Cairn Energy PLC Interim Management Statement

RNS Number : 8581E

Cairn Energy PLC

16 May 2013

 



For Immediate Release                                                                                               16 May 2013

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

Interim Management Statement

Cairn intends to announce its interim results for the six months to 30 June 2013 on Tuesday 20 August 2013.  In advance of these results, Cairn is providing an update on its recent operations and guidance in respect of the Group's trading performance. This information is unaudited and subject to further review.

Simon Thomson, Chief Executive, Cairn Energy PLC said:

"Cairn is a well funded business with a balanced portfolio of potentially high growth assets.

Our operated 2013/2014 frontier multi-well exploration programme is on track to start later this year.  This targets more than 3.5billion boe of gross resource in the Atlantic Margin, testing a variety of play types and prospects in Senegal, Morocco, Ireland and Greenland that all offer shareholders material organic growth potential."

Highlights

Atlantic Margin

Ø Planning under way for frontier exploration drilling programme, beginning in Morocco H2 2013, targeting > 3.5 billion (bn) barrels of oil equivalent (boe) of mean un-risked gross prospective resource

Ø Further opportunities added to Cairn frontier drilling programme through farm-in to acreage offshore Senegal and offshore West of Ireland

Ø Cairn's prospect and lead inventory currently includes 61 prospects and 124 leads which constantly evolves and grows as more information is gathered and evaluated

Ø Contracted the 'Cajun Express', a 5^th Generation, dynamically positioned, semi-submersible drilling rig from Transocean for one year from H2 2013

UK and Norway

Ø The Skarfjell appraisal well (35/9-7) was completed and successfully encountered oil down-dip of the discovery well.  Cairn (20%) has increased its estimated gross resource range to between 74 million barrels of oil (mmbbls) (92 million barrels of oil equivalent (mmboe)) to 235 mmbbls (282 mmboe)

Ø Further success on the Catcher Area: The Bonneville exploration well (28/9a-6) and its side track (28/9a-6z) discovered oil; (Cairn (30%), Premier (50%; operator) Wintershall (20%))

Ø Approval is expected in 2013 for the development of key projects in the UK North Sea which will provide future cash flow

Funding strength and flexibility

Ø Group net cash at 31 March 2013 of US$1.5bn

Ø ~10% residual shareholding in Cairn India Limited (CIL) valued at ~US$1bn at 31 March 2013

Enquiries to:

Analysts / Investors

David Nisbet, Corporate Affairs                                                                Tel: [phone]

Media
Patrick Handley, David Litterick

Brunswick Group LLP                                                                             Tel: [phone]

CORPORATE AND FINANCE

As at 31 March 2013, the Company's net cash balance stood at US$1.5bn.  The free cash flow from the Company's pre-development interests will be used to fund future exploration programmes. Over the next five years, the Company expects to spend: up to US$1.5bn on its development assets (which will be partially debt funded); plus a rolling annual programme of exploration and appraisal to average between US$250 to US$300 million (m) (net of any Norwegian tax refunds).

During the first quarter of 2013, the Company has farmed-in to two frontier exploration positions: offshore Senegal and the Porcupine Basin, offshore West of Ireland.

Cairn is acquiring a 65% Working Interest (WI) and Operatorship in three contiguous blocks offshore Senegal, by fully funding the 100% costs of one exploration well to an investment cap. Thereafter, exploration costs will be apportioned Cairn 72.2% (WI 65%), FAR Limited (FAR) 27.8% (WI 25%) and Petrosen 0.0% (WI 10%). As part of the transaction, Cairn will also pay 72.2% of costs incurred on the blocks by FAR to date, a total of ~US$10m.

Subject to necessary approvals, Cairn will acquire a 38% WI and Operatorship of two licences offshore Ireland by paying the pro-rated share of back costs ($4.1m) and 63.33% of future exploration and appraisal costs for up to two wells, subject to a cap.  Costs in excess of the cap will be shared by the parties according to their equity interests. 

OPERATIONS

Cairn's prospect and lead inventory has grown significantly in 2012/2013 through corporate acquisitions, farm-ins, ongoing exploration work and bid round successes, as the Company delivered on its rebuilding and repositioning strategy. The inventory, which currently includes 61 prospects and 124 leads, constantly evolves and grows as more information is gathered and evaluated.  At any one time the Company's exploration programme focuses on the most mature and material drillable prospects in any given area or geological basin.

Atlantic Margin

Cairn has an exploration strategy of seeking new frontier plays along the palaeo and rifted passive Atlantic Margins. This strategy is focused on delivering multiple emerging play types and prospects, some of which will be tested by an exploration drilling programme over the next 18 months targeting > 3.5bn boe gross mean unrisked prospective resource.

Morocco

Preparations are under way for the planned first well in the sequence on the Foum Draa permit offshore Morocco (Cairn 50%, operator), which is due to commence later this year subject to necessary approvals. These preparations include sea bed site surveys and environmental surveys as well as contracting the 5^th Generation semi-submersible 'Cajun Express' rig. 

The Foum Draa well will test Cretaceous deep-water turbidite plays and will target stratigraphically older objectives than have been previously penetrated anywhere along this margin. The gross mean prospective resource of the targeted prospect in the Foum Draa blocks is estimated by Cairn to be 142 mmbbls with a potential follow-up prospect of 126 mmbbls. 

On the Juby Maritime permit (Cairn 37.5%) plans are under way with our Joint Venture (JV) partner, Genel Energy plc, to drill an exploration well in 2013/ early 2014 to target a Middle Jurassic carbonate prospect some 1,000 metres below an old heavy oil discovery in the Upper Jurassic, subject to the necessary approvals.  Cairn estimates the Cap Juby Middle Jurassic prospect gross mean prospective resource exceeds 70 mmbbls.  The existing 3D data over Cap Juby is being reprocessed and a newly acquired 680km² 3D seismic survey over a separate carbonate prospect in Juby Maritime is also being processed.   Final migrated data is scheduled to be ready for interpretation later this year.

As with all its operations, Cairn is working responsibly with the Moroccan authorities and other stakeholders to ensure that it understands the environment and communities where it operates and to provide assurance that it will operate safely and efficiently.  To this end, the Environmental Impact Assessment (EIA) for the planned drilling programme is under way.  

Senegal

The planned exploration drilling offshore Senegal (with JV partners FAR and Petrosen (the Senegal National Oil Company)) is targeted, subject to necessary approvals, for 2014.

The three blocks in which Cairn has acquired an interest cover an area of >7,000km² near shore to deep water exploration over the shelf, slope and basin floor of the Senegalese portion of the productive Mauritania-Senegal-Guinea-Bissau Basin. The acreage is covered by a 2,050km² 3D seismic survey and a number of play types, leads and prospects have been identified.  The dual objective 'L' prospect in moderate water depth, which is targeted for drilling in 2014, is estimated by Cairn to have a consolidated gross mean un-risked prospective resource of >250 mmbbls.

Greenland

The joint Social Baseline Study in Baffin Bay between Maersk Oil, Shell, ConocoPhillips and Cairn is progressing.  All four operators expect to be active in the Baffin Bay area offshore Greenland and will collaborate on undertaking the Social Baseline Study, part of the Social Impact Assessment process, which Maersk Oil will lead.   Experts from each of the companies and Nunaoil (the Greenland national oil company) will support and guide the study, which is due to complete during summer 2013.

West of Ireland

Cairn has recently farmed-in as Operator (38% WI) to two licences offshore West of Ireland in the Porcupine Basin, which contains the undeveloped Spanish Point gas condensate and Burren oil discoveries, and six adjacent licensing option blocks.  The acreage covers an area of 2,753km² with more than 500km² covered by 3D seismic and will add prospect locations to Cairn's frontier exploration programme.

The two licences - Frontier Exploration Licence (FEL) 2/04 (which includes the Spanish Point and Burren discoveries) and FEL 4/08, an area of 1,242km² - are currently operated by Chrysaor (60% WI) with Providence Resources (32% WI) and SOSINA Exploration Ltd (8% WI).  The six adjacent licensing option blocks, known as Licensing Option (LO) 11/2, cover an area of 1,511km² and can be converted to a FEL from October 2013.

The first appraisal well on Spanish Point is targeted for Q2 2014.  The partners also currently expect to propose a 3D seismic work programme on LO 11/2.   Further appraisal drilling will be dependent on the first appraisal well result.

UK and Norwegian North Sea & Norwegian Continental Shelf

During the last quarter, we have seen a number of successes across our North Sea portfolio.

The Skarfjell oil discovery (35/9-7; Cairn 20%) was made in April 2012 and was immediately followed by a 3D seismic survey over the accumulation. The operator's gross resource range for Skarfjell post discovery was between 60 mmbbls and 160 mmbbls.  Following completion of an appraisal well drilled down-dip and designed to test reservoir extent, thickness and quality, Cairn has revised its gross resource range to between 74 mmbbls (92 mmboe) to 235 mmbbls (282 mmboe).

The Bonneville exploration well (28/9a-6) and its side track (28/9a-6z) discovered oil in excellent quality reservoirs. The Bonneville discovery is located four kilometres south of the Burgman discovery on the Catcher licence in the UK Central North Sea.  The Bonneville discovery is the seventh oil discovery on the Catcher licence, indicating the potential for satellite developments.  The estimated oil in place for the Bonneville discovery is approximately 30mmbbls.

The Mariner FDP was approved in February 2013.  The FDPs for Kraken and Catcher, operated by EnQuest and Premier Oil, will be submitted H1 and H2 2013 respectively.  An appraisal well has been drilled at Kraken with the results confirming the north Kraken area.  The reservoir is oil filled and the thickness of the sand is as expected.

Mediterranean

Cairn holds licences covering approximately 3,175km² in the Valencia Basin, offshore Spain and is in the early stages of its exploration programme.  The authorisation to acquire 3D seismic is progressing.  Applications for further acreage offshore Spain (in the Gulf of Lion off the Catalonian coast) have been submitted and are under review by the Ministry of Industry, Energy and Tourism.

Elsewhere in the Mediterranean region, Cairn recently qualified as a non-operator in the Lebanon bid round which closes on 7 November 2013.

NOTES TO EDITORS

Cairn Energy PLC ('Cairn') is one of Europe's leading independent oil and gas exploration and development companies and is listed on the London Stock Exchange. Cairn has discovered and developed oil and gas reserves in a variety of locations around the world. The company historically focused its activities on the geographic region of South Asia where it operated for more than 20 years.  During this time it discovered, developed and produced oil and gas both offshore and onshore in Bangladesh and India and made more than 40 significant discoveries.  In particular, Cairn made a major oil discovery in Rajasthan in the north west of India at the beginning of 2004 where over 25 discoveries have since been made with the potential to provide more than 30% of India's crude oil production.  Today, Cairn continues to hold an approximate 10% shareholding in Cairn India Limited. Cairn's business operations are now focused on frontier exploration acreage in Morocco, Senegal, Ireland, Greenland and the Mediterranean along with exploration and pre-development interests in the North Sea. Cairn has its headquarters in Edinburgh, Scotland supported by operational offices in London, Greenland, Norway, Spain and Morocco. 

Cairn in Morocco

Ø Cairn operates two exploration permits offshore Morocco where it is planning a multi-well drilling programme commencing H2 2013.

Cairn in Greenland

Ø Cairn through its subsidiary, Capricorn, operates 11 blocks offshore Greenland.

Ø A total of 14 exploration wells have been drilled offshore Greenland to date, five of which were drilled in the 1970s, one in 2000, three by Cairn in 2010 and five by Cairn in 2011.

Cairn in UK and Norway

Ø Cairn has non-operated and operated exploration, appraisal and development assets in the UK and Norwegian North Sea.

Cairn in the Mediterranean area

Ø Cairn is in the early stages of carrying out frontier exploration in Spain.

Ø Cairn has interests in Area 3 in Malta.

Cairn in Senegal

Ø Cairn has farmed-in as Operator (65%) to three blocks offshore Senegal, subject to regulatory approval.

Cairn in Ireland

Ø Cairn has farmed-in as Operator (38%) to two licences offshore West of Ireland, subject to regulatory approval.

Cairn and Corporate Responsibility

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

 

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