Half-Yearly Report Announceme
EMBARGOED FOR RELEASE AT 0700 24 August 2010
CAIRN ENERGY PLC ("Cairn")
Half-yearly Report Announcement
HIGHLIGHTS
Ø Proposed sale of 51% of Cairn India (CIL) to Vedanta Resources Plc (Vedanta) announced 16 August 2010
Ø Rajasthan development on track, Mangala current production ~ 125,000 barrels of oil per day (bopd)
Ø First well in Greenland provides early indication of working hydrocarbon system
Ø Revenue before exceptional items increased by 311% from $81 m to $333 m
OPERATIONS
Ø Gross operated production: 87,523 boepd (H1 2009: 68,941 boepd)
Ø Average net entitlement production: 32,866 boepd (H1 2009:11,573 boepd)
Corporate
Ø Cairn to sell 51% of Cairn India (CIL) to Vedanta for a consideration of up to $8,480m (INR 396,561 m)
Ø Proposed Vedanta Transaction expected to complete end 2010/early 2011
Ø Intention to return a substantial proportion of post tax proceeds to Cairn shareholders
India - Rajasthan
Ø Mangala Processing Terminal (MPT) Trains One, Two and Three operational
Ø Oil sales commenced via ~ 590km pipeline to private refiners and the Indian Oil Corporation (IOC)
Ø Mangala production currently around 125,000 bopd
Greenland
Ø Two offshore rigs currently operating in the previously undrilled Baffin Bay Basin
Ø First hydrocarbons discovered in Baffin Bay basin by T8-1 well which has encountered gas, in thin sands
Ø 2,500 km of 2D seismic to be acquired in the West Disko Eqqua Block
Ø 7,500 km of planned 2D seismic in southern Greenland underway
Ø Three site surveys in southern Greenland complete
Financial
Ø Revenue before exceptional items increased by 311% from $81 m to $333 m
Ø Operating result before exceptional items increased from $15 m loss to $94 m profit
Ø Group net cash at 30 June 2010 of $267 m (H1 2009: $631 m) and total facilities of $1,639 m (H1 2009: $899 m), of which $831 m (H1 2009: $850 m) has been drawn down
Sir Bill Gammell, Chief Executive said:
"In line with Cairn's long-held strategy of adding and realising value, the transaction with Vedanta will result in a substantial return of cash to shareholders whilst ensuring the company has the financial flexibility to pursue its multi-basin exploration strategy in Greenland.
I am encouraged that we have early indications of a working hydrocarbon system with our first well in Greenland, confirming our belief in the exploration potential. We look forward to assessing the results of the remainder of the 2010 drilling programme."
Enquiries:
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Analysts/Investors Mike Watts, Deputy Chief Executive Jann Brown, Finance Director |
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 2010 preliminary results presentation will be available at 0900 (UK time) on Tuesday 24 August 2010 on the Cairn Energy PLC website: www.cairnenergy.com
An archived version of the webcast will be available later.
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
Cairn Energy's long-stated objective has been to add value for its shareholders through exploration and to realise value at the appropriate time.
The IPO of Cairn India (CIL) in 2007 provided a return of cash to shareholders and gave the Company sufficient financial flexibility to allow fast-track development of the world-class discoveries in Rajasthan and the creation of a material exploration position in Greenland. The completion of the first phase of the Rajasthan development with Mangala crude being transported by pipeline to coastal refineries represents a major milestone for Cairn. The project in Rajasthan has been a massive undertaking and I would like to thank CIL for delivering one of the biggest onshore oil and gas production developments in India for many years.
The Mangala field is now producing approximately 125,000 barrels of oil per day (bopd), it has the potential for 150,000 bopd and the Rajasthan resource base has the potential to produce at least 240,000 bopd, subject to required Government of India (GoI) approvals and additional investment.
The Board believes that the Rajasthan project is now materially de-risked and that it is an appropriate time to realise further value from its shareholding in CIL.
The transaction with Vedanta announced on 16 August has the potential to generate up to $8.48 bn of pre-tax cash which will allow a significant post-tax return to shareholders. We will seek the GoI's endorsement and any necessary consent.
The Board intends to return this cash in a manner which will seek to be both tax efficient and flexible, taking into account the differing tax and accounting requirements of Cairn shareholders.
The transaction will also allow the Company to retain significant exposure to the ongoing India business through a retained minority shareholding.
The Board also intends to utilise part of the net cash proceeds to provide financial flexibility to fund Cairn's ongoing exploration and appraisal programmes.
It is planned that the circular to all shareholders will be issued in September 2010. Further details on the return of cash will be communicated to Cairn shareholders in due course after completion of the transaction.
Strategy of the Cairn Group following the Disposal
Cairn's strategy is to establish commercial reserves from strategic positions in high-potential exploration plays in order to create and deliver shareholder value.
Cairn has focused on gaining early entry into frontier basin plays such as in Bangladesh, India and Greenland where we are already encouraged by the early indications of a working hydrocarbon system. Following completion of the transaction, the principal focus will be to build on the 2010 exploration programme in the frontier basin positions of Greenland and continue to pursue its proven strategy of building shareholder value from growth opportunities.
Norman Murray
Chairman, 23 August 2010
CHIEF EXECUTIVE'S REVIEW
The Chairman has explained the rationale behind the disposal of the Group's majority interest in India. Post transaction completion we will continue to participate in the growth and success of our discoveries in Rajasthan through our retained equity position.
Cairn's strategy has always been to focus on opportunities with material growth potential. In continuation of this transformational growth strategy, the Company has commenced exploration drilling in Greenland where it has a leading early entry acreage position. We have a similar vision for Greenland and the same belief in the potential as we did in our south Asian and Indian operations.
I believe post the transaction Cairn will continue to offer shareholders significant growth potential through:
Ø Its leading operated exploration position offshore Greenland where we have a material acreage exposure to a number of separate basin-plays
Ø A minority interest of between approximately 11 per cent and 22 per cent in Cairn India (on a fully-diluted basis at completion) and its Rajasthan development
Ø A strong balance sheet with the financial flexibility to fast-track exploration activity and pursue additional material growth opportunities as they arise
India
It is now more than six years since the major discovery of Mangala in Rajasthan in January 2004. As oil is now being transported by pipeline to the Gujarat coast, the development is delivering value for the GoI, the Rajasthan government and the people of India.
When the Rajasthan fields are on production at the current approved peak production plateau rate of 175,000 bopd, CIL, along with its joint venture partner ONGC, will account for more than 20 per cent of India's overall domestic oil output.
I look forward to significant future production as the additional fields are appraised, developed and tied in to this world-class infrastructure. During this process the contribution of Rajasthan oil to the Indian economy will steadily increase.
An ongoing goal for the coming years will be to optimise the exploitation of the basin's full resource potential beyond the existing 25 discoveries.
Greenland
Operations on the first two exploration wells in Baffin Bay, which spudded in July, are presently ongoing.
Cairn has always recognised that drilling offshore Greenland would present significant logistical challenges and has approached the design of its drilling programme with the aim of reducing all of the associated risks in accordance with the "ALARP" ("as low as reasonably practicable") principle. This is a practical approach to risk mitigation that is common across many industries.
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 well control incident, allows a second rig with its associated services to be immediately available to drill a relief well, if required. In addition, the drilling schedule has been designed in such a way that at critical junctures only one rig will enter a hydrocarbon-bearing section at any given time.
The Alpha-1 well is being drilled to test the Cretaceous Alpha prospect. In the Tertiary volcanic section the well was sidetracked for mechanical reasons and is currently setting casing in the volcanics. It is anticipated that the target objectives in the well will be reached in September.
The first hydrocarbons encountered in the Baffin Bay Basin (which is of North Sea scale) have been found by the T8-1 well which is currently operating. Although we are at the very start of exploration in the basin the discovery of gas in thin sands is indicative of an active hydrocarbon system. The well has not yet reached target depth.
The third exploration well in the current sequence will be located on the T4 prospect approximately 150 km north west of Alpha and 150 km north of T8. The fourth well in this season's programme is dependent on the drilling schedule and is yet to be decided.
Financial Review
At 30 June 2010, Cairn had net cash of $267 m (H1 2009: $631 m) and total facilities of $1,639 m (H1 2009: $899 m), of which $831 m (H1 2009: $850 m) has been drawn down.
Key Financial Performance Indicators
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H1 2010 |
H1 2009 |
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Production (boepd)* |
32,866 |
11,573 |
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Production sold (boepd)* |
28,877 |
11,512 |
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Average price per boe sold ($) |
63.48 |
**38.68 |
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Average production costs per boe ($)*** |
14.72 |
5.59 |
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Revenue ($m) |
333 |
**81 |
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Gross profit** |
147 |
****16 |
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Operating profit/(loss) ($m)** |
94 |
****(15) |
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Profit/(loss) before tax ($m)** |
88 |
****(22) |
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Profit/(loss) after tax ($m)** |
57 |
****(21) |
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Exceptional items ($m) |
(30) |
(55) |
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Cash flow from operating activities ($m) |
125 |
(25) |
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Net assets ($m) |
2,741 |
****2,406 |
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Net cash ($m) |
267 |
631 |
* on an entitlement interest basis
** excludes the impact of exceptional items
*** excluding stock movement and pre-award costs
**** restated for change in inventory valuation adjustment (see note 14 to the half-year accounts)
Production, Revenue and Gross Profit
All numbers are stated before the impact of exceptional items.
Group oil and gas revenues for the period were $333 m, compared with $81 m in the first half of 2009. Average entitlement production increased to 32,866 boepd (H1 2009: 11,573 boepd), of which oil production accounted for 88% (H1 2009: 58%). Production costs also rose to $72 m from $18 m for the same period in the prior year.
The significant increases in revenue and production reflect the contribution made by the Mangala field in Rajasthan which commenced production in August 2009.
The Group's blended average price realised was $63.48 compared to $38.68 in the first half of 2009. Rajasthan crude realised an average price of $67.48 for the period.
Production costs include the higher cost of trucking oil from Rajasthan to Kandla port until May, when the primary delivery method was switched to the pipeline from the MPT to Salaya.
The majority of the unsuccessful exploration costs of $41 m (H1 2009: $24 m) occurred following the completion of an exploration well offshore Tunisia in the Louza block. The expected target reservoir was not developed in the well and it was abandoned without testing.
Total depletion and decommissioning charges have increased from $23 m to $73 m and the charge per barrel of oil equivalent (boe) has increased from $10.90 per boe to $12.30 per boe. Both increases are as a result of Rajasthan production.
Gross profit for the period was $147 m (H1 2009 restated: $16 m).
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 $10 m (H1 2009: $10 m) and for depreciation and amortisation of $3 m (H1 2009: $4 m). Net of these charges, administrative expenses are $36 m (H1 2009: $23 m).
Net finance costs for the period were $6 m (H1 2009: $7 m). Finance costs include a realised foreign exchange loss of $3 m (H1 2009: $26 m). Interest charges increased from $7 m to $15 m due to a reduction in the interest capitalised on the Rajasthan development.
The Group's tax charge for the period is $31 m (H1 2009 restated: $1 m credit). The current tax charge of $33 m is higher than the H1 2009 charge of $11 m mainly as a result of an increase in the Indian MAT tax rate to 17.4%, and an increase in the accounting profits on which MAT is charged. In addition, the tax holiday for the CB/OS-2 contract area ended on 31 March 2009, and the profits derived from this area are now taxed at the Indian corporate income tax rate of 42.23%. The Indian deferred tax credit for the period is $2 m (H1 2009 restated: $12 m).
CIL is currently undertaking a court approved scheme of reorganisationof the group under which certain interests in Indian Production Sharing Contracts (PSCs) currently held by foreign companies will transfer to CIL, an Indian company. During the tax holiday period on the Rajasthan PSC RJ-ON-90/1, the effective tax rate will trend towards 19.93%, the MAT rate for domestic companies and at the end of the tax holiday period the rate should revert to the corporate rate (currently 33.22%).
The Group made a profit before exceptional items of $57 m (H1 2009 restated: loss $21m).
Exceptional Items
Ravva Arbitration
The calculation of the GoI's share of petroleum produced from the Ravva field in earlier years has been disputed for some years. In January 2009 the GoI instructed the buyers of the Ravva crude not to pass over the revenues to Cairn until such time as they believed that the liability had been settled in full. In 2009 Cairn provided for the full $96m liability, and this has been collected by the GoI by withholding revenues. Cairn continues to seek resolution of the dispute and recovery of these revenues through legal channels.
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, $30 m has been recognised in the Income Statement as a result of this modification.
The current year impact of these items is separately disclosed on the face of the Group Income Statement and further details can be found in Note 3 to the Half-Yearly Accounts. Their effect is to decrease the profit before and after tax by $30 million. In H1 2009 their effect is to decrease profit before tax by $96 m and profit after tax by $55 m.
Cash Flow, Capital Investment and Liquidity
Cash inflow from operating activities was $125 m (H1 2009 restated: $25 m outflow). Whilst operating cashflows in H1 2009 were impacted by the GoI withholding Ravva revenues, H1 2010 operating cashflows have increased significantly as a result of the contribution made by the Mangala field in Rajasthan.
Significant inflows during the period arose from the receipt of $64 m proceeds from the disposal of a 10% interest in Cairn's operated Greenland licences to PETRONAS and from the further draw down of $165 m of the CIL loan facility, taking the total debt drawn at the period end to $831 m (H1 2009: $850 m). The Group also earned interest on cash balances of $31 m (H1 2009: $26 m).
Cash outflow on capital expenditure is set out on the table below:
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H1 2010 |
H1 2009 |
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$ m |
$ m |
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Exploration/ appraisal expenditure |
181 |
31 |
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Development expenditure |
270 |
428 |
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Other capital expenditure |
5 |
2 |
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Total |
456 |
461 |
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Exploration/appraisal expenditure in H1 2010 includes costs of the Greenland drilling programme, the unsuccessful well costs in Tunisia and the Group's share of the non-operated drilling campaign in the KG basin offshore India. Development expenditure in H1 2010 primarily relates to the Rajasthan development.
Group net cash at 30 June 2010, after taking account of the $831 m debt drawn, was $267 m (H1 2009: $631 m).
Going Concern
The directors have considered the financial and operational risks relevant to support a statement of going concern. They have a reasonable expectation that the Group has adequate financial resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing the interim financial statements.
Outlook
The Group is fully funded to complete its high impact exploration programme in Greenland this summer and continue with the Rajasthan development project in India.
The Vedanta transaction represents a pivotal moment for the Group. Following completion of the transaction it will provide the Group with the funding to continue an active exploration and appraisal programme in Greenland and to return a substantial proportion of the proceeds to shareholders in the first half of 2011. The resulting reduction in equity base will re-gear the Group to future exploration success. By retaining a significant stake in CIL, we will also retain exposure to the future potential in this important business.
In May 2010 the Group saw the milestone of first oil through the pipeline from Mangala to the coast at Salaya. The currently approved plateau production of 125,000 bopd along with sales at the same level has been reached slightly ahead of schedule.
The agreement with Vedanta will lock in the value of both current and future production from Rajasthan and to position the group to take advantage of its asset base in Greenland and the retained stake in Cairn India.
Sir Bill Gammell
Chief Executive, 23 August 2010
OPERATIONAL REVIEW
Group Production
The Group's average entitlement production for H1 2010 was 32,866 boepd net to Cairn compared to 11,573 boepd in H1 2009.
The figures in the table below show Group production for H1 2010 on a gross, working interest and entitlement basis (including 100% of both CIL and Capricorn production).
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Production (boepd)
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Ravva |
CB/OS-2 |
Rajasthan |
Sangu |
Total |
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Gross field |
37,125 |
13,870 |
31,031 |
5,497 |
87,523 |
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Working interest |
8,353 |
5,548 |
21,722 |
2,062 |
37,685 |
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Entitlement interest |
4,343 |
3,917 |
23,168 |
1,438 |
32,866 |
Group entitlement production during H1 2010 was 12% gas: 88% oil.
Group Booked 2P Reserves
The table below shows reserves information at 30 June 2010 on an entitlement interest basis for the Group (including 100% of CIL's and Capricorn's reserves). For accounting and reserves purposes, the Group has used an oil price assumption of $65/barrel (bbl) flat in 2010 and $65/bbl (real) for 2010 onwards.
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Reserves 31.12.09 mmboe |
Produced in mmboe |
Additions in mmboe |
Revisions in mmboe |
Reserves 30.06.10 mmboe |
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India |
253.7 |
(5.8) |
0.0 |
(1.1) |
246.8 |
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Bangladesh |
0.2 |
(0.3) |
0.0 |
0.7 |
0.6 |
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Total |
253.9 |
(6.1) |
0.0 |
(0.4) |
247.4 |
The 2010 mid year entitlement reserves position has decreased by 6.5 m barrels of oil equivalent (mmboe) from 253.9 mmboe at 2009 year end to 247.4 mmboe, which is principally due to net production of 6.1 mmboe and a negative total net entitlement reserves revision of 1.1 mmboe in CIL resulting from a number of factors.
The affect on net entitlement reserves of different future oil prices is summarised below:
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Oil Price ($/boe) |
Net Entitlement Reserves (mmboe) |
Increase/(reduction) compared to $65/ boe base case (mmboe) |
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$50 |
267.9 |
20.5 |
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$90 |
229.8 |
(17.6) |
On a direct working interest basis, reserves as at 30 June 2010 have decreased by 7.4 mmboe to 335.3 mmboe (31 December 2009: 342.8 mmboe), comprising 334.4 mmboe in India and 0.9 mmboe in Bangladesh.
RAJASTHAN (Block RJ-ON-90/1) (Cairn India 70% (Operator); ONGC 30%)
Development - Upstream
The MPT is designed to process crude from the Rajasthan fields and has a capacity to handle 205,000 bopd of crude with scope for further expansion. Four processing trains are being built to ensure that Cairn India and its joint venture partner, ONGC, is able to produce and process the approved peak plateau production of 175,000 bopd in 2011.
While Train One, with a capacity to process 30,000 bopd, was commissioned in August 2009, Trains Two and Three with a capacity of 50,000 bopd each commenced production in May 2010 and June 2010 respectively. Current Mangala production is approximately 125,000 bopd.
The Raageshwari Gas Terminal, the Thumbli water field (saline aquifer) and the captive power plant at MPT have been commissioned and are operational.
Development drilling and the well completion activities are progressing with three drilling rigs and one completion rig operating in the Mangala development area.
The results from all the wells drilled to date confirm the good reservoir quality and the high deliverability of the Fatehgarh Formation reservoir.
The ongoing development drilling results indicate a production potential of 150,000 bopd from Mangala, subject to GoI approval.
Development - Midstream (Pipeline)
Of the total length of the MPT to Bhogat pipeline of ~ 670 km which passes through the states of Rajasthan and Gujarat, the MPT to Salaya section of ~ 590 km along with the final delivery infrastructure to each buyer is now operational.
Pipeline sales started to private refiners in June 2010 and to IOC in July 2010.
In-principle approvals for the Salaya to Bhogat section have been obtained and the necessary land purchase has been completed. The contracting process is well underway with some key contracts already placed. Bhogat lies on the Gujarat coast and provides further flexibility in respect of future offtake volumes.
Crude - Sales
The initial crude oil sales arrangements to Public Sector Undertakings have now been supplemented by sales to private refiners following the decision of the GoI to allow private refiners to qualify as additional offtakers of the Rajasthan crude.
The commercial terms and pricing negotiations have been concluded with all the buyers. In accordance with the PSC, this pricing is based on comparable low sulphur crude frequently traded in the region - Bonny Light - with appropriate adjustments for crude quality.
The implied price realisation represents an average 10-15% discount to Brent on the basis of prices prevailing for the twelve months to June 2010.
Sales arrangements are now in place for 143,000 bopd. With the pipeline and related facilities becoming operational, sales to both public and private refiners are at the currently approved plateau of 125,000 bopd. In addition, a request has been made to the GoI to allow access to more refining capacity by allowing sales to Special Economic Zones and to overseas refineries.
Resource base including Enhanced Oil Recovery (EOR)
The current assessment of the EOR resource base is more than 300 mmbbls of incremental recoverable oil from the Mangala, Bhagyam and Aishwariya (MBA) fields. An EOR pilot project has been initiated this year. The first phase of EOR pilot consisting of four injectors and one producer has been drilled, with production and water injection in the pilot to start this year, followed by polymer and Alkali Surfactant Polymer injection. If the trials are successful, the intention is to implement chemical flooding on a field scale in Mangala, followed by Bhagyam and Aishwariya. CIL is also in the final stages of planning to carry out pilot work to evaluate the low permeability Barmer Hill formation. The pilot programme is expected to demonstrate the appropriate cost effective technology for the optimised development of this resource base. A declaration of commerciality for the Barmer Hill has been submitted to the GoI.
When the Rajasthan fields are on production at the current approved peak production plateau rate of 175,000 bopd, Cairn India, along with its joint venture partner ONGC, will account for more than 20 per cent of India's overall oil output. Cairn has a belief and vision that, subject to further investment and approval from the GoI, the Barmer Basin can produce at least 240,000 bopd.
GREENLAND
Capricorn has built the leading frontier exploration position offshore west and south Greenland where the prospective geological basins around the coast are either undrilled or at a very early stage of evaluation. The potential for hydrocarbons offshore Greenland has been highlighted by onshore field work, the recent USGS Circum-Arctic report and the interest shown by the international oil industry in the 2010 Baffin Bay Bid Round.
The 2008 USGS report contains an assessment of risked potential in the eastern Greenland (31 billion boe), northern Greenland (3.3 billion boe) and western Greenland - east Canada (17 billion boe) basins.The south Greenland offshore area lies outside of the Arctic Circle and was not included in the survey.
Cairn commenced drilling operations on the Alpha (Alpha-1) and the T8 (T8-1) exploration prospects in the Sigguk Block, approximately 175 km offshore Disko Island, west Greenland in July using the Stena Don, a fifth generation semi submersible and the Stena Forth, a sixth generation drillship. The Alpha and T8 exploration prospects lie in water depths of between 300 and 500 metres and have planned target depths of 4,200 m and 3,250 m respectively.
The operations on both wells are currently ongoing but are reaching a significant phase. The Alpha-1 well has been sidetracked in the volcanics lying above the main target section for mechanical reasons and is currently anticipated to reach target depth in September. The T8-1 well has encountered biogenic gas with components of thermogenic gas in thin sands and is expected to reach target depth by the end of August.
Iceberg management has been handled successfully with, on average, only two or three icebergs a day coming within a 25 km radius of the drilling units. This is fewer icebergs than anticipated and well within the capability of our fleet of towing vessels to handle.
BANGLADESH
During the first half of 2010 the Sangu Field produced at an average rate of 33 million standard cubic feet of gas per day (mmscfpd) following a successful well intervention campaign in March/April. Planning is currently underway for a follow-up intervention campaign in late 2010 which is aimed at maintaining production at current levels. In addition we continue to pursue operational efficiencies that will enable economic production to be extended while maintaining the excellent safety and environmental performance at Sangu.
PRINCIPAL RISKS AND UNCERTAINTIES
Our approach to managing business risks and the principal risks, potential impacts and mitigation strategies as at the end of 2009 were set out in pages 32-33 of the 2009 Annual Report and Accounts. During the first half of 2010, the Company continued to regularly review business risks and mitigating measures across the organisation through applying its business risk management system.
The principal risks and potential impacts as at the end of June 2010 are unchanged from the end of 2009 and are summarised below:
Strategic Risks
Potential Impact: Strategy fails to create shareholder value or meet shareholder expectations
Risks:
Ø Strategy fails to create shareholder value or meet shareholder expectations
Ø Ineffective capital allocation
Ø Inadequate resource and succession planning across the Group
Financial Risks
Potential Impact: Asset financial performance and access to funding may not be matched, leading to an inability to meet the Group's financial obligations
Risks:
Ø Inability to fund exploration and developments work programmes
Ø Shortfall in operational cash flow, through lower than expected oil prices or production levels
Ø Potential impact of disputes resulting from different interpretation of fiscal regimes, legal agreements or regulations leading to additional costs, increased taxation and failure to achieve cost recovery
Operational Risks
Potential 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
Risks:
Ø Health, safety and environmental incidents
Ø Security incidents
Ø Maintaining regulatory approval for projects/operations
Ø Ineffective Business Management System
Ø Failure to secure materials, services or resources
Ø Inadequate ice management plan for drilling in Greenland
Ø Ineffective business continuity plans
Ø Inadequate systems to prevent bribery & corruption
External Risks
Potential Impact: Cairn is active in a number of overseas markets and strategy delivery may be affected by changes in external political, regulatory or market conditions
Risks:
Ø Changes in regulatory and fiscal environment affecting delivery of strategy or value
Ø Ineffective stakeholder relationships
Ø Inadequate response to natural disasters affecting Group assets or staff
Changes during the first half 2010 in relation to the following risk factors have, however, been identified and are reported below.
Risk - Shortfall in operational cash flow, through lower than expected oil prices or production levels
Entering into sales agreements with buyers of Mangala production at agreed oil price levels and the confirmation of the reservoir deliverability and performance of facilities and pipeline infrastructure at up to 125,000 bopd, has reduced the likelihood of shortfalls in operational cash flow.
Risk - Health, safety and environmental incidents
The tragic accident on the Deepwater Horizon in the Gulf of Mexico in April 2010 and the associated oil spill brought into sharp focus the potential risks associated with offshore drilling. Planning for the Greenland drilling programme was at an advanced stage at that time, however we have carried out additional reviews of the drilling programme and believe that there is a thorough and robust strategy in place which minimises the potential for health, safety or environmental incidents. More details on the steps taken are included in the CR section of the half yearly report 2010.
The risk of transportation related accidents associated with Cairn India's Mangala operations in Rajasthan has been reduced in the first half with the cessation of crude trucking operations following the commissioning of the pipeline to Salaya.
Risk - Inadequate ice management plan for drilling in Greenland
In Greenland, the ice management plan has been deployed successfully and the likelihood of icebergs detrimentally affecting operations has reduced.
Risk - Maintaining regulatory approval for projects/operations
Approval has now been received from the Greenland Government in respect of all four wells to be drilled during the current 2010 drilling programme and, accordingly, the risk that approval would not be received has been removed.
Risk - Strategy fails to create shareholder value or meet shareholder expectations/ Ineffective capital allocation/ Inability to fund exploration and development work programmes
On 16 August 2010, the Company announced that it had entered into a conditional agreement with Vedanta Resources plc for the sale of a maximum of 51% of the share capital of Cairn India Limited to THL Aluminium Limited, a wholly-owned subsidiary of Vedanta Resources plc, with completion of that sale targeted for the end of this calendar year. If successfully concluded, this transaction would mitigate these risks through realising shareholder value and providingfunding for exploration activities in the future.
While a detailed analysis of the risks associated with this transaction will be included in the Shareholder Circular, they will include the following principal risk:
Risk- The part sale of the Company's shareholding in Cairn India Limited may not complete
If the conditions in respect of that transaction are not satisfied or waived or if the sale agreement is otherwise terminated, then the sale will not be concluded. In those circumstances, the company will not receive the cash price payable and, indeed, may become liable to pay a break fee to THL Aluminium Limited of approximately £ 64 m.
Note that the risk factors are not intended to be presented in any order of priority. In addition, the risks set out above may not be exhaustive and additional risks and uncertainties, not presently known to the Company, or which the Company currently deems immaterial, may arise or become material in the future. The risk factors should be considered in conjunction with the cautionary note to shareholders in relation to forward-looking statements set out on page 2.
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 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.
A List of the current directors is maintained on the Cairn Energy PLC website: www.cairnenergy.com
By order of the Board.
|
|
|
|
Sir Bill Gammell |
Jann Brown |
|
Chief Executive |
Finance Director |
23 August 2010
GROUP INCOME STATEMENT
For the six months ended 30 June 2010
|
|
|
Continuing operations |
Continuing operations exceptional items |
Six months ended 30 June 2010 |
Six months ended 30 June 2009 (Restated) |
Year ended 31 December 2009 (Restated) |
|
|
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(audited) |
|
|
Notes |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
Revenue |
3 |
332.6 |
- |
332.6 |
17.1 |
169.9 |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
Production costs |
|
(72.1) |
- |
(72.1) |
(18.3) |
(74.9) |
|
Unsuccessful exploration costs |
|
(40.8) |
- |
(40.8) |
(24.0) |
(57.4) |
|
Depletion and decommissioning charge |
|
(73.2) |
- |
(73.2) |
(22.9) |
(60.1) |
|
|
|
|
|
|
|
|
|
Gross profit/(loss) |
|
146.5 |
- |
146.5 |
(48.1) |
(22.5) |
|
|
|
|
|
|
|
|
|
Other operating income |
|
7.0 |
- |
7.0 |
6.4 |
12.8 |
|
Administrative expenses |
3 |
(49.0) |
(29.5) |
(78.5) |
(37.2) |
(119.1) |
|
Impairment of intangible exploration/appraisal assets |
7 |
(10.5) |
- |
(10.5) |
(0.5) |
(137.5) |
|
Impairment of property, plant & equipment - development/producing assets |
|
- |
- |
- |
- |
(1.3) |
|
Gain on sale of intangible exploration/appraisal assets |
3 |
- |
- |
- |
- |
15.0 |
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
|
94.0 |
(29.5) |
64.5 |
(79.4) |
(252.6) |
|
|
|
|
|
|
|
|
|
Exceptional gain on disposal of non-controlling interests |
3 |
- |
- |
- |
- |
199.5 |
|
Finance income |
|
11.8 |
- |
11.8 |
27.1 |
43.2 |
|
Finance costs |
3 |
(17.9) |
- |
(17.9) |
(65.3) |
(63.3) |
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation |
|
87.9 |
(29.5) |
58.4 |
(117.6) |
(73.2) |
|
|
|
|
|
|
|
|
|
Taxation (charge)/credit on profit/(loss) |
3,6 |
(30.7) |
- |
(30.7) |
41.5 |
126.6 |
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period |
|
57.2 |
(29.5) |
27.7 |
(76.1) |
53.4 |
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
(12.6) |
(61.6) |
19.0 |
|
Non-controlling interests |
|
|
|
40.3 |
(14.5) |
34.4 |
|
|
|
|
|
|
|
|
|
Earnings per ordinary share - basic (cents) |
|
|
|
(0.93) |
(4.61) |
1.09 |
|
|
|
|
|
|
|
|
|
Earnings per ordinary share - diluted (cents) |
|
|
|
(0.93) |
(4.61) |
1.08 |
|
|
|
|
|
|
|
|
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2010
|
|
Six months
ended 30 June
2010
(unaudited)
$m
|
Six months
ended 30 June
2009
(Restated)
(unaudited)
$m
|
Year ended
31 December
2009
(Restated)
(audited)
$m
|
|
|
|
|
|
|
Profit/(loss) for the period
|
27.7
|
(76.1)
|
53.4
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
Deficit on valuation of financial assets
|
-
|
(1.9)
|
(1.9)
|
|
Currency translation differences
|
(7.4)
|
40.4
|
48.1
|
|
Other comprehensive income for the period
|
(7.4)
|
38.5
|
46.2
|
|
|
|
|
|
|
Total comprehensive income for the period
|
20.3
|
(37.6)
|
99.6
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity holders of the parent
|
(19.6)
|
(25.7)
|
57.7
|
|
Non-controlling interests
|
39.9
|
(11.9)
|
41.9
|
|
|
20.3
|
(37.6)
|
99.6
|
GROUP BALANCE SHEET
As at 30 June 2010
|
|
|
|
As at 30 |
As at 31 December |
|
|
|
As at 30 |
June 2009 |
2009 |
|
|
|
June 2010 |
(Restated) |
(Restated) |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
|
Notes |
$m |
$m |
$m |
|
Non-current assets |
|
|
|
|
|
Intangible exploration/appraisal assets |
7 |
488.0 |
549.2 |
376.2 |
|
Property, plant & equipment - development/producing assets |
8 |
2,081.8 |
1,513.0 |
1,828.6 |
|
Property, plant and equipment - other |
|
6.7 |
7.1 |
6.9 |
|
Intangible assets - other |
|
74.0 |
11.2 |
72.9 |
|
|
|
|
|
|
|
|
|
2,650.5 |
2,080.5 |
2,284.6 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Inventory |
|
32.4 |
1.6 |
10.7 |
|
Trade and other receivables |
|
552.7 |
277.5 |
346.6 |
|
Bank deposits |
9 |
100.1 |
418.4 |
13.2 |
|
Cash and cash equivalents |
9 |
997.3 |
1,062.2 |
1,176.5 |
|
Derivative financial instruments |
|
0.5 |
0.5 |
- |
|
Income tax assets |
|
20.0 |
5.1 |
8.1 |
|
|
|
|
|
|
|
|
|
1,703.0 |
1,765.3 |
1,555.1 |
|
|
|
|
|
|
|
Assets held-for-sale |
|
2.9 |
- |
10.1 |
|
|
|
|
|
|
|
Total assets |
|
4,356.4 |
3,845.8 |
3,849.8 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
617.3 |
317.1 |
348.5 |
|
Obligations under finance leases |
|
1.7 |
1.6 |
1.5 |
|
Provisions |
|
31.4 |
30.3 |
38.9 |
|
Income tax liabilities |
|
4.7 |
- |
6.1 |
|
|
|
|
|
|
|
|
|
655.1 |
349.0 |
395.0 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Loans and borrowings |
9 |
830.7 |
850.0 |
666.1 |
|
Obligations under finance leases |
|
1.1 |
2.6 |
2.0 |
|
Provisions |
|
51.1 |
30.2 |
30.2 |
|
Deferred tax liabilities |
|
77.1 |
207.6 |
79.5 |
|
|
|
|
|
|
|
|
|
960.0 |
1,090.4 |
777.8 |
|
|
|
|
|
|
|
Total liabilities |
|
1,615.1 |
1,439.4 |
1,172.8 |
|
|
|
|
|
|
|
Net assets |
|
2,741.3 |
2,406.4 |
2,677.0 |
|
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
|
Called-up share capital |
|
16.7 |
16.4 |
16.6 |
|
Share premium |
|
481.8 |
376.4 |
473.5 |
|
Shares held by ESOP and SIP Trust |
|
(27.0) |
(27.2) |
(27.2) |
|
Foreign currency translation |
|
(45.8) |
(41.7) |
(38.8) |
|
Capital reserves - non-distributable |
|
40.2 |
40.2 |
40.2 |
|
Retained earnings |
|
1,507.8 |
1,374.7 |
1,488.8 |
|
|
|
|
|
|
|
|
|
1,973.7 |
1,738.8 |
1,953.1 |
|
|
|
|
|
|
|
Non-controlling interests |
|
767.6 |
667.6 |
723.9 |
|
|
|
|
|
|
|
Total equity |
|
2,741.3 |
2,406.4 |
2,677.0 |
GROUP STATEMENT OF CASHFLOWS
For the six months ended 30 June 2010
|
|
Notes |
Six months ended 30 June 2010 (unaudited) $m |
Six months ended 30 June 2009 (Restated) (unaudited) $m |
Year ended 31 December 2009 (Restated) (audited) $m |
|
Cash flows from operating activities |
|
|
|
|
|
Profit/(loss) before taxation |
|
58.4 |
(117.6) |
(73.2) |
|
Exceptional revenue provision |
|
- |
64.0 |
64.0 |
|
Unsuccessful exploration costs |
|
40.8 |
24.0 |
57.4 |
|
Depletion, depreciation decommissioning and amortisation |
|
76.7 |
26.6 |
68.5 |
|
Share based payments charge |
|
44.1 |
8.1 |
43.4 |
|
Impairment and exceptional impairment |
|
10.5 |
0.5 |
138.8 |
|
Gain on sale of intangible exploration/appraisal assets |
|
- |
- |
(15.0) |
|
Exceptional gain on disposal of non-controlling interests |
|
- |
- |
(199.5) |
|
Finance income |
|
(11.8) |
(27.1) |
(43.2) |
|
Finance costs |
|
17.9 |
33.7 |
31.7 |
|
Exceptional finance costs |
|
- |
31.6 |
31.6 |
|
Net interest paid |
|
(15.2) |
(9.0) |
(14.7) |
|
Income tax paid |
|
(46.7) |
(11.5) |
(50.8) |
|
Foreign exchange differences |
|
(1.6) |
(6.4) |
4.1 |
|
Movement on inventory of oil and condensate |
|
(21.6) |
(0.5) |
(9.6) |
|
Trade and other receivables movement |
|
(67.3) |
(46.5) |
33.3 |
|
Trade and other payables movement |
|
47.5 |
34.5 |
5.0 |
|
Movement in other provisions |
|
(6.6) |
(29.2) |
39.1 |
|
Net cash from/(used in) operating activities |
|
125.1 |
(24.8) |
110.9 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Expenditure on intangible exploration/appraisal assets |
|
(180.7) |
(31.4) |
(128.1) |
|
Expenditure on property, plant & equipment - development/producing assets |
|
(270.5) |
(428.0) |
(785.0) |
|
Purchase of property, plant and equipment - other |
|
(1.6) |
(0.3) |
(1.8) |
|
Purchase of intangible assets - other |
|
(3.6) |
(1.7) |
(4.0) |
|
Buy-back of shares in subsidiary out of capital |
|
- |
- |
(3.7) |
|
Proceeds on disposal of intangible exploration/appraisal assets |
|
63.5 |
- |
5.1 |
|
Proceeds on disposal of property, plant and equipment - other |
|
- |
0.1 |
- |
|
Movement in funds on bank deposit |
|
(87.2) |
(132.8) |
288.0 |
|
Interest received |
|
31.3 |
26.2 |
38.9 |
|
Net cash used in investing activities |
|
(448.8) |
(567.9) |
(590.6) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from sale of non-controlling interests |
|
1.2 |
- |
241.4 |
|
Arrangement and facility fees |
|
(19.7) |
- |
(34.9) |
|
Proceeds from shares issued for cash |
|
- |
157.8 |
157.8 |
|
Proceeds from exercise of share options |
|
8.4 |
0.2 |
4.7 |
|
Purchase of own shares |
|
(9.7) |
- |
- |
|
Payment of finance lease liabilities |
|
(0.7) |
(1.5) |
(2.4) |
|
Proceeds of borrowings |
|
164.6 |
350.0 |
166.1 |
|
Net cash flows from financing activities |
|
144.1 |
506.5 |
532.7 |
|
Net (decrease)/ increase in cash and cash equivalents |
|
(179.6) |
(86.2) |
53.0 |
|
Opening cash and cash equivalents at beginning of period |
|
1,176.5 |
1,113.0 |
1,113.0 |
|
Exchange gains on cash and cash equivalents |
|
0.4 |
35.4 |
10.5 |
|
Closing cash and cash equivalents |
9 |
997.3 |
1,062.2 |
1,176.5 |
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2010
|
|
Equity share capital |
Shares held by ESOP and SIP Trust |
Foreign currency translation |
Capital reserves |
Retained earnings (Restated) |
Non- controlling interests (Restated) |
Total Equity (Restated) |
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
At 1 January 2009 |
234.8 |
(28.8) |
(78.8) |
40.2 |
1,433.7 |
677.6 |
2,278.7 |
|
Prior year adjustment |
- |
- |
- |
- |
(0.5) |
(0.3) |
(0.8) |
|
At 1 January 2009 (Restated) |
234.8 |
(28.8) |
(78.8) |
40.2 |
1,433.2 |
677.3 |
2,277.9 |
|
Total comprehensive income for the period |
- |
- |
40.0 |
- |
17.7 |
41.9 |
99.6 |
|
Exercise of employee share options |
4.7 |
- |
- |
- |
- |
- |
4.7 |
|
Shares issued for cash in year |
157.8 |
- |
- |
- |
- |
- |
157.8 |
|
Disposal of non-controlling interests |
- |
- |
- |
- |
- |
41.8 |
41.8 |
|
Buy-back of non-controlling interest |
- |
- |
- |
- |
- |
(41.0) |
(41.0) |
|
Share based payments |
- |
- |
- |
- |
39.5 |
3.9 |
43.4 |
|
Cost of shares vesting |
- |
1.6 |
- |
- |
(1.6) |
- |
- |
|
Shares issued on buy-back of non-controlling interest |
92.8 |
- |
- |
- |
- |
- |
92.8 |
|
At 1 January 2010 |
490.1 |
(27.2) |
(38.8) |
40.2 |
1,488.8 |
723.9 |
2,677.0 |
|
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 |
|
Disposal of non-controlling interests |
- |
- |
- |
- |
0.3 |
0.9 |
1.2 |
|
Cost of shares purchased |
- |
(9.7) |
- |
- |
- |
- |
(9.7) |
|
Cost of shares vesting |
- |
9.9 |
- |
- |
(9.9) |
- |
- |
|
At 30 June 2010 |
498.5 |
(27.0) |
(45.8) |
40.2 |
1,507.8 |
767.6 |
2,741.3 |
The disposal on non-controlling interests in 2010 arises from the exercise of share options awarded to employees of Cairn India Limited.
|
Six months ended 30 June 2009 |
Equity share capital |
Shares held by ESOP and SIP Trust |
Foreign currency translation |
Capital reserves |
Retained earnings (Restated) |
Non-controlling interests (Restated) |
Total Equity (Restated) |
|
|
$m |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
At 1 January 2009 |
234.8 |
(28.8) |
(78.8) |
40.2 |
1,433.7 |
677.6 |
2,278.7 |
|
Prior year adjustment |
- |
- |
- |
- |
(0.5) |
(0.3) |
(0.8) |
|
At 1 January 2009 (Restated) |
234.8 |
(28.8) |
(78.8) |
40.2 |
1,433.2 |
677.3 |
2,277.9 |
|
Total comprehensive income for the period |
- |
- |
37.1 |
- |
(62.8) |
(11.9) |
(37.6) |
|
Exercise of employee share options |
0.2 |
- |
- |
- |
- |
- |
0.2 |
|
Shares issued in period for cash |
157.8 |
- |
- |
- |
- |
- |
157.8 |
|
Share based payments |
- |
- |
- |
- |
5.9 |
2.2 |
8.1 |
|
Cost of shares vesting |
- |
1.6 |
- |
- |
(1.6) |
- |
- |
|
At 30 June 2009 |
392.8 |
(27.2) |
(41.7) |
40.2 |
1,374.7 |
667.6 |
2,406.4 |
NOTES TO THE ACCOUNTS
For the six months ended 30 June 2010
1. Accounting Policies
Basis of Preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2010 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 2009, 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 IFRS as adopted by the European Union.
This Interim Report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ended 31 December 2010, and which uses the same accounting policies and methods of computation applied for the year ended 31 December 2009 except for the adoption of relevant new standards and interpretations and a change in the accounting policy for the valuation of inventory.
During the period, the Group adopted IAS 27 "Consolidated and Separate Financial Statements (revised)". As a consequence gains on the disposal of non-controlling interests are now recognised direct in equity rather than in profit or loss for the period. Comparatives have not been restated. The Group also adopted IFRS 3 "Business Combinations (revised)" though there was no impact on the financial position or performance of the Group on adoption of this revised IFRS.
Cairn has changed accounting policy for the valuation of inventory. The Group's policy is now to do so at the lower of cost or net realisable value. Previously inventories of oil and condensate were valued at estimated selling price. See note 14 for further details and the impact of this change on comparative statements.
2. Profit/(loss) for the period
Analysis of loss for the period ended 30 June 2009
|
|
Continuing operations (Restated) |
Continuing operations exceptional items |
Six months ended 30 June 2009 (Restated) |
|
|
(unaudited) |
(unaudited) |
(unaudited) |
|
|
$m |
$m |
$m |
|
|
|
|
|
|
Revenue |
81.1 |
(64.0) |
17.1 |
|
|
|
|
|
|
Cost of sales |
|
|
|
|
Production costs |
(18.3) |
- |
(18.3) |
|
Unsuccessful exploration costs |
(24.0) |
- |
(24.0) |
|
Depletion and decommissioning charge |
(22.9) |
- |
(22.9) |
|
|
|
|
|
|
Gross profit/(loss) |
15.9 |
(64.0) |
(48.1) |
|
|
|
|
|
|
Other operating income |
6.4 |
- |
6.4 |
|
Administrative expenses |
(37.2) |
- |
(37.2) |
|
Impairment of intangible exploration/appraisal assets |
(0.5) |
- |
(0.5) |
|
|
|
|
|
|
Operating loss |
(15.4) |
(64.0) |
(79.4) |
|
|
|
|
|
|
Finance income |
27.1 |
- |
27.1 |
|
Finance costs |
(33.7) |
(31.6) |
(65.3) |
|
|
|
|
|
|
Loss before taxation |
(22.0) |
(95.6) |
(117.6) |
|
Taxation credit on loss |
1.1 |
40.4 |
41.5 |
|
|
|
|
|
|
Loss for the period |
(20.9) |
(55.2) |
(76.1) |
2. Profit/(loss) for the period (continued)
Analysis of profit for the year ended 31 December 2009
|
|
Continuing operations (Restated) |
Continuing operations exceptional items |
Year ended 31 December 2009 (Restated) |
|
|
(audited) |
(audited) |
(audited) |
|
|
$m |
$m |
$m |
|
|
|
|
|
|
Revenue |
233.9 |
(64.0) |
169.9 |
|
|
|
|
|
|
Cost of sales |
|
|
|
|
Production costs |
(74.9) |
- |
(74.9) |
|
Unsuccessful exploration costs |
(57.4) |
- |
(57.4) |
|
Depletion and decommissioning charge |
(60.1) |
- |
(60.1) |
|
|
|
|
|
|
Gross profit/(loss) |
41.5 |
(64.0) |
(22.5) |
|
|
|
|
|
|
Other operating income |
12.8 |
- |
12.8 |
|
Administrative expenses |
(89.2) |
(29.9) |
(119.1) |
|
Impairment of intangible exploration/appraisal assets |
(1.9) |
(135.6) |
(137.5) |
|
Impairment of property, plant & equipment - development/producing assets |
(1.3) |
- |
(1.3) |
|
Gain on sale of intangible exploration/appraisal assets |
- |
15.0 |
15.0 |
|
|
|
|
|
|
Operating loss |
(38.1) |
(214.5) |
(252.6) |
|
|
|
|
|
|
Exceptional gain on disposal of non-controlling interests |
- |
199.5 |
199.5 |
|
Finance income |
43.2 |
- |
43.2 |
|
Finance costs |
(31.7) |
(31.6) |
(63.3) |
|
|
|
|
|
|
Loss before taxation |
(26.6) |
(46.6) |
(73.2) |
|
|
|
|
|
|
Taxation credit on loss |
70.1 |
56.5 |
126.6 |
|
|
|
|
|
|
Profit for the period |
43.5 |
9.9 |
53.4 |
3. Exceptional Items
2010 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 $29.5m is therefore recognised in the Income Statement for the six months ended 30 June 2010 as a result of this modification. A charge of $29.9m was recognised in the year ended 31 December 2009 which also related to this modification. Given the size and expected infrequent nature of this or similar modifications, these charges have been disclosed as exceptional items.
2009 Exceptional Items
Impairment of intangible exploration/appraisal assets
On 30 November 2009, Cairn announced the acquisition of the 9.99% non-controlling interest held by Dyas in Capricorn Oil Limited. Total consideration for the purchase of the Capricorn shares was $102.5m payable in $91.3m PLC shares, $3.7m cash and the transfer of 15% of Capricorn's working interests in the Tunisian and Albanian licences. Prior to the transfer, an impairment test was performed based on fair value less cost to sell resulting in an impairment charge of $135.6m with an associated tax credit of $33.6m.
Ravva arbitration
The calculation of the GoI's share of petroleum produced from the Ravva field has been the subject of differing interpretations for some years and an arbitration to settle the matter was launched in 2003. The biggest single issue, the treatment of an item known as the ONGC carry, was found in Cairn's favour by the arbitration panel in 2004. This was subsequently appealed by the GoI, following which it had been disclosed as a contingent liability in the notes to the financial statements. Cairn India's share of this liability was $64.0m principal, plus interest of $31.6m.
Following the procedure laid out in the Ravva Production Sharing Contract (PSC), the GoI's appeal was made to the Malaysian courts and in January 2009 they decided to set aside the arbitration award made in favour of Cairn India. Although not the final step in the legal process, the GoI then instructed the buyers of the Ravva crude not to pass over the revenues to Cairn until such time as they believed that the liability had been settled in full.
A further judgement was delivered by the Malaysian Court of Appeal in September 2009 which reversed the Malaysian Court's January 2009 ruling and had the effect of re-instating the original award in favour of Cairn India. The GoI have won the right to appeal this judgment to the Federal Court of Malaysia and a date for the appeal is awaited. Despite the September judgement re-instating the original arbitration award, the GoI continued to prevent the buyers passing revenues to Cairn throughout the remainder of the 2009 and into January 2010.
Consequently, on a conservative basis, Cairn has provided for the full $95.6m liability as an exceptional item in 2009. The disputed share of profit petroleum of $64.0m has been charged against revenue and the potential interest charge of $31.6m has been recognised as a finance cost. An associated deferred tax credit of $40.4m has also been recognised, making a net impact on profit after tax of $55.2m.
Disposal of non-controlling interest in Cairn India Limited and Farm-out of exploration/appraisal assets
On 14 October 2009, Cairn entered into an agreement with PETRONAS to dispose of a further 2.29% of the Group's holding in Cairn India Limited and farm-out a 10% interest in each of the six Cairn operated Greenland exploration licences. The total consideration receivable from PETRONAS was $310.0m of which $241.4m relates to the Cairn India Limited shares with the remaining $68.6m allocated across the Greenland assets.
The disposal of the Cairn India Limited shares resulted in a gain of $199.5m. Capital gains tax on the sale of $17.5m was charged to the Income Statement. Under the Group's accounting policy proceeds on the disposal of intangible exploration/appraisal assets are initially credited against previously capitalised costs in the Balance Sheet. Surplus proceeds remaining were credited to the Income Statement recognising a gain of $15.0m.
PETRONAS has an option to increase its interest to 20% in any development in these blocks, in return for payment of further consideration to reflect a market valuation of the additional 10% interest at that time. In addition, PETRONAS may also farm-in to Cairn's interests in non-operated Greenland exploration licences, subject to approval, within a year of the transaction. Proceeds will reflect the market value at that time. This option has not been exercised in the current period.
4. Segmental Analysis - Operating segments
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 three 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 Bangladesh and Nepal and a share in certain North Indian assets operated by Cairn India Limited.
Cairn Energy PLC, 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.
No operating segments have been aggregated to form the above reportable segments.
Management monitors the results of its business units separately for the purposes of making decisions about resource allocation and performance assessment.
The segment results for the six months ended 30 June 2010 are as follows:
|
|
|
Cairn India Group |
Capricorn Group |
Cairn Energy PLC |
Six months ended 30 June 2010 |
|
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
Revenue from external customers |
|
328.5 |
4.1 |
- |
332.6 |
|
|
|
|
|
|
|
|
Segment profit/(loss) after taxation |
|
106.7 |
(73.9) |
(5.1) |
27.7 |
The segment results for the six months ended 30 June 2009 were as follows:
|
|
|
Cairn India Group (restated) |
Capricorn Group |
Cairn Energy PLC |
Six months ended 30 June 2009 (restated) |
|
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
Revenue from external customers |
|
8.4 |
8.7 |
- |
17.1 |
|
|
|
|
|
|
|
|
Segment (loss)/profit after taxation |
|
(42.8) |
0.4 |
(33.7) |
(76.1) |
The segment results for the year ended 31 December 2009 were as follows:
|
|
|
Cairn India Group (restated) |
Capricorn Group |
Cairn Energy PLC |
Year ended 31 December 2009 (restated) |
|
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
|
156.7 |
13.2 |
- |
169.9 |
|
|
|
|
|
|
|
|
Segment profit/(loss) after taxation |
|
68.9 |
(141.6) |
126.1 |
53.4 |
4. Segmental Analysis - Operating segments (continued)
The segment assets are as follows:
|
|
Cairn India Group |
Capricorn Group |
Cairn Energy PLC |
Group |
|
|
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
As at 30 June 2010 |
3,538.6 |
696.4 |
121.4 |
4,356.4 |
|
As at 30 June 2009 (Restated) |
3,157.3 |
492.0 |
196.5 |
3,845.8 |
|
As at 31 December 2009 (Restated) |
3,059.5 |
586.2 |
204.1 |
3,849.8 |
Segment assets include intangible exploration/appraisal assets; property, plant & equipment - development/producing assets; property, plant & equipment - other; intangible assets - other; trade receivables and operating cash. They exclude deferred tax assets and inter-company balances.
5. Share Based Payments
The 2010 Share Incentive Plan (the 'Plan') was approved at a board meeting held on 9 December 2009. The Plan was subsequently approved by HM Revenue & Customs ('HMRC') on 26 February 2010. The Plan is an arrangement which allows Cairn to award free shares to UK employees (including directors) and to award shares matching partnership shares purchased by employees, subject to HMRC limits. The shares are normally held in trust for a period of 5 years after which they can be released to employees on a tax free basis.
2010 Share Incentive Plan
The following awards were made under the 2010 Share Incentive Plan during the period:
|
Award Date |
Number |
WAGP (£) |
Fair Value (£) |
|
March 2010 |
57,778 |
3.79 |
188,000 |
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 % |
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 (£) |
|
March 2010 |
2,062,084 |
4.27 |
3,248,000 |
|
June 2010 |
74,460 |
4.27 |
117,282 |
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 % |
37% |
|
Volatility % |
52% |
|
Lapse due to withdrawals |
nil |
5. Share Based Payments (continued)
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 (£) |
|
March 2010 |
162,998 |
4.27 |
324,000 |
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 % |
47% |
|
Volatility % |
52% |
|
Risk free rate |
4.4% p.a. |
|
Lapse due to withdrawals |
5% p.a. |
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 (£) |
|
March 2010 |
321,613 |
4.27 |
676,899 |
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.
6. Income Tax
Analysis of tax charge
|
|
Six months ended 30 June 2010 $m |
Six months ended 30 June 2009 (restated) $m |
Year ended 31 December 2009 (restated) $m |
|
Current tax: |
|
|
|
|
|
|
|
|
|
Overseas Tax
|
|
|
|
|
Indian Regular Tax on profits for the period at 42.23% (30 June 2009 and 31 December 2009: 42.23%) |
12.0 |
1.8 |
6.3 |
|
Indian Regular Tax on profits for the period at 33.60% (30 June 2009 and 31 December 2009: 33.99%) |
(1.2) |
6.4 |
6.4 |
|
Indian Minimum Alternate Tax charge at 17.43% (30 June 2009: 10.56% and 31 December 2009: 14.53%) |
22.3 |
2.3 |
17.5 |
|
Adjustments in respect of prior periods |
- |
- |
5.8 |
|
Withholding taxes deducted at source |
- |
0.1 |
0.1 |
|
|
|
|
|
|
|
33.1 |
10.6 |
36.1 |
|
|
|
|
|
|
Exceptional current tax |
|
|
|
|
Indian tax on capital gains at 21.12% |
- |
- |
17.5 |
|
|
|
|
|
|
Total current tax |
33.1 |
10.6 |
53.6 |
|
Deferred tax:
UK |
|
|
|
|
Temporary differences in respect of non-current assets |
(0.4) |
- |
- |
|
India |
|
|
|
|
Temporary differences in respect of non-current assets |
24.7 |
(11.2) |
(101.6) |
|
Other temporary differences |
(26.7) |
(0.5) |
(4.6) |
|
|
(2.4) |
(11.7) |
(106.2) |
|
|
|
|
|
|
Exceptional deferred tax: (see Note 3) |
|
|
|
|
Temporary differences in respect of non-current assets |
- |
- |
(33.6) |
|
Other temporary differences |
- |
(40.4) |
(40.4) |
|
|
- |
(40.4) |
(74.0) |
|
Total deferred tax |
(2.4) |
(52.1) |
(180.2) |
|
Tax charge/(credit) on profit/(loss) |
30.7 |
(41.5) |
(126.6) |
7. Intangible exploration/appraisal assets
|
|
Cairn India Group |
Capricorn Group |
Total |
|
|
$m |
$m |
$m |
Cost |
|
|
|
|
At 1 January 2009 |
370.6 |
265.8 |
636.4 |
|
Additions |
18.4 |
11.5 |
29.9 |
|
Transfers between categories |
(19.2) |
- |
(19.2) |
|
Unsuccessful exploration costs |
(21.3) |
(2.7) |
(24.0) |
|
At 30 June 2009 |
348.5 |
274.6 |
623.1 |
|
Additions |
21.9 |
39.7 |
61.6 |
|
Transfers between categories |
0.2 |
- |
0.2 |
|
Transfers to assets held-for-sale |
- |
(10.1) |
(10.1) |
|
Disposals |
- |
(53.2) |
(53.2) |
|
Unsuccessful exploration costs |
(28.9) |
(4.5) |
(33.4) |
|
Foreign exchange |
(1.1) |
- |
(1.1) |
|
At 1 January 2010 |
340.6 |
246.5 |
587.1 |
|
Additions |
41.6 |
121.4 |
163.0 |
|
Unsuccessful exploration costs |
(14.7) |
(95.3) |
(110.0) |
|
Foreign exchange |
0.2 |
(0.1) |
0.1 |
|
At 30 June 2010 |
367.7 |
272.5 |
640.2 |
Impairment |
|
|
|
|
At 1 January 2009 |
- |
73.4 |
73.4 |
|
Impairment |
- |
0.5 |
0.5 |
|
At 30 June 2009 |
- |
73.9 |
73.9 |
|
Impairment |
- |
1.4 |
1.4 |
|
Exceptional impairment |
- |
135.6 |
135.6 |
|
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 |
|
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 |
|
Net book value at 30 June 2009 |
348.5 |
200.7 |
549.2 |
|
Net book value at 1 January 2009 |
370.6 |
192.4 |
563.0 |
In April 2010, Cairn completed an exploration well offshore Tunisia in the Louza block. Although minor evidence of light oil was observed, the expected target reservoir was not developed in the well. The well has therefore been plugged and abandoned without testing. As a result, all related costs are charged to the Income Statement as unsuccessful exploration costs. As $69.2m of these costs were previously impaired, the impairments have been released on relinquishment of the block.
At the period end, the Group reviews intangible/exploration assets for indicators of impairment. Where an indicator is identified, the asset is tested for impairment. As at 30 June 2010, indicators were found on two assets held by the Capricorn Group where uncertain future drilling plans or other facts or circumstances existing indicated that the carrying value of the assets may not be recovered. As the cash generating unit of the Capricorn Group is currently carried at net present value, there is no additional headroom to support the carrying value of exploration assets where such indicators exist. As a result an impairment of $10.5m was identified and charged to the Income Statement. There have been no changes to the assumptions used in impairment calculations from those presented at the year end.
8. Property, plant and equipment - Development/producing assets
|
|
Cairn India Group |
Capricorn Group |
Total |
|
|
$m |
$m |
$m |
|
Cost |
|
|
|
|
At 1 January 2009 |
1,399.4 |
84.6 |
1,484.0 |
|
Additions |
397.2 |
(0.1) |
397.1 |
|
Transfers between categories |
19.2 |
- |
19.2 |
|
At 30 June 2009 |
1,815.8 |
84.5 |
1,900.3 |
|
Additions |
354.4 |
(0.1) |
354.3 |
|
Transfers between categories |
(0.2) |
- |
(0.2) |
|
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 |
|
|
|
|
|
|
Depletion and decommissioning |
|
|
|
|
At 1 January 2009 |
286.7 |
77.7 |
364.4 |
|
Charge for the period |
21.2 |
1.7 |
22.9 |
|
At 30 June 2009 |
307.9 |
79.4 |
387.3 |
|
Charge for the period |
33.8 |
3.4 |
37.2 |
|
Impairment |
- |
1.3 |
1.3 |
|
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 |
|
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 |
|
Net book value at 30 June 2009 |
1,507.9 |
5.1 |
1,513.0 |
|
Net book value at 1 January 2009 |
1,112.7 |
6.9 |
1,119.6 |
At each reporting date, the Group reviews the carrying value of cash generating units within property, plant and equipment - development/producing assets for indicators of impairment or reversal of prior year impairment. The review at 30 June 2010 determined that there was no impairment or reversal of impairment. There have been no changes to the assumptions used in impairment calculations from those presented at the year end.
9. Net Funds
|
|
At 1 January 2010 $m |
Cash flow $m |
Exchange movements $m |
At 30 June 2010 $m |
|
|
|
|
|
|
|
Bank deposits |
13.2 |
87.2 |
(0.3) |
100.1 |
|
|
|
|
|
|
|
Cash at bank |
36.6 |
488.4 |
24.1 |
549.1 |
|
Short-term deposits |
1,139.9 |
(668.0) |
(23.7) |
448.2 |
|
Cash and cash equivalents |
1,176.5 |
(179.6) |
0.4 |
997.3 |
|
Loans and borrowings |
(666.1) |
(164.6) |
- |
(830.7) |
|
Net cash |
523.6 |
(257.0) |
0.1 |
266.7 |
|
Finance leases |
(3.5) |
0.7 |
- |
(2.8) |
|
Net funds |
520.1 |
(256.3) |
0.1 |
263.9 |
10. Contingent liabilities
There have been no significant changes in contingent liabilities from those reported in the Cairn Energy PLC 2009 Annual Report and Accounts.
11. Capital commitments
At 30 June 2010, the Group had capital commitments of $458.6m (June 2009: $245.6m; December 2009: $542.4m) in relation to intangible exploration/appraisal assets, mostly in Greenland and India, and $847.6m (June 2009: $863.3m; December 2009: $750.3m) in relation to property, plant and equipment - development/producing assets, largely relating to the Rajasthan development.
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 2009 is set out in the Directors' Remuneration Report contained in the Cairn Energy PLC 2009 Annual Report and Accounts. There have been no material changes in the period ended 30 June 2010.
(b) Other transactions
No other related party transactions have taken place in the six months ended 30 June 2010 that have materially affected the financial position or the performance of the Group during that period.
13. Events after the Balance Sheet date
On 16 August 2010, Cairn announced the proposed part sale of the Group's shareholding in Cairn India Limited ("CIL") to Vedanta Resources PLC ("Vedanta"). The proposed transaction will leave Cairn with a shareholding of between 11% and 21% and will result in the de-consolidation of CIL and its subsidiaries from the Cairn Group consolidated results. The assets of the CIL group will therefore be transferred into a disposal group and classified as held-for-sale under IFRS 5.
Under the proposed transaction, Cairn will sell a maximum of 51% of CIL to Vedanta for consideration of up to $8.5bn, based on $8.66 (INR 405) per CIL share. The proposed price represents a premium of approximately 32% to the CIL average closing price for 90 days prior to 14 August 2010. Put and call options arrangements, exercisable after July 2012 and July 2013 (exercisable at $8.66 (INR 405)), will ensure a majority interest in CIL is sold. The intention is then to return a substantial proportion of the proceeds from the transaction to Cairn shareholders. Completion is expected late 2010/early 2011.
CIL is reported as a separate operating segment within the Group's disclosures in accordance with IFRS 8 "Operating segments". See note 4 for further details.
14. Change in accounting policy
Cairn has changed its accounting policy for the valuation of inventories of oil and condensate. Cairn now value such inventories at the lower of cost and net realisable value where previously these inventories were valued at net realisable value based on the estimated selling price.
Cairn's revised accounting policy aligns the Group with the majority of UK listed entities in the oil and gas sector. Given the increasing volumes of inventory held in Rajasthan, Cairn believes that valuing oil and condensate at cost presents a fairer and more comparable measure of operating profit for a given period.
The impact on the current period's performance resulting from this change is to reduce profit in the period by $30.1m and prior period comparatives have been restated to reflect this change in policy. The following tables indicate the changes that have been made to comparative statements.
14. Prior year adjustments (continued)
|
Six months ended 30 June 2009 |
June 2009 Financial Statements |
Inventory valuation adjustment |
Restated June 2009 |
|
|
$m |
$m |
$m |
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
Inventory |
5.1 |
(3.5) |
1.6 |
|
Current Assets |
1,768.8 |
(3.5) |
1,765.3 |
|
Total assets |
3,849.3 |
(3.5) |
3,845.8 |
|
Deferred tax liabilities |
209.2 |
(1.6) |
207.6 |
|
Non-current liabilities |
1,092.0 |
(1.6) |
1,090.4 |
|
Total liabilities |
1,441.0 |
(1.6) |
1,439.4 |
|
Net assets |
2,408.3 |
(1.9) |
2,406.4 |
|
|
|
|
|
|
Retained earnings |
1,375.9 |
(1.2) |
1,374.7 |
|
Equity attributable to equity holders of the parent |
1,740.0 |
(1.2) |
1,738.8 |
|
Non-controlling interests |
668.3 |
(0.7) |
667.6 |
|
Total equity |
2,408.3 |
(1.9) |
2,406.4 |
|
|
|
|
|
|
Income Statement |
|
|
|
|
|
|
|
|
|
Production costs |
(16.3) |
(2.0) |
(18.3) |
|
Gross loss |
(46.1) |
(2.0) |
(48.1) |
|
Operating loss |
(77.4) |
(2.0) |
(79.4) |
|
Loss before taxation |
(115.6) |
(2.0) |
(117.6) |
|
Taxation credit on loss |
40.6 |
0.9 |
41.5 |
|
Loss for the period |
(75.0) |
(1.1) |
(76.1) |
|
Loss attributable to equity holders of the parent |
(60.9) |
(0.7) |
(61.6) |
|
Loss attributable to non-controlling interests |
(14.1) |
(0.4) |
(14.5) |
|
|
|
|
|
|
Earnings per ordinary share - basic (cents) |
(4.55) |
(0.06) |
(4.61) |
|
Earnings per ordinary share - diluted (cents) |
(4.55) |
(0.06) |
(4.61) |
|
|
|
|
|
|
Statement of Comprehensive Income |
|
|
|
|
|
|
|
|
|
Loss for the period ended June 2009 |
(75.0) |
(1.1) |
(76.1) |
|
Total comprehensive income for the period |
(36.5) |
(1.1) |
(37.6) |
|
Loss attributable to equity holders of the parent |
(25.0) |
(0.7) |
(25.7) |
|
Loss attributable to non-controlling interests |
(11.5) |
(0.4) |
(11.9) |
The earnings per ordinary share for the six months ended 30 June 2009 have also been updated to reflect the subdivision of Cairn Energy PLC ordinary shares during the second half of 2009.
14. Prior year adjustments (continued)
|
Year ended 31 December 2009 |
December 2009 Financial Statements |
Inventory valuation adjustment |
Restated December 2009 |
|
|
|
$m |
$m |
$m |
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
Inventory |
24.7 |
(14.0) |
10.7 |
|
|
Current Assets |
1,569.1 |
(14.0) |
1,555.1 |
|
|
Total assets |
3,863.8 |
(14.0) |
3,849.8 |
|
|
Deferred tax liabilities |
83.5 |
(4.0) |
79.5 |
|
|
Non-current liabilities |
781.8 |
(4.0) |
777.8 |
|
|
Total liabilities |
1,176.8 |
(4.0) |
1,172.8 |
|
|
Net assets |
2,687.0 |
(10.0) |
2,677.0 |
|
|
|
|
|
|
|
|
Retained earnings |
1,495.0 |
(6.2) |
1,488.8 |
|
|
Equity attributable to equity holders of the parent |
1,959.3 |
(6.2) |
1,953.1 |
|
|
Non-controlling interests |
727.7 |
(3.8) |
723.9 |
|
|
Total equity |
2,687.0 |
(10.0) |
2,677.0 |
|
|
|
|
|
|
|
|
Income Statement |
|
|
|
|
|
|
|
|
|
|
|
Production costs |
(62.4) |
(12.5) |
(74.9) |
|
|
Gross loss |
(10.0) |
(12.5) |
(22.5) |
|
|
Operating loss |
(240.1) |
(12.5) |
(252.6) |
|
|
Loss before taxation |
(60.7) |
(12.5) |
(73.2) |
|
|
Taxation credit on loss |
123.3 |
3.3 |
126.6 |
|
|
Profit for the year |
62.6 |
(9.2) |
53.4 |
|
|
Profit attributable to equity holders of the parent |
24.7 |
(5.7) |
19.0 |
|
|
Profit attributable to non-controlling interests |
37.9 |
(3.5) |
34.4 |
|
|
|
|
|
|
|
|
Earnings per ordinary share - basic (cents) |
1.82 |
(0.73) |
1.09 |
|
|
Earnings per ordinary share - diluted (cents) |
1.81 |
(0.73) |
1.08 |
|
|
|
|
|
|
|
|
Statement of Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
62.6 |
(9.2) |
53.4 |
|
|
Total comprehensive income for the year |
108.8 |
(9.2) |
99.6 |
|
|
Profit attributable to equity holders of the parent |
63.4 |
(5.7) |
57.7 |
|
|
Profit attributable to non-controlling interests |
45.4 |
(3.5) |
41.9 |
GLOSSARY OF TERMS
The following are the main terms and abbreviations used in this announcement:
Corporate
|
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 |
|
IOC |
Indian Oil Corporation |
|
MAT |
minimum alternate tax |
|
MBA |
Mangala, Bhagyam and Aishwariya |
|
MPT |
Mangala Processing Terminal |
|
GoI |
Government of India |
|
Group |
the Company and its subsidiaries |
|
ONGC |
Oil and Natural Gas Corporation Limited |
Technical
|
2P |
proven plus probable |
|
2D/3D |
two dimensional/three dimensional |
|
boe |
barrels of oil equivalent |
|
boepd |
barrels of oil equivalent per day |
|
bopd |
barrels of oil per day |
|
EOR |
enhanced oil recovery |
|
mmboe |
million barrels of oil equivalent |
|
mmbbls |
million barrels of oil |
|
mmscfd |
million standard cubic feet of gas per day |
|
PSC |
production sharing contract |
|
STOIIP |
stock tank oil initially in place |
|
USGS |
United States Geological Survey |
NOTES TO EDITORS:
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 arms to the business:
Ø Cairn India limited ("Cairn India") is now 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 currently retains a 62.37% interest in Cairn India.
Ø Capricorn Oil Limited ("Capricorn"), a 100% subsidiary of Cairn, is focused on exploration. Capricorn now has assets in Bangladesh, Nepal, Northern India, Greenland, Tunisia, Albania, and pending licence awards in 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 "Cairn India" where referred to in the release means Cairn India Limited and/or its subsidiaries, 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.
Ø Cairn India is headquartered in Gurgaon on the outskirts of Delhi, with operational offices in Chennai, Gujarat, Andhra Pradesh and Rajasthan.
Ø Cairn Energy PLC (including Capricorn) is run from Edinburgh with operational offices in Dhaka, Chittagong and Kathmandu.
For further information on Cairn please go to: www.cairnenergy.com
This information is provided by RNS
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