2008 into incentives over Cairn Energy PLC shares. Consequently, $7 million has been recognised in the Income Statement as a result of this modification (H1 2010: $30 million). No further significant charges in respect of this conversion will be incurred.
Cash Flow, Capital Investment and Liquidity
Cash inflow from operating activities was $1,049 million (H1 2010: $125 million) reflecting the increased contribution made by the Rajasthan field. The Group also earned interest of $25 million during the period (H1 2010: $31 million).
Cash outflow on capital expenditure is set out in the table below:
|
|
H1 2011 |
H1 2010 |
|
|
$ million |
$ million |
|
|
|
|
|
Exploration/appraisal expenditure |
242 |
181 |
|
Development expenditure |
218 |
270 |
|
Other capital expenditure |
5 |
5 |
|
|
|
|
|
Total |
465 |
456 |
|
|
|
|
Exploration/appraisal expenditure during the period includes costs of the Greenland drilling programme. Development expenditure during the period primarily relates to the Rajasthan development.
At 30 June 2011, the Group had net cash of $1,003 million (H1 2010: $267 million). CIL had net cash of $1,048 million, comprising $1,452 million cash and $404 million debt. PLC/Capricorn had net debt of $45 million, comprising $75 million cash and $120 million debt. On 11 July Cairn received ~$1.4 billion from Vedanta for the first 10% tranche of the 40% sale in CIL and subsequently cancelled its $900 million loan facility after repaying $200 million already drawn.
Going Concern
The directors have considered the financial and operational risks relevant to support a statement of going concern. The Group's liquidity is carefully and routinely monitored with scenarios run for different assumptions, including oil price and production rates. The directors have a reasonable expectation that the Group has adequate financial resources to continue in operational existence for the foreseeable future and therefore continues to adopt the going concern basis in preparing the half-year financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
We operate in a dynamic environment and risk management is an essential component of business success at Cairn. We seek out investment opportunities which offer the optimum balance of risk (technical, political and commercial) and reward. In our business activities, the identification, evaluation and management of risk, together with the way we respond to changes in the external environment, are key to the delivery of our strategic goals, protection of our assets, management of our reputation and maintaining our 'licence to operate'. This approach is embedded throughout the organisation and is supported by formal processes and a number of risk management forums, which feed into the Group Risk Management Committee chaired by the Chief Executive, with participation from both executive and non executive directors plus members of the senior management team. The board has overall responsibility for risk management.
Our approach to managing business risks plus the principal risks, potential impacts and mitigation strategies as at the end of 2010 were set out in more detail in pages 32-35 of the 2010 Annual Report and Accounts.
During H1 2011, the Company continued to regularly review business risks and mitigating actions across the organisation through our business risk management system. Emerging risks during the first half of 2011 have included:
· Completion of the transaction to sell a 40% interest in CIL to Vedanta Resources plc, approved by our shareholders in 2010 has been delayed pending Government of India approval. The transaction will be completed in two stages: the first tranche of 10% of Cairn's shareholding has been completed and the second tranche of 30% shareholding, received conditional approval on 26 July 2011. The uncertainties over both the timing of this approval and the associated conditions have increased the risks to the business, both in terms of the transaction completion and the ongoing business in India. This risk has been managed in the main through regular interaction between Cairn, CIL, Vedanta and the authorities in India and conditional GoI approval has now been received.
· Cairn has placed a high priority on implementing the recommendations made by the OGP Global Industry Response Group (GIRG) following their review of the lessons from the Deepwater Horizon tragedy on the Gulf of Mexico in 2010, which were issued in May 2011. These are being integrated into the Company's management systems and were used in the planning for the 2011 Greenland drilling project.
· Potential interference from third parties to our operations, offices and information systems has increased through the period. To manage this, we maintain and regularly review and improve our security procedures.
· The current poor economic climate has resulted in increased pressure on Government finances and there is an increased risk of intervention in fiscal and regulatory frameworks of the oil and gas industry. Turbulence in global financial markets can also result in a reduction in the price and liquidity of Cairn's shares.
Summarised on the next pages are the principal risks, potential impacts and mitigation strategies as presented at the end of 2010 with updates on significant changes that have occurred in the period to 30 June 2011 and since then (marked in bold). It should be noted that additional risks and uncertainties not known to Cairn, or which Cairn deems immaterial, may arise or become material in the future. The list below is therefore by no means exhaustive and is not presented in any order of priority.
Strategic Risks
|
Impact: Strategy fails to create shareholder value in line with shareholder expectations |
|
|
Risk |
Mitigation |
|
Strategy fails to create shareholder value or in line with shareholder expectations |
Our strategy has been focused on the development of our production base in India and our high potential exploration position in Greenland. We have regular, open and transparent communications with all stakeholders to ensure there is a clear understanding of the Group strategy, its risks and potential rewards.
We manage our strategic alignment with our listed subsidiary, CIL, through our controlling shareholding and our representation on the CIL board, all of which is underpinned by a formal Relationship Agreement.
The sale of a majority shareholding in CIL to Vedanta was approved by our shareholders in 2010. Conditional approval of the Government of India was received by letter dated 26 July 2011. The approval is subject to a number of conditions, certain of which are being put to the shareholders of CIL for their approval. Cairn has voted in favour of accepting these conditions. Joint venture partner, Oil and Natural Gas Corporation Limited is also required to provide a No Objection Certificate in respect of the transaction and the approval of the Ministry of Home Affairs is required before the transaction can be completed.
|
|
Inadequate portfolio management |
Regular reviews are undertaken of the existing portfolio and new opportunities with the potential to add to shareholder value.
On completion of the Vedanta transaction, the Company's residual shareholding in CIL of ~22% will remain a significant portion of Cairn's shareholder value. It is intended that a shareholder agreement will be put in place which will provide the main means of seeking to protect shareholder value.
|
|
Ineffective capital allocation |
Regular reviews of the risk and reward potential are conducted across the asset base of the Group.
|
|
Inadequate resource and succession planning across the Group |
Resource planning is an essential element of the annual work programme and budgeting process.
Staff are supplemented by consultants and/or contractors during periods of high activity or where additional specialists are required.
During H1 2011, the staff headcount increased by ~14%.
Regular reviews are undertaken to ensure Cairn retains competitive remuneration and incentivisation policies.
Staff appraisal, training and development programmes are in place, along with executive and senior management succession plans.
Following the changes to the composition of the board announced in June, the succession plans are currently being updated.
|
Financial Risks
|
Impact: Asset financial performance and access to funding may not be matched, leading to an inability to meet the Group's financial obligations. |
|
|
Risk |
Mitigation |
|
Inability to fund exploration and development work programmes |
A prudent approach is applied in budgeting and business planning to ensure that we have sufficient capital available to meet commitments on exploration drilling, whilst maintaining appropriate leverage to enhance returns from development and production assets.
At the end of 2010, a stand-by secured revolving debt facility of US$ 900 million was entered into to provide liquidity to the Group and US$ 200 million was drawn in the period to 31 July 2011. These monies were repaid and the facility cancelled on 1 August 2011 following receipt of the proceeds of the 10% shareholding in Cairn India Limited, which completed on 11 July and raised net proceeds of ~$1.4 billion in cash and reduced Cairn's shareholding in Cairn India Limited to 52.11%.
|
|
Shortfall in operational cash flow, through lower than expected oil prices or production levels
|
Scenarios for both oil price and production volumes are rigorously prepared and monitored on a regular basis providing comfort on our funding headroom. |
|
Disputes resulting from different interpretations of fiscal legal agreements or regulations leading to additional costs, increased taxation and failure to achieve cost recovery
|
Compliance matrices and legal, financial, supply chain and operational due diligence reviews are in place to ensure that our understanding of our contractual rights and obligations is clear and robustly defended; and to minimise the potential for inadequate processes or interpretations that could lead to disputes. |
Operational Risks
|
Impact: Exploration, development or production operations detrimentally impacted by incidents involving staff, contractors, communities, suppliers or losses to the environment, leading to reputational damage, project delays, cost overruns or loss of revenue. |
|
|
Risk |
Mitigation |
|
Exposure to low likelihood, high impact health, safety, environment or security events (e.g. major accidents, well blow-outs etc) |
Management systems, standards and internal and independent external assurance and review processes are in place covering the design and operation of facilities, pipelines and well drilling operations.
Maintaining and regularly testing emergency organisation, procedures and equipment in order to be able to respond appropriately to an emergency.
Participation in industry initiatives to ensure capture of lessons learned from incidents elsewhere in the industry. The outcome of the industry review of the lessons learned from the Deepwater Horizon tragedy (by the OGP GIRG) have been incorporated into the Company's Drilling Management System.
|
|
Health, safety, security and environmental incidents |
Implementation of Corporate Responsibility (CR) Management System on all projects, with regular monitoring of effectiveness of risk mitigation measures and reporting and investigation of all incidents.
An internal audit was completed on the CR Management System by an external party in May 2011. No significant shortcomings were identified and an action plan is in place to address the identified areas for improvement.
Health, safety, security and environmental risks evaluated during project screening processes and protective measures regularly tested. Emergency response organisation and procedures in place and regularly tested.
|
|
Not maintaining regulatory approvals for projects/operations |
Compliance matrices established in each asset/project covering legal and regulatory requirements. Regular monitoring of compliance measures.
Regular engagement with government and regulators to maintain understanding of requirements of existing or potentially new laws and/or regulations.
|
|
Ineffective Business Management System |
Regular reviews and audits conducted to ensure policies, standards, processes and procedures are effective and up-to-date given changing business activities and external requirements.
|
|
Failure to secure materials, services or resources
|
Contracting strategy and procurement processes in place, supplemented by market intelligence and regular engagement with contractors/suppliers. |
|
Inadequate ice management plan for drilling in Greenland |
Lessons learned from successful implementation of ice management plan during the Greenland 2010 drilling programme have been incorporated into the 2011 drilling programme.
|
|
Ineffective business continuity plans |
Disaster recovery plans and recovery facility in place and regularly tested. Business continuity plan in place, maintained up-to-date and regularly tested.
|
|
Inadequate systems to prevent bribery & corruption |
Consistent application of the Group Code of Business Ethics in all business activities and throughout supply chain processes.
Anti-bribery and corruption management system and processes were fully updated in line with the requirements of the UK Bribery Act, and a training programme was initiated ahead of the Act coming into force on 1 July 2011.
|
External Risks
|
Impact: Cairn is active in a number of overseas markets and strategy delivery may be affected by changes in political, regulatory or market conditions |
|
|
Risk |
Mitigation |
|
Changes in regulatory and fiscal environment affecting delivery of strategy or value |
While the Group cannot predict the impact of future changes in fiscal policy in the countries and markets in which it operates, building successful relationships with governments, regulators, local community representatives and industry associations allows the Group to keep abreast of potential changes and allows appropriate lobbying.
|
|
Ineffective management of stakeholder relationships |
Corporate and asset level stakeholder management and communication plans are designed to maintain successful relationships with internal and external stakeholders.
Robust response procedures are in place for addressing complaints or grievances.
Cairn respects the rights of individuals and organisations to express their views in a safe and peaceful manner but would be concerned with any action that represents a breach of security and that may pose a risk to the safety of people and/or equipment. When this position has been compromised legal remedies have been or will be sought.
|
|
Inadequate response to natural disasters affecting Group assets or staff |
Risks are evaluated during project screening processes and appropriate precautionary steps identified and tested. Insurance is in place for assets.
Emergency and crisis response organisation and procedures in place and regularly tested.
|
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that, to the best of their knowledge, these condensed financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 and the Disclosure and Transparency Rules (DTRs) of the UK Financial Services Authority.
The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R being a fair review of the business and important events impacting it, as well as a description of the principal risks and uncertainties that Cairn faces for the remainder of the year and a fair review of the related party disclosure requirements.
The directors of the Company are listed in the Annual Report for the year ended 31 December 2010 with the exception of the board changes detailed above (on page 4).
By order of the Board.
Simon Thomson Jann Brown
Chief Executive Managing Director & CFO
22 August 2011 22 August 2011
GROUP INCOME STATEMENT
For the six months ended 30 June 2011
|
|
|
Discontinuing operations six months ended 30 June 2011 |
Continuing operations six months ended 30 June 2011 |
Discontinuing operations six months ended 30 June 2010 |
Continuing operations six months ended 30 June 2010 |
Discontinuing operations year ended 31 December 2010 |
Continuing operations year ended 31 December 2010 |
|
|
|
(unaudited) |
(unaudited) |
(unaudited) (restated) |
(unaudited) (restated) |
(audited) |
(audited) |
|
|
Notes |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
1,336.3 |
- |
332.6 |
- |
1,601.3 |
- |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
Production costs |
|
(191.5) |
- |
(68.3) |
- |
(275.6) |
(1.1) |
|
Pre-award costs |
|
(2.7) |
(3.6) |
(0.8) |
(3.0) |
(1.9) |
(12.7) |
|
Unsuccessful exploration costs |
|
(3.6) |
(94.8) |
(14.7) |
(26.1) |
(23.1) |
(211.9) |
|
Depletion and decommissioning charge |
|
- |
- |
(73.2) |
- |
(143.6) |
- |
|
|
|
|
|
|
|
|
|
|
Gross profit/(loss) |
|
1,138.5 |
(98.4) |
175.6 |
(29.1) |
1,157.1 |
(225.7) |
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
5.1 |
0.9 |
6.5 |
0.5 |
11.0 |
0.8 |
|
Administrative expenses |
|
(24.9) |
(24.5) |
(33.2) |
(15.8) |
(67.5) |
(35.0) |
|
Exceptional administrative expenses |
4 |
- |
(6.8) |
(2.1) |
(27.4) |
(2.3) |
(35.6) |
|
Impairment |
|
- |
- |
- |
(10.5) |
- |
(16.0) |
|
(Loss)/gain on sale of oil and gas assets |
2 |
- |
- |
- |
- |
(9.3) |
12.6 |
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
|
1,118.7 |
(128.8) |
146.8 |
(82.3) |
1,089.0 |
(298.9) |
|
|
|
|
|
|
|
|
|
|
Finance income |
|
24.9 |
0.2 |
11.1 |
5.3 |
24.3 |
2.5 |
|
Finance costs |
|
(28.9) |
(12.7) |
(22.5) |
- |
(77.4) |
(7.2) |
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation |
|
1,114.7 |
(141.3) |
135.4 |
(77.0) |
1,035.9 |
(303.6) |
|
Taxation Tax (charge)/credit |
6 |
(330.6) |
- |
(31.1) |
0.4 |
350.6 |
0.3 |
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period |
|
784.1 |
(141.3) |
104.3 |
(76.6) |
1,386.5 |
(303.3) |
|
Profit for the period from discontinuing operations |
2 |
|
784.1 |
|
104.3 |
|
1,386.5 |
|
Profit for the period |
|
|
642.8 |
|
27.7 |
|
1,083.2 |
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
371.5 |
|
(12.6) |
|
794.3 |
|
Non-controlling interests |
|
|
271.3 |
|
40.3 |
|
288.9 |
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per ordinary share - basic (cents) - note 7 |
26.54 |
|
(0.93) |
|
56.88 |
||
|
Earnings/(loss) per ordinary share - diluted (cents) - note 7 |
26.37 |
|
(0.93) |
|
56.62 |
||
|
Loss per ordinary share - basic from continuing operations (cents) - note 7 |
(10.09) |
|
(5.63) |
|
(21.72) |
|
Loss per ordinary share - diluted from continuing operations(cents) - note 7 |
(10.09) |
|
(5.63) |
|
(21.72) |
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2011
|
|
Six months ended 30 June 2011 (unaudited) $m |
Six months ended 30 June 2010 (unaudited) $m |
Year ended 31 December 2010 (audited) $m |
|
|
|
|
|
|
Profit for the period |
642.8 |
27.7 |
1,083.2 |
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Currency translation differences |
2.4 |
(7.4) |
0.5 |
|
Other comprehensive income for the period |
2.4 |
(7.4) |
0.5 |
|
|
|
|
|
|
Total comprehensive income for the period |
645.2 |
20.3 |
1,083.7 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
373.9 |
(19.6) |
793.6 |
|
Non-controlling interests |
271.3 |
39.9 |
290.1 |
|
|
645.2 |
20.3 |
1,083.7 |
GROUP BALANCE SHEET
As at 30 June 2011
|
|
|
As at 30 June 2011 |
As at 30 June 2010 |
As at 31 December 2010 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
|
Notes |
$m |
$m |
$m |
|
Non-current assets |
|
|
|
|
|
Intangible exploration/appraisal assets |
8 |
485.6 |
488.0 |
262.8 |
|
Property, plant & equipment - development/producing assets |
9 |
- |
2,081.8 |
- |
|
Property, plant and equipment - other |
|
1.5 |
6.7 |
1.1 |
|
Intangible assets - other |
|
65.0 |
74.0 |
64.9 |
|
|
|
|
|
|
|
|
|
552.1 |
2,650.5 |
328.8 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Inventory |
|
- |
32.4 |
- |
|
Trade and other receivables |
|
62.5 |
552.7 |
39.4 |
|
Bank deposits |
10 |
- |
100.1 |
- |
|
Cash and cash equivalents |
10 |
75.2 |
997.3 |
187.0 |
|
Derivative financial instruments |
|
- |
0.5 |
- |
|
Income tax assets |
|
- |
20.0 |
- |
|
|
|
|
|
|
|
|
|
137.7 |
1,703.0 |
226.4 |
|
|
|
|
|
|
|
Assets held-for-sale |
2 |
5,643.8 |
2.9 |
4,725.6 |
|
|
|
|
|
|
|
Total assets |
|
6,333.6 |
4,356.4 |
5,280.8 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Loans and borrowings |
10 |
120.0 |
- |
- |
|
Trade and other payables |
|
210.3 |
617.3 |
77.0 |
|
Obligations under finance leases |
|
- |
1.7 |
- |
|
Provisions |
|
7.8 |
31.4 |
2.8 |
|
Derivative financial instruments |
|
0.5 |
- |
- |
|
Income tax liabilities |
|
0.1 |
4.7 |
0.1 |
|
|
|
|
|
|
|
|
|
338.7 |
655.1 |
79.9 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Loans and borrowings |
10 |
- |
830.7 |
- |
|
Obligations under finance leases |
|
- |
1.1 |
- |
|
Provisions |
|
- |
51.1 |
- |
|
Deferred tax liabilities |
|
- |
77.1 |
- |
|
|
|
|
|
|
|
|
|
- |
960.0 |
- |
|
|
|
|
|
|
|
Liabilities related to disposal units held-for-sale |
2 |
1,487.6 |
- |
1,362.5 |
|
|
|
|
|
|
|
Total liabilities |
|
1,826.3 |
1,615.1 |
1,442.4 |
|
|
|
|
|
|
|
Net assets |
|
4,507.3 |
2,741.3 |
3,838.4 |
|
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
|
Called-up share capital |
|
16.8 |
16.7 |
16.7 |
|
Share premium |
|
487.1 |
481.8 |
484.7 |
|
Shares held by ESOP Trust |
|
(0.1) |
(26.2) |
(8.2) |
|
Shares held by SIP Trust |
|
(1.6) |
(0.8) |
(0.8) |
|
Foreign currency translation |
|
(37.1) |
(45.8) |
(39.5) |
|
Capital reserves - non-distributable |
|
40.2 |
40.2 |
40.2 |
|
Retained earnings |
|
2,697.3 |
1,507.8 |
2,317.6 |
|
|
|
|
|
|
|
|
|
3,202.6 |
1,973.7 |
2,810.7 |
|
|
|
|
|
|
|
Non-controlling interests |
|
1,304.7 |
767.6 |
1,027.7 |
|
|
|
|
|
|
|
Total equity |
|
4,507.3 |
2,741.3 |
3,838.4 |
GROUP STATEMENT OF CASHFLOWS
For the six months ended 30 June 2011
|
|
Notes |
Six months Ended 30 June 2011 (unaudited) $m |
Six months Ended 30 June 2010 (unaudited) $m |
Year ended 31 December 2010 (audited) $m |
|
Cash flows from operating activities |
|
|
|
|
|
Loss before taxation from continuing activities |
|
(141.3) |
(77.0) |
(303.6) |
|
Profit before taxation from discontinuing activities |
|
1,114.7 |
135.4 |
1,035.9 |
|
|
|
|
|
|
|
Profit before taxation |
|
973.4 |
58.4 |
732.3 |
|
|
|
|
|
|
|
Unsuccessful exploration costs |
|
98.4 |
40.8 |
235.0 |
|
Depletion and decommissioning, depreciation and amortisation |
|
1.1 |
76.7 |
151.0 |
|
Share-based payments charge |
|
18.6 |
44.1 |
68.8 |
|
Impairment |
|
- |
10.5 |
16.0 |
|
Gain on sale of oil and gas assets |
|
- |
- |
(3.3) |
|
Finance income |
|
(25.1) |
(16.4) |
(26.8) |
|
Finance costs |
|
41.6 |
22.5 |
84.6 |
|
Net interest paid |
|
(29.8) |
(15.2) |
(73.9) |
|
Income tax paid |
|
(242.3) |
(46.7) |
(221.5) |
|
Foreign exchange differences |
|
(0.3) |
(1.6) |
(3.4) |
|
Movement on inventory of oil and condensate |
|
(3.6) |
(21.6) |
(0.1) |
|
Trade and other receivables movement |
|
(172.7) |
(67.3) |
(210.6) |
|
Trade and other payables movement |
|
34.4 |
47.5 |
62.8 |
|
Provisions movement |
|
364.9 |
(6.6) |
26.2 |
|
Derivative financial instruments movement |
|
(9.9) |
- |
- |
|
Net cash generated from operating activities |
|
1,048.7 |
125.1 |
837.1 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Expenditure on intangible exploration/appraisal assets |
|
(242.3) |
(180.7) |
(533.7) |
|
Expenditure on property, plant & equipment - development/producing assets |
|
(218.4) |
(270.5) |
(526.6) |
|
Purchase of property, plant and equipment - other |
|
(2.0) |
(1.6) |
(3.6) |
|
Purchase of intangible assets - software |
|
(2.5) |
(3.6) |
(5.9) |
|
Proceeds on disposal of intangible exploration/appraisal assets |
|
- |
63.5 |
78.5 |
|
Movement in funds on bank deposits |
|
(501.9) |
(87.2) |
(439.9) |
|
Interest received |
|
25.1 |
31.3 |
43.5 |
|
Net cash used in investing activities |
|
(942.0) |
(448.8) |
(1,387.7) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from increase in non-controlling interests |
|
4.5 |
1.2 |
11.9 |
|
Arrangement and facility fees |
|
(15.2) |
(19.7) |
(28.5) |
|
Proceeds from issue of debentures |
|
- |
- |
304.6 |
|
Cost of shares purchased |
|
(0.8) |
(9.7) |
(9.8) |
|
Proceeds from exercise of share options |
|
2.4 |
8.4 |
11.3 |
|
Payment of finance lease liabilities |
|
(0.8) |
(0.7) |
(1.5) |
|
(Repayment)/proceeds of borrowings |
|
(148.0) |
164.6 |
(307.2) |
|
Net cash flows (used in)/from financing activities |
|
(157.9) |
144.1 |
(19.2) |
|
Decrease in cash and cash equivalents |
|
(51.2) |
(179.6) |
(569.8) |
|
Opening cash and cash equivalents at beginning of period |
|
625.5 |
1,176.5 |
1,176.5 |
|
Exchange (losses)/gains on cash and cash equivalents |
|
(0.4) |
0.4 |
18.8 |
|
Closing cash and cash equivalents |
10 |
573.9 |
997.3 |
625.5 |
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2011
|
|
Equity share capital |
Shares held by ESOP Trust |
Shares held by SIP Trust |
Foreign currency translation |
Capital reserves |
Retained earnings |
Non- controlling interests |
Total equity |
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010 |
490.1 |
(27.2) |
- |
(38.8) |
40.2 |
1,488.8 |
723.9 |
2,677.0 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
794.3 |
288.9 |
1,083.2 |
|
Other comprehensive income for the year |
- |
- |
- |
(0.7) |
- |
- |
1.2 |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
(0.7) |
- |
794.3 |
290.1 |
1,083.7 |
|
Exercise of employee share options |
11.3 |
- |
- |
- |
- |
- |
- |
11.3 |
|
Share-based payments |
- |
- |
- |
- |
- |
58.5 |
5.8 |
64.3 |
|
Increase in non-controlling interest through the exercise of share options |
- |
- |
- |
- |
- |
4.0 |
7.9 |
11.9 |
|
Cost of shares purchased |
- |
(9.0) |
(0.8) |
- |
- |
- |
- |
(9.8) |
|
Cost of shares vesting |
- |
28.0 |
- |
- |
- |
(28.0) |
- |
- |
|
At 1 January 2011 |
501.4 |
(8.2) |
(0.8) |
(39.5) |
40.2 |
2,317.6 |
1,027.7 |
3,838.4 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
- |
- |
371.5 |
271.3 |
642.8 |
|
Other comprehensive income for the period |
- |
- |
- |
2.4 |
- |
- |
- |
2.4 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
- |
- |
- |
2.4 |
- |
371.5 |
271.3 |
645.2 |
|
Exercise of employee share options |
2.4 |
- |
- |
- |
- |
- |
- |
2.4 |
|
Shares issued to ESOP Trust |
0.1 |
(0.1) |
- |
- |
- |
- |
- |
- |
|
Share-based payments |
- |
- |
- |
- |
- |
15.2 |
2.4 |
17.6 |
|
Increase in non-controlling interest through the exercise of share options |
- |
- |
- |
- |
- |
1.2 |
3.3 |
4.5 |
|
Cost of shares purchased |
- |
- |
(0.8) |
- |
- |
- |
- |
(0.8) |
|
Cost of shares vesting |
- |
8.2 |
- |
- |
- |
(8.2) |
- |
- |
|
At 30 June 2011 |
503.9 |
(0.1) |
(1.6) |
(37.1) |
40.2 |
2,697.3 |
1,304.7 |
4,507.3 |
GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
For the six months ended 30 June 2011
|
|
Equity share capital |
Shares held by ESOP Trust |
Shares held by SIP Trust |
Foreign currency translation |
Capital reserves |
Retained earnings |
Non-controlling interests |
Total equity |
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010 |
490.1 |
(27.2) |
- |
(38.8) |
40.2 |
1,488.8 |
723.9 |
2,677.0 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
- |
- |
(12.6) |
40.3 |
27.7 |
|
Other comprehensive income for the period |
- |
- |
- |
(7.0) |
- |
- |
(0.4) |
(7.4) |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
- |
- |
- |
(7.0) |
- |
(12.6) |
39.9 |
20.3 |
|
Exercise of employee share options |
8.4 |
- |
- |
- |
- |
- |
- |
8.4 |
|
Share-based payments |
- |
- |
- |
- |
- |
41.2 |
2.9 |
44.1 |
|
Increase in non-controlling interest through the exercise of share options |
- |
- |
- |
- |
- |
0.3 |
0.9 |
1.2 |
|
Cost of shares purchased |
- |
(8.9) |
(0.8) |
- |
- |
- |
- |
(9.7) |
|
Cost of shares vesting |
- |
9.9 |
- |
- |
- |
(9.9) |
- |
- |
|
At 30 June 2010 |
498.5 |
(26.2) |
(0.8) |
(45.8) |
40.2 |
1,507.8 |
767.6 |
2,741.3 |
NOTES TO THE ACCOUNTS
For the six months ended 30 June 2011
1. Accounting Policies
Basis of Preparation
The half-yearly condensed consolidated financial statements for the six months ended 30 June 2011 have been prepared in accordance with IAS 34 "Interim Financial Reporting". The disclosed figures are not statutory accounts in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010, on which the auditors gave an audit report which was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies. The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.
This half-yearly report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ended 31 December 2011, and uses the same accounting policies and methods of computation applied for the year ended 31 December 2010.
The comparative amounts in the Income Statement for the period ending 30 June 2010 have been restated for to be consistent with the disclosure as at 30 June 2011.
There were no new relevant standards or interpretations to be adopted for the six months ended 30 June 2011.
2. Discontinued Operations and Assets Held-for-sale
On 16 August 2010, Cairn announced the conditional agreement with Vedanta, for the sale of a maximum 51% (subsequently agreed to be 40%) of the fully-diluted share capital of Cairn India. Shareholder approval from both parties was obtained. On 29 June 2011, the Government of India ("GoI") released a press statement, later confirmed in writing on 26 July 2011, approving the transaction subject to certain conditions. As at 30 June 2011 Cairn continued to believe that the transaction would complete and has classified the assets and liabilities of the Cairn India Group as a disposal group held-for-sale.
The sale by Cairn of the 40% interest in Cairn India will complete in two tranches: a tranche of 10%, which completed on 11 July 2011, and a further tranche of 30%, following the receipt of formal acceptance by both parties of the conditions stipulated by GoI. The disposal of the 10% and the 30% tranches will be accounted for as a single transaction.
Immediately following completion, Cairn is expected to have a residual interest of approximately 22% of the fully-diluted share capital of Cairn India, while Vedanta will hold a controlling 58.5% interest. Cairn has received proceeds of $1.5bn (post-tax proceeds of $1.4bn) for the completion of the 10% tranche on 11 July 2011. The expected cash consideration for the 30% tranche is $4.5bn (post-tax $4.0bn).
The conditions for approval of the transaction offered by GoI include the acceptance of Royalty payable by ONGC being allowable for cost recovery in respect of the Rajasthan block RJ-ON-90/1. Based on the PSC provisions and legal advice received, Cairn has been consistently of the view that Royalty is not a contract cost and therefore should not be allowable for cost recovery. While Cairn continues to be of the view that ONGC's and GoI's position on Royalty is without merit, Cairn believe that these issues have slowed the momentum in some of the Rajasthan block developments. Without the active support of GoI and ONGC, it will not be possible for Cairn India to achieve the full potential of the resource base in this block. Therefore both Cairn and Vedanta have indicated that they will accept the GoI conditions.
Cairn has recalculated its production entitlement interest based on Royalty paid by ONGC being allowed for cost recovery. Given uncertainty over the timing of payment to ONGC, Cairn hasrecogniseda provision in respect of revenues now attributable to ONGC, resulting in a reduction in revenues attributable to Cairn of $284m. No other GoI conditions, including the withdrawal of the Cess arbitration on the Rajasthan block, have any direct impact on the financial performance of the Group.
On 20 December 2010, Santos International Holdings Pty Limited agreed to purchase the entire share capital of Cairn Energy Sangu Field Limited, which held a 37.5% interest in the producing Sangu gas field, offshore Bangladesh, and a 50% interest in Block 16 exploration acreage for a consideration of $0.8m. As a result of this transaction Cairn no longer has operations in Bangladesh.
On 31 December 2009, Cairn entered into an agreement with Oil Search Limited for the sale of the Group's 12.73% interest in Block PRL-1, Papa New Guinea. This transaction subsequently received government approval in October 2010 and therefore the assets were classified as held-for-sale as at 30 June 2010.
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
2. Discontinued Operations and Assets Held-for-sale (continued)
The results of the Cairn India Limited Group (2010: Cairn India Limited Group and Cairn Energy Sangu Field Limited) are presented as discontinuing operations and summarised below:
|
|
|
Six months ended 30 June 2011 (unaudited) |
|
|
|
$m |
|
|
|
|
|
Revenue |
|
1,336.3 |
|
Cost of sales |
|
(197.8) |
|
Gross profit |
|
1,138.5 |
|
Other operating income and expenses |
|
(19.8) |
|
|
|
|
|
Operating profit |
|
1,118.7 |
|
Net finance costs |
|
(4.0) |
|
Profit before taxation |
|
1,114.7 |
|
Taxation |
|
(330.6) |
|
Profit for the period |
|
784.1 |
|
|
|
|
|
Attributable to: |
|
|
|
Equity holders of the parent |
|
512.8 |
|
Non-controlling interests |
|
271.3 |
Earnings per share:
|
Basic (cents) - note 7 |
|
36.63 |
|
Diluted (cents) - note 7 |
|
36.46 |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
2. Discontinued Operations and Assets Held-for-sale (continued)
|
|
|
Cairn India Limited six months ended 30 June 2010 (unaudited) |
Cairn Energy Sangu Field Limited six months ended 30 June 2010 (unaudited) |
Total six months ended 30 June 2010 (unaudited) |
|
|
|
$m |
$m |
$m |
|
|
|
|
|
|
|
Revenue |
|
328.5 |
4.1 |
332.6 |
|
Cost of sales |
|
(154.4) |
(2.6) |
(157.0) |
|
Gross profit |
|
174.1 |
1.5 |
175.6 |
|
Other operating income and expenses |
|
(24.8) |
(4.0) |
(28.8) |
|
|
|
|
|
|
|
Operating profit/(loss) |
|
149.3 |
(2.5) |
146.8 |
|
Net finance (costs)/income |
|
(11.5) |
0.1 |
(11.4) |
|
Profit/(loss) before taxation |
|
137.8 |
(2.4) |
135.4 |
|
Taxation |
|
(31.1) |
- |
(31.1) |
|
Profit/(loss) for the period |
|
106.7 |
(2.4) |
104.3 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
66.4 |
(2.4) |
64.0 |
|
Non-controlling interests |
|
40.3 |
- |
40.3 |
Earnings per share:
|
Basic (cents) - note 7 |
|
|
4.70 |
|
Diluted(cents) - note 7 |
|
|
4.68 |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
2. Discontinued Operations and Assets Held-for-sale (continued)
|
|
|
Cairn India Limited year ended 31 December 2010 (audited) |
Cairn Energy Sangu Field Limited year ended 31 December 2010 (audited) |
Total year ended 31 December 2010 (audited) |
|
|
|
$m |
$m |
$m |
|
|
|
|
|
|
|
Revenue |
|
1,594.2 |
7.1 |
1,601.3 |
|
Cost of sales |
|
(438.1) |
(6.1) |
(444.2) |
|
Gross profit |
|
1,156.1 |
1.0 |
1,157.1 |
|
Other operating income and expenses |
|
(53.6) |
(14.5) |
(68.1) |
|
|
|
|
|
|
|
Operating profit/(loss) |
|
1,102.5 |
(13.5) |
1,089.0 |
|
Net finance costs |
|
(53.1) |
- |
(53.1) |
|
Profit/(loss) before taxation |
|
1,049.4 |
(13.5) |
1,035.9 |
|
Taxation |
|
350.6 |
- |
350.6 |
|
Profit/(loss) for the year |
|
1,400.0 |
(13.5) |
1,386.5 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
1,111.1 |
(13.5) |
1,097.6 |
|
Non-controlling interests |
|
288.9 |
- |
288.9 |
|
|
|
|
|
|
|
Profit/(loss) on ordinary activities for the year |
|
1,400.0 |
(4.2) |
1,395.8 |
|
Loss on disposal |
|
- |
(9.3) |
(9.3) |
|
|
|
1,400.0 |
(13.5) |
1,386.5 |
Earnings per share:
|
Basic (cents) - note 7 |
|
|
78.60 |
|
Diluted (cents) - note 7 |
|
|
78.30 |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
2. Discontinued Operations and Assets Held-for-sale (continued)
The major classes of assets and liabilities classified as held-for-sale as at 30 June 2011 are as follows:
|
|
Cairn India Limited as at 30 June 2011 |
Total as at 30 June 2010 |
Cairn India Limited as at 31 December 2010 |
Other as at 31 December 2010 |
Total as at 31 December 2010 |
|
|
$m |
$m |
$m |
$m |
$m |
|
Assets |
|
|
|
|
|
|
Intangible exploration/appraisal assets |
391.9 |
2.9 |
376.5 |
1.5 |
378.0 |
|
Property, plant & equipment - development/producing assets |
2,620.7 |
- |
2,402.2 |
- |
2,402.2 |
|
Property, plant & equipment - other |
8.1 |
- |
6.6 |
- |
6.6 |
|
Intangible assets - other |
6.3 |
- |
4.8 |
- |
4.8 |
|
Deferred tax asset |
382.1 |
- |
524.8 |
- |
524.8 |
|
Inventory |
14.3 |
- |
10.8 |
- |
10.8 |
|
Trade and other receivables |
712.6 |
- |
504.4 |
- |
504.4 |
|
Income tax assets |
54.9 |
- |
- |
- |
- |
|
Bank deposits |
953.6 |
- |
452.6 |
- |
452.6 |
|
Financial instruments |
0.6 |
- |
2.9 |
- |
2.9 |
|
Cash and cash equivalents |
498.7 |
- |
438.5 |
- |
438.5 |
|
Assets held-for-sale |
5,643.8 |
2.9 |
4,724.1 |
1.5 |
4,725.6 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Trade and other payables |
488.8 |
- |
408.2 |
- |
408.2 |
|
Obligations under finance leases |
1.1 |
- |
2.0 |
- |
2.0 |
|
Provisions |
549.3 |
- |
242.8 |
- |
242.8 |
|
Income tax liabilities |
37.1 |
- |
35.8 |
- |
35.8 |
|
Loans and borrowings |
404.2 |
- |
673.7 |
- |
673.7 |
|
Financial instruments |
7.1 |
- |
- |
- |
- |
|
Liabilities related to disposal unit held-for-sale |
1,487.6 |
- |
1,362.5 |
- |
1,362.5 |
|
Net assets directly associated with disposal unit and assets held-for-sale |
4,156.2 |
2.9 |
3,361.6 |
1.5 |
3,363.1 |
The cash flows attributable to discontinued operations were as follows:
|
|
Total six months ended 30 June 2011 |
Cairn India Limited six months ended 30 June 2010 |
Cairn Energy Sangu Field Limited six months ended 30 June 2010 |
Total six months ended 30 June 2010 |
Cairn India Limited year ended 31 December 2010 |
Cairn Energy Sangu Field Limited year ended 31 December 2010 |
Total year ended 31 December 2010 |
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
Operating |
1,048.6 |
136.5 |
(1.4) |
135.1 |
874.7 |
(1.6) |
873.1 |
|
Investing |
(717.4) |
(316.9) |
(5.7) |
(322.6) |
(1,013.9) |
- |
(1,013.9) |
|
Financing |
(270.2) |
145.6 |
- |
145.6 |
(20.7) |
- |
(20.7) |
|
Net cash inflow/ (outflow) |
61.0 |
(34.8) |
(7.1) |
(41.9) |
(159.9) |
(1.6) |
(161.5) |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
3. Segmental Analysis
Operating Segments
For management purposes, the Group is organised into two business units; the Capricorn Group, being Capricorn Oil Limited and its subsidiary undertakings, and the Cairn India Group, each reporting internally to its own chief executive. There are two reportable operating segments as follows:
Cairn India Limited Group's operations are primarily within India.
Capricorn Group's operations focus on new exploration activities in Greenland and the Mediterranean. The Capricorn Group also includes the Group's interests in Nepal and a share in certain North Indian assets operated by Cairn India Limited. Operating segments based on the geographical locations of the Capricorn Group's Greenland, Mediterranean and South Asia operating segments have been aggregated to form the Capricorn reportable segment. No one individual segment accounts for more than 10% of total segmental assets of the Group.
Cairn Energy PLC is disclosed and exists to accumulate the activities and results of Cairn UK Holdings Limited, an intermediate holding company and direct parent of Cairn India Limited, and Cairn Energy PLC company results. Unallocated expenditure and net assets/(liabilities) including amounts of a corporate nature, not specifically attributable to one of the sub-Groups, are also included within this segment.
Management monitors the results of its business units separately for the purposes of making decisions about resource allocation and performance assessment.
Following the announcement of the Vedanta transaction on 16 August 2010, the results of the Cairn India Limited Group segment are classified as discontinuing and assets and liabilities classified as held-for-sale. Under IFRS certain presentational changes and adjustments are required to reflect that the assets and liabilities are classified as held-for-sale at the Balance Sheet date.
Throughout the period, the Board monitored the performance of the Group by reference to the combined results of its separate operating segments, Cairn India and Capricorn, following accounting policies which did not reflect the classification of assets and liabilities of Cairn India as held-for-sale. The Board does not receive any allocation of assets or liabilities by segment. Segmental results are therefore disclosed on this basis. A summary of the adjustments made to reconcile the segmental results to those reported under the Group's accounting policies are included within the segmental information provided. These adjustments include the reversal of the depletion and decommissioning, depreciation and amortisation charges for the period and a deferred tax position prepared on the basis that Cairn India was held-for-sale as at the Balance Sheet date. The combined impact of these adjustments is to decrease the profit after tax by $65.8m (31 December 2010: increase by $637.8m).
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
3. Segmental Analysis (continued)
The segment results for the six months ended 30 June 2011 are as follows:
|
|
Cairn India Group |
Capricorn Group |
Cairn Energy PLC |
Total Six months ended 30 June 2011 |
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
Revenue from external customers |
1,336.3 |
- |
- |
1,336.3 |
|
|
|
|
|
|
|
Production costs |
(199.1) |
- |
- |
(199.1) |
|
Pre-award costs |
(2.7) |
(3.6) |
- |
(6.3) |
|
Unsuccessful exploration costs |
(3.6) |
(94.8) |
- |
(98.4) |
|
Depletion and decommissioning charge |
(235.8) |
- |
- |
(235.8) |
|
|
|
|
|
|
|
Gross profit/(loss) |
895.1 |
(98.4) |
- |
796.7 |
|
|
|
|
|
|
|
Depreciation |
(1.9) |
(0.2) |
- |
(2.1) |
|
Amortisation |
(1.7) |
(0.9) |
- |
(2.6) |
|
Other income and administrative expenses |
(19.8) |
(15.1) |
(7.4) |
(42.3) |
|
Exceptional administrative expenses |
- |
(6.8) |
- |
(6.8) |
|
|
|
|
|
|
|
Operating profit/(loss) |
871.7 |
(121.4) |
(7.4) |
742.9 |
|
|
|
|
|
|
|
Interest income |
24.9 |
0.2 |
- |
25.1 |
|
Interest expense |
(14.9) |
(0.6) |
(10.8) |
(26.3) |
|
Other finance income and costs |
(14.0) |
(0.1) |
(1.2) |
(15.3) |
|
|
|
|
|
|
|
Profit/(loss) before taxation |
867.7 |
(121.9) |
(19.4) |
726.4 |
|
|
|
|
|
|
|
Taxation (charge)/credit |
(149.4) |
- |
- |
(149.4) |
|
|
|
|
|
|
|
Profit/(loss) after taxation |
718.3 |
(121.9) |
(19.4) |
577.0 |
|
|
|
|
|
|
|
Adjustments to reconcile to the financial statements |
|
|
|
|
|
Inventory |
7.6 |
- |
- |
7.6 |
|
Depletion and decommissioning, depreciation and amortisation |
239.4 |
- |
- |
239.4 |
|
Deferred taxation |
(181.2) |
- |
- |
(181.2) |
|
|
|
|
|
|
|
Reported profit/(loss) after taxation |
784.1 |
(121.9) |
(19.4) |
642.8 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the parent |
512.8 |
(121.9) |
(19.4) |
371.5 |
|
Non-controlling interests |
271.3 |
- |
- |
271.3 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Segment assets |
5,643.8 |
571.1 |
118.7 |
6,333.6 |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
3. Segmental Analysis (continued)
The segment results for the six months ended 30 June 2010 were as follows:
|
|
Cairn India Group |
Capricorn Group |
Cairn Energy PLC |
Total six months ended 30 June 2010 |
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
Revenue from external customers |
328.5 |
4.1 |
- |
332.6 |
|
|
|
|
|
|
|
Production costs |
(65.9) |
(2.4) |
- |
(68.3) |
|
Pre-award costs |
(0.8) |
(3.0) |
- |
(3.8) |
|
Unsuccessful exploration costs |
(14.7) |
(26.1) |
- |
(40.8) |
|
Depletion and decommissioning charge |
(73.0) |
(0.2) |
- |
(73.2) |
|
|
|
|
|
|
|
Gross profit/(loss) |
174.1 |
(27.6) |
- |
146.5 |
|
|
|
|
|
|
|
Depreciation |
(1.6) |
(0.2) |
- |
(1.8) |
|
Amortisation |
(1.3) |
(0.4) |
- |
(1.7) |
|
Other income and administrative expenses |
(21.9) |
(10.7) |
(5.9) |
(38.5) |
|
Impairment |
- |
(10.5) |
- |
(10.5) |
|
Exceptional administrative expenses |
- |
(29.5) |
- |
(29.5) |
|
|
|
|
|
|
|
Operating profit/(loss) |
149.3 |
(78.9) |
(5.9) |
64.5 |
|
|
|
|
|
|
|
Interest income |
11.0 |
0.5 |
0.2 |
11.7 |
|
Interest expense |
(9.7) |
- |
- |
(9.7) |
|
Other finance income and costs |
(12.8) |
4.1 |
0.6 |
(8.1) |
|
|
|
|
|
|
|
Profit/(loss) before taxation |
137.8 |
(74.3) |
(5.1) |
58.4 |
|
|
|
|
|
|
|
Taxation (charge)/credit |
(31.1) |
0.4 |
- |
(30.7) |
|
|
|
|
|
|
|
Reported profit/(loss) after taxation |
106.7 |
(73.9) |
(5.1) |
27.7 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the parent |
66.4 |
(73.9) |
(5.1) |
(12.6) |
|
Non-controlling interests |
40.3 |
- |
- |
40.3 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Segment assets |
3,538.6 |
696.4 |
121.4 |
4,356.4 |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
3. Segmental Analysis (continued)
The segment results for the year ended 31 December 2010 were as follows:
|
|
Cairn India Group |
Capricorn Group |
Cairn Energy PLC |
Total Year ended 31 December 2010 |
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
Revenue from external customers |
1,594.2 |
7.1 |
- |
1,601.3 |
|
|
|
|
|
|
|
Production costs |
(252.5) |
(6.3) |
- |
(258.8) |
|
Pre-award costs |
(1.9) |
(12.7) |
- |
(14.6) |
|
Unsuccessful exploration costs |
(23.1) |
(211.9) |
- |
(235.0) |
|
Depletion and decommissioning charge |
(351.4) |
(0.9) |
- |
(352.3) |
|
|
|
|
|
|
|
Gross profit/(loss) |
965.3 |
(224.7) |
- |
740.6 |
|
|
|
|
|
|
|
Depreciation |
(3.4) |
(0.5) |
- |
(3.9) |
|
Amortisation |
(3.7) |
(2.1) |
- |
(5.8) |
|
Other income and administrative expenses |
(48.8) |
(22.4) |
(12.1) |
(83.3) |
|
Exceptional administrative expenses |
- |
(37.9) |
- |
(37.9) |
|
Impairment |
- |
(16.0) |
- |
(16.0) |
|
Gain on sale of oil and gas assets |
- |
3.3 |
- |
3.3 |
|
|
|
|
|
|
|
Operating profit/(loss) |
909.4 |
(300.3) |
(12.1) |
597.0 |
|
|
|
|
|
|
|
Interest income |
24.3 |
1.2 |
0.5 |
26.0 |
|
Interest expense |
(46.8) |
- |
- |
(46.8) |
|
Other finance income and costs |
(30.6) |
1.2 |
(7.6) |
(37.0) |
|
|
|
|
|
|
|
Profit/(loss) before taxation |
856.3 |
(297.9) |
(19.2) |
539.2 |
|
|
|
|
|
|
|
Taxation (charge)/credit |
(94.1) |
0.3 |
- |
(93.8) |
|
|
|
|
|
|
|
Profit/(loss) after taxation |
762.2 |
(297.6) |
(19.2) |
445.4 |
|
|
|
|
|
|
|
Adjustments to reconcile to the financial statements |
|
|
|
|
|
Inventory |
(17.9) |
- |
- |
(17.9) |
|
Depletion and decommissioning, depreciation and amortisation |
211.0 |
- |
- |
211.0 |
|
Deferred taxation |
444.7 |
- |
- |
444.7 |
|
|
|
|
|
|
|
Reported profit/(loss) after taxation |
1,400.0 |
(297.6) |
(19.2) |
1,083.2 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the parent |
1,111.1 |
(297.6) |
(19.2) |
794.3 |
|
Non-controlling interests |
288.9 |
- |
- |
288.9 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Segment assets |
4,724.0 |
448.1 |
108.7 |
5,280.8 |
4. Exceptional Items
Share-based payments
At an EGM held on 21 December 2009, Cairn's shareholders approved the conversion of 'phantom options' awarded in 2007 and 2008 based on notional 'Units' in the Group into Cairn Energy PLC Share options and LTIP's. In accordance with IFRS 2, the incremental fair value of the modified awards, calculated at the date of modification, is charged over the remaining vesting period. A net charge of $6.8m is therefore recognised in the Income Statement for the six months ended 30 June 2011 (30 June 2010: $27.4m, 31 December 2010: $35.6m) as a result of this modification. Given the size and expected infrequent nature of this or similar modifications, these charges have been disclosed as exceptional items.
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
5. Share-based Payments
2010 Share Incentive Plan
The following awards were made under the 2010 Share Incentive Plan during the period:
|
Award Date |
Number |
WAGP (£) |
Fair Value (£) |
|
Free shares awarded in June 2011 |
70,769 |
4.00 |
242,000 |
|
Matching shares awarded during the period |
46,730 |
4.32 |
159,796 |
The fair value of the awards made during the period is based on an independent valuation, using the Binomial pricing model with the following assumptions:
|
Vesting |
86% |
|
Volatility |
52% |
|
Lapse due to withdrawals |
5% |
2009 Long Term Incentive Plan (LTIP)
The following awards were made under the 2009 LTIP during the period:
|
Grant Date |
Number |
WAEP (£) |
Fair Value (£) |
|
June 2011 |
2,309,531 |
4.03 |
3,846,000 |
The fair value of the awards made during the period is based on an independent valuation, using the Binomial pricing model with the following assumptions:
|
Vesting |
41% |
|
Volatility |
52% |
|
Lapse due to withdrawals |
nil |
2009 Approved Share Option Plan
The following awards were made under the 2009 Approved Share Option Plan during the period:
|
Grant Date |
Number |
WAEP (£) |
Fair Value (£) |
|
June 2011 |
240,448 |
4.03 |
442,560 |
The fair value of the awards made during the period is based on an independent valuation, using the Binomial pricing model with the following assumptions:
|
Vesting |
46% |
|
Volatility |
52% |
|
Risk free rate |
3.2% |
|
Lapse due to withdrawals |
5% |
2009 Unapproved Share Option Plan
The following awards were made under the 2009 unapproved Share Option Plan during the period:
|
Grant Date |
Number |
WAEP (£) |
Fair Value (£) |
|
June 2011 |
551,937 |
4.03 |
1,016,000 |
The fair value of the awards made during the period is based on an independent valuation, using the Binomial pricing model with same assumptions as used for the 2009 Approved Share option awards.
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
6. Income Tax
Analysis of tax charge
|
|
Six months ended 30 June 2011 $m |
Six months ended 30 June 2010 $m |
Year ended 31 December 2010 $m |
|
Current tax: |
|
|
|
|
UK corporation tax |
|
|
|
|
Tax on profits for the period at 26.25% (30 June 2010 and 31 December 2010: 28.00%) |
1.4 |
- |
2.9 |
|
|
|
|
|
|
|
1.4 |
- |
2.9 |
|
|
|
|
|
|
Foreign Tax
|
|
|
|
|
Indian Corporate Income Tax on profits for the period at 42.23% (30 June 2010 and 31 December 2010: 42.23%) |
16.3 |
12.0 |
28.5 |
|
Indian Regular Tax on profits for the period at 33.22% (30 June 2010 and 31 December 2010: 33.60%) |
- |
(1.2) |
(1.3) |
|
Indian Minimum Alternate Tax charge at 19.93% (30 June 2010: 17.43% and 31 December 2010: 18.27%) |
170.2 |
22.3 |
208.8 |
|
Adjustments in respect of prior periods |
- |
- |
14.4 |
|
Withholding taxes deducted at source |
- |
- |
0.1 |
|
|
|
|
|
|
|
186.5 |
33.1 |
250.5 |
|
|
|
|
|
|
Total current tax |
187.9 |
33.1 |
253.4 |
|
Deferred tax:
United Kingdom |
|
|
|
|
Temporary differences in respect of non-current assets |
- |
(0.4) |
(0.4) |
|
India |
|
|
|
|
Temporary differences in respect of non-current assets |
142.7 |
24.7 |
(603.9) |
|
Other temporary differences |
- |
(26.7) |
- |
|
Total deferred tax |
142.7 |
(2.4) |
(604.3) |
|
Tax charge/(credit) on profit/(loss) |
330.6 |
30.7 |
(350.9) |
Tax (credits)/charges to the Income Statement are disclosed as follows:
|
Tax (credit) on continuing operations |
- |
(0.4) |
(0.3) |
|
Tax charge/(credit) on discontinuing operations |
330.6 |
31.1 |
(350.6) |
|
|
|
|
|
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
7. Earnings Per Ordinary Share
|
Basic and diluted earnings per share are calculated using the following measures of (loss)/profit: |
||||
|
|
|
|
|
|
|
|
Notes |
Six months ended 30 June 2011 $m |
Six months ended 30 June 2010 $m |
Year ended 31 December 2010 $m |
|
|
|
|
|
|
|
Loss for the period - continuing operations |
|
(141.3) |
(76.6) |
(303.3) |
|
Profit for the period - discontinuing operations attributable to the equity holders of the parent |
2 |
512.8 |
64.0 |
1,097.6 |
|
Profit attributable to the equity holders of the parent |
|
371.5 |
(12.6) |
794.3 |
|
Less potential increase in non-controlling interests - discontinued operations |
|
(1.9) |
(0.1) |
(2.4) |
|
|
|
|
|
|
|
Diluted profit attributable to equity holders of the parent |
|
369.6 |
(12.7) |
791.9 |
|
|
|
|
|
|
|
Analysed as: |
|
|
|
|
|
Diluted loss attributable to equity holders of the parent - continuing operations |
|
(141.4) |
(76.5) |
(303.3) |
|
|
|
|
|
|
|
Diluted profit attributable to equity holders of the parent - discontinued operations |
|
511.0 |
63.8 |
1,095.2 |
|
|
|
|
|
|
|
|
|
369.6 |
(12.7) |
791.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reflects the share data used in the basic and diluted earnings per share computations: |
||||
|
|
|
As at 30 June 2011 |
As at 30 June 2010 |
As at 31 December 2010 |
|
|
|
'000 |
'000 |
'000 |
|
|
|
|
|
|
|
Weighted average number of shares |
|
1,400,711 |
1,367,086 |
1,398,761 |
|
Less weighted average shares held by ESOP and SIP Trusts |
|
(934) |
(7,744) |
(2,127) |
|
|
|
|
|
|
|
Basic weighted average number of shares |
|
1,399,777 |
1,359,342 |
1,396,634 |
|
|
|
|
|
|
|
Dilutive potential ordinary shares: |
|
|
|
|
|
Employee share options |
|
1,876 |
2,490 |
2,151 |
|
|
|
|
|
|
|
Diluted weighted average number of shares |
|
1,401,653 |
1,361,832 |
1,398,785 |
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
8. Intangible Exploration/Appraisal Assets
|
|
Cairn India Group |
Capricorn Group |
Total |
|
|
$m |
$m |
$m |
|
Cost |
|
|
|
|
At 1 January 2010 |
340.6 |
246.5 |
587.1 |
|
Foreign exchange |
0.2 |
(0.1) |
0.1 |
|
Additions |
41.6 |
121.4 |
163.0 |
|
Unsuccessful exploration costs |
(14.7) |
(95.3) |
(110.0) |
|
At 30 June 2010 |
367.7 |
272.5 |
640.2 |
|
Foreign exchange |
(2.0) |
0.1 |
(1.9) |
|
Additions |
19.2 |
339.1 |
358.3 |
|
Disposals |
- |
(74.1) |
(74.1) |
|
Unsuccessful exploration costs |
(8.4) |
(185.8) |
(194.2) |
|
Transfers to assets held-for-sale |
(376.5) |
(77.2) |
(453.7) |
|
At 1 January 2011 |
- |
274.6 |
274.6 |
|
Foreign exchange |
- |
0.5 |
0.5 |
|
Additions |
- |
317.1 |
317.1 |
|
Unsuccessful exploration costs |
- |
(94.8) |
(94.8) |
|
At 30 June 2011 |
- |
497.4 |
497.4 |
|
Impairment |
|
|
|
|
At 1 January 2010 |
- |
210.9 |
210.9 |
|
Impairment |
- |
10.5 |
10.5 |
|
Unsuccessful exploration costs |
- |
(69.2) |
(69.2) |
|
At 30 June 2010 |
- |
152.2 |
152.2 |
|
Impairment |
- |
1.1 |
1.1 |
|
Disposal |
- |
(65.8) |
(65.8) |
|
Transfers to assets held-for-sale |
- |
(75.7) |
(75.7) |
|
At 1 January 2011 and 30 June 2011 |
- |
11.8 |
11.8 |
|
Net book value at 30 June 2011 |
- |
485.6 |
485.6 |
|
Net book value at 1 January 2011 |
- |
262.8 |
262.8 |
|
Net book value at 30 June 2010 |
367.7 |
120.3 |
488.0 |
|
Net book value at 1 January 2010 |
340.6 |
35.6 |
376.2 |
During the six month period to 30 June 2011 Cairn India Group additions of $19.0m and unsuccessful exploration costs of $3.6m have been recognised directly within assets held-for-sale. See Note 2 for further details.
At the period end, the Group reviews intangible exploration/appraisal assets for indicators of impairment. Where an indicator is identified, the asset is tested for impairment. The review as at 30 June 2011 determined that there were no indicators of impairment or reversal of impairment. There have been no changes to the assumptions to be used in impairment calculations from those presented at the year end.
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
9. Property, Plant & Equipment - Development/Producing Assets
|
|
Cairn India Group |
Capricorn Group |
Total |
|
|
$m |
$m |
$m |
|
Cost |
|
|
|
|
At 1 January 2010 |
2,170.0 |
84.4 |
2,254.4 |
|
Additions |
326.0 |
0.4 |
326.4 |
|
At 30 June 2010 |
2,496.0 |
84.8 |
2,580.8 |
|
Additions |
390.6 |
1.1 |
391.7 |
|
Disposals |
- |
(85.9) |
(85.9) |
|
Transfers to assets held-for-sale |
(2,886.6) |
- |
(2,886.6) |
|
At 1 January 2011 and 30 June 2011 |
- |
- |
- |
|
|
|
|
|
|
Depletion and decommissioning |
|
|
|
|
At 1 January 2010 |
341.7 |
84.1 |
425.8 |
|
Charge for the period |
73.0 |
0.2 |
73.2 |
|
At 30 June 2010 |
414.7 |
84.3 |
499.0 |
|
Charge for the period |
69.7 |
0.7 |
70.4 |
|
Disposals |
- |
(85.0) |
(85.0) |
|
Transfers to assets held-for-sale |
(484.4) |
- |
(484.4) |
|
At 1 January 2011 and 30 June 2011 |
- |
- |
- |
|
Net book value at 1 January 2011 and 30 June 2011 |
- |
- |
- |
|
Net book value at 30 June 2010 |
2,081.3 |
0.5 |
2,081.8 |
|
Net book value at 1 January 2010 |
1,828.3 |
0.3 |
1,828.6 |
During the six month period to 30 June 2011 Cairn India Group additions of $218.5m were recognised directly within assets held-for-sale. See Note 2 for further details.
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
10. Net Funds
|
|
At 30 June 2011 $m |
At 30 June 2010 $m |
At 31 December 2010 $m |
|
|
|
|
|
|
Bank deposits |
- |
100.1 |
- |
|
Cash and cash equivalents |
75.2 |
997.3 |
187.0 |
|
Loans and borrowings - current |
(120.0) |
- |
- |
|
Loans and borrowings - non-current |
- |
(830.7) |
- |
|
|
|
|
|
|
|
(44.8) |
266.7 |
187.0 |
|
|
|
|
|
|
Bank deposits held in discontinued operations |
953.6 |
- |
452.6 |
|
Cash and cash equivalents held in discontinued operations |
498.7 |
- |
438.5 |
|
Loans and borrowings held in discontinued operations |
(404.2) |
- |
(673.7) |
|
Net cash |
1,003.3 |
266.7 |
404.4 |
For the purpose of the consolidated cash flow statement, cash and cash equivalents comprises the following:
|
|
At 30 June 2011 |
At 30 June 2010 |
At 31 December 2010 |
|
|
$m |
$m |
$m |
|
|
|
|
|
|
Cash and cash equivalents |
75.2 |
997.3 |
187.0 |
|
Cash and cash equivalents held in discontinued operations |
498.7 |
- |
438.5 |
|
|
573.9 |
997.3 |
625.5 |
On 15 December 2010 Cairn Energy PLC entered into a stand-by secured revolving credit of $900m. $120m of this facility was drawn at 30 June 2011. This was repaid and subsequently cancelled in August 2011.
11. Capital Commitments and Contingent Liabilities
(a) Contingent liabilities
There have been no significant changes in contingent liabilities from those reported in the Cairn Energy PLC 2010 Annual Report and Accounts with the exception of the acceptance of the cost recovery of Royalty in respect of the Rajasthan block RJ-ON-90/1. This is disclosed in Note 2.
(b) Capital commitments
At 30 June 2011, the Group had capital commitments of $624.4m (June 2010: $458.6m; December 2010: $327.0m) in relation to intangible exploration/appraisal assets, mostly in Greenland.
The above capital commitments represent Cairn's share of obligations in relation to its interests in Joint Ventures. As all Cairn Joint Ventures are jointly controlled assets, these commitments represent Cairn's share of the capital commitment of the Joint Ventures themselves.
NOTES TO THE ACCOUNTS (CONTINUED)
For the six months ended 30 June 2011
12. Related Party Transactions
(a) Remuneration of key management personnel
The remuneration of directors, who are the key management personnel of the Group, for the year ended 31 December 2010 is set out in the Directors' Remuneration Report contained in the Cairn Energy PLC 2010 Annual Report and Accounts. As discussed on page four there were various changes to directors and their roles and responsibilities on 30 June 2011.
(b) Other transactions
No other related party transactions have taken place in the six months ended 30 June 2011 that have materially affected the financial position or the performance of the Group during that period.
13. Events After the Balance Sheet Date
On 27 June Cairn announced that certain adjustments had been agreed with to the sale and purchase agreement for the sale of a 40% interest in the shareholding in Cairn India. Cairn and Vedanta agreed that the sale by Cairn of the 40% interest will complete in two tranches: a 10% tranche, which completed on 11 July 2011, and a further 30% tranche following the receipt of formal acceptance by both parties of the conditions stipulated by GoI. The disposal of the 10% and the 30% tranches will be accounted for as a single transaction.
Immediately following completion, Cairn is expected to have a residual interest of approximately 22% of the fully-diluted share capital of Cairn India, while Vedanta will hold a controlling 58.5% interest. Cairn has received proceeds of $1.5bn (post-tax proceeds of $1.4bn) for the completion of the 10% tranche on 11 July. The expected cash consideration for the 30% tranche is $4.5bn (post-tax $4.0bn).
INDEPENDENT REVIEW REPORT TO CAIRN ENERGY PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprise the Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Group Statement of Cash Flows, Group Statement of Changes in Equity and the related Notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
Glasgow
22 August 2011
GLOSSARY OF TERMS
The following are the main terms and abbreviations used in this announcement:
Corporate
|
IAS |
International Accounting Standard |
|
Board |
the Board of Directors of Cairn Energy PLC |
|
Cairn |
Cairn Energy PLC and/or its subsidiaries as appropriate |
|
Cairn India/CIL |
Cairn India Limited and/or its subsidiaries as appropriate |
|
Capricorn |
Capricorn Oil Limited and/or its subsidiaries as appropriate |
|
Company |
Cairn Energy PLC |
|
CR |
Corporate Responsibility |
|
DTRs |
Disclosure and Transparency Rules |
|
GIRG |
Global Industry Response Group |
|
GoI |
Government of India |
|
Group |
the Company and its subsidiaries |
|
HSE |
Health Safety and Environment |
|
IHS |
Information Handling Services |
|
IPO |
Initial Public Offering |
|
JV |
Joint Venture |
|
MBA |
Mangala, Bhagyam and Aishwariya |
|
MPT |
Mangala Processing Terminal |
|
NERI |
Danish National Environmental Research Institute |
|
OGP |
International Association of Oil and Gas Producers |
|
ONGC |
Oil and Natural Gas Corporation Limited |
|
OSRL |
Oil Spill Response Limited |
|
PSC |
Production Sharing Contract |
|
PSU |
Public Sector Undertaking |
|
USGS |
US Geological Survey |
|
Vedanta |
Vedanta Resources plc |
Technical
|
2P |
proven plus probable |
|
2D/3D/4D |
two dimensional/three dimensional/four dimensional |
|
bbl |
barrel |
|
boe |
barrel(s) of oil equivalent |
|
boepd |
barrels of oil equivalent per day |
|
bopd |
barrels of oil per day |
|
EOR |
enhanced oil recovery |
|
FDP |
field development plan |
|
mmboe |
million barrels of oil equivalent |
|
mmbbls |
million barrels of oil |
|
mmscfd |
million standard cubic feet of gas per day |
|
PSC |
production sharing contract |
|
TD |
Target Depth |
NOTES TO EDITORS
Cairn Energy PLC
Ø Cairn Energy PLC ("Cairn") is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange. Following the IPO of Cairn India in January 2007, there are two separate parts of the business:
· Cairn India limited ("Cairn India") is listed on the Bombay Stock Exchange and the National Stock Exchange of India and has interests in a total of 11 acreage blocks in India and Sri Lanka. Cairn retains a 52.11% interest in Cairn India (on an un-diluted basis).
· Capricorn Oil Limited ("Capricorn"), a subsidiary of Cairn is focused on exploration. Capricorn has assets in, Nepal, Northern India, Greenland, Albania and Spain.
Ø "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries (including Cairn India and Capricorn), as appropriate.
Ø "Capricorn" where referred to in this release means Capricorn Oil Limited and/or its subsidiaries as appropriate.
Ø Cairn has focused its activities on the geographic region of South Asia, which has already resulted in a significant number of oil and gas discoveries. In particular, Cairn made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. Cairn has now made more than 20 discoveries in Rajasthan block RJ-ON-90/1. Production from Rajasthan started in August 2009 and is expected to reach the approved plateau of 175,000 bopd.
Ø Cairn Energy PLC (including Capricorn) is run from Edinburgh with operational offices in Kathmandu and Nuuk.
Cairn in Greenland
Ø Cairn through its subsidiary, Capricorn, operates 11 blocks offshore Greenland.
Ø Cairn has plans to drill up to four or possibly five wells offshore Greenland in summer 2011. Two state-of-the-art rigs are being used for the drilling and exploration programme - the Ocean Rig Corcovado, a sixth generation drill-ship, and the Leiv Eiriksson, a fifth generation semi-submersible.
Ø Up to fourteen vessels are supporting the drilling programme. They provide cover for emergency response, rig stand-by, ice management, anchor handling, oil spill response and re-supply operations.
Ø Cairn has carried out extensive Environmental and Social Impact Assessments to identify how potential environmental and social impacts of the drilling programme can be avoided or mitigated.
Ø Only ten exploration wells have been drilled in offshore Greenland to date, five of which were drilled in the 1970s, one in 2000, three in 2010 by Cairn Energy and one to date by Cairn Energy in 2011.
For further information on Cairn see www.cairnenergy.com
This information is provided by RNS
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