Drilling Report

Cairn Energy PLC
17 February 2005


EMBARGOED FOR RELEASE AT 0700

                                                                17 February 2005

                                CAIRN ENERGY PLC
                    Pre Close Operational and Trading Update

Cairn intends to announce its preliminary results for the year to 31 December
2004 on Tuesday, 19 April 2005. In advance of these results, Cairn is providing
an update on recent operations and guidance in respect of the Group's trading
performance in 2004. The information contained herein has not been audited and
is subject to further review.

OPERATIONAL UPDATE

The major focus of the company over the last few months has continued to be in
Rajasthan.

Rajasthan Block RJ/ON-90/1

   • Successful first appraisal well on the N-V field.
   • Production life from the Development Area estimated to be in excess of
    25 years.
   • Joint Cairn/ONGC review of the Mangala development options under way.
   • 30 month appraisal extension beyond May 2005 to be sought for acreage
    outside the Development Area.
   • Raageshwari deep gas appraisal continuing.
   • A further 5 wells drilled since December; 2 successful, 2 dry, 1
    operating.

Bill Gammell, Chief Executive said:
'2004 was an excellent year of discovery and growth for Cairn. The more we
progress Rajasthan the better we feel about it.

We are continuing to focus on a very active seismic and drilling campaign while
exploring the development opportunities to maximise the value of Mangala,
Aishwariya and other discoveries.'

Rajasthan N-V Oil Discovery and Extension Area

The N-V extension area of 856km(2) was awarded to Cairn by the Indian Government
in January 2005 on the basis of the N-V-1 oil discovery made in August 2004. The
first appraisal well, which is an extended reach well N-V-1ST, is currently
operating and has been drilled 750 metres from the discovery well.

The N-V-1ST well has confirmed that the field extends into the extension area.
This highly deviated well has encountered 320 metres of net high quality
Fatehgarh oil pay sands, which equates to 104 metres of true vertical net oil
pay. It has a common oil water contact with the discovery well.

A test programme is presently being prepared and the N-V-1ST well is expected to
be suspended as a potential future producer. A further two appraisal wells are
planned on this structure. An update will be available with end of year results
in April.
Elsewhere in the extension area a 2D seismic survey is currently under way and a
minimum of two additional wells are planned before the end of May 2005.

Rajasthan Development Area

The Development Area covers 1858km(2) on the block under long term contract.
This area includes the Mangala and Aishwariya fields discovered last year,
several other fields and discoveries, and the future exploration potential over
the entire Development Area.

Cairn currently estimates the production life for projects within the
Development Area to be in excess of 25 years. Consequently, Cairn intends to
seek an extension beyond 2020, which is the current initial development term.

ONGC became a 30% participant in the Development Area in January 2005. The
experience and knowledge of ONGC, gained from its major developments in the
Cambay basin to the south, is invaluable in assisting the joint venture's
selection of the commercial development options.

Cairn expects to submit a Field Development Plan on behalf of the joint venture
to the Indian Government in May.

Other activity within the Development Area continues apace. A 450km(2) 3D
seismic survey has been completed across the Mangala and Aishwariya fields. The
interpretation of this data is under way and preliminary results are
encouraging. As a result of the 3D seismic over Aishwariya an up dip well has
been programmed to confirm the crest of the field. A further 3D seismic survey
over the N-R-1 and N-R-2 discoveries is nearing completion. Current drilling
activity is focused on the deep gas play at Raageshwari, in the southern part of
the area.

Potentially large in place volumes of gas have been established at Raageshwari
in non conventional volcanic reservoirs. The Raageshwari-5 well tested 1 mmscfd
of gas from the volcanic section and 1.5 mmscfd from the Fatehgarh. This well
will shortly be placed on long term test. A further down-dip appraisal well,
Raageshwari-6, will core the Fatehgarh section and is designed to confirm
additional in place gas volumes in the Fatehgarh.

To enhance our understanding of potential recovery factors, well stimulation
studies are continuing. Future fraccing of Raageshwari wells may enable the
optimal deliverability to be determined before reserve assessments can be made.

Rajasthan Exploration Area

A significant portion of the remaining exploration acreage outwith the
Development Area is unappraised. Cairn will be seeking a 30 month extension of
the appraisal period beyond May 2005.

Rajasthan - Overall Drilling Activity

Cairn has drilled five additional wells in Rajasthan since the December update.

Exploration wells W-A-1, which was 35 km south east of Mangala and W-B-1, which
was 64km south west, were plugged and abandoned.

GR-F-2 and Guda-3 both appraised previous oil discoveries in the Thumbli
formation. The Thumbli oil play has significant oil in place potential and
productivity trials along with stimulation tests indicate the potential for
commercial production. Various development options for the Thumbli oil are
currently being reviewed.

The exploration well GR-A-2 is currently drilling 150 km south of Mangala.

Near term drilling activity will focus on the N-V area, prospects around Mangala
and Aishwariya, and exploration for the deep gas potential in the south of the
Rajasthan block.

Other Producing Properties in India (Ravva, Lakshmi and Gauri)

Ravva continues to perform well and additional infill wells are planned later
this year, subject to required regulatory approvals, to maintain plateau
production. At Lakshmi four out of five infill wells have so far been drilled,
three of which have been completed and put on production. Currently the Lakshmi
and Gauri fields are producing in excess of 100 mmscfd of gas.

Bangladesh

Following the acquisition of an additional 37.5% equity interest and the
Operatorship from Shell on 30 June 2004, Cairn has implemented a second phase of
development drilling at Sangu, which consists of an additional three development
wells.

Two of these development wells have been drilled and completed, with the third
well in the process of being completed. This takes the number of active
development wells from four to seven and will help provide greater flexibility
in meeting the field deliverability requirements.

The three new development wells have identified a difference between the
volumetrically-derived estimates and material-balance derived estimates of
gas-in-place for two of the main producing reservoirs. Cairn will be adopting
the lower material-balance derived estimates and re-categorising the difference
in the 'possible' reserve category.

As domestic market demand for gas becomes increasingly strong and historic Sangu
payment delays are largely resolved, Cairn is now considering recommencing
active exploration in Bangladesh.

Group Reserves

In accordance with Cairn's previously stated intention, an independent
assessment of its reserves estimates on all its fields in Bangladesh and India
has been conducted by an internationally-recognised firm of reservoir engineers,
DeGolyer and MacNaughton, using information available as at December 2004.

2004 PRE CLOSED PERIOD TRADING STATEMENT

Average 2004 production is outlined in the table below:

Production boepd      Ravva    Sangu    Lakshmi& Gauri    Gryphon*       Total
(approximate)
Gross field           68,000   22,000            13,000       3,300    106,300
Working interest      15,300   12,200             6,500         300     34,300
Entitlement interest   7,500    7,600             7,400         300     22,800

* Cairn sold its only remaining North Sea interest during May 2004

As stated in the Interim Results, well intervention and infill drilling
programmes to enhance production on both the Sangu and Lakshmi gas fields
commenced in the latter part of 2004 and are ongoing. As a consequence, gross
production in 2005 is expected to exceed that achieved in 2004.

In accordance with the terms of the respective Production Sharing Contracts
('PSCs'), Cairn's production entitlement from both the Ravva and Sangu fields
decreased in 2004.

Following the October Arbitration Hearing award in relation to the
interpretation of the Ravva PSC, first quarter 2004 production from the field
has been revised to reflect a higher Government share during this period.
Production acquired pursuant to the acquisition of Shell's interests in
Bangladesh has been recognised from the transaction completion date (30 June,
2004).

Although principally a US$ business, the Group reports in Sterling and therefore
the financial results have been impacted by the weakening of the US$ against
Sterling from $1.79 to $1.92 during 2004.

The average price realised by the Group for 2004 is anticipated to be in the
region of $24 per boe compared with $22.86 per boe for 2003. The average cost of
sales per barrel is expected to be in the region of £7 to £7.50 per boe compared
to £6.39 per boe in 2003. The increase in the average cost of sales per barrel
reflects a revision to the remaining entitlement reserves due to a reduction in
the estimate of gross remaining proved plus probable reserves, primarily from
the Sangu field and the impact of higher oil price assumptions when calculating
Cairn's share of future production.

With work ongoing to determine the optimal development plan for Mangala and
Aishwariya, the associated Rajasthan proved plus probable reserves will be
disclosed but are unlikely to be booked in the year end financial statements.

Gross profit, pre exceptional items, for 2004 is expected to be in the region of
£45m to £52m. Operating profits, pre exceptional items, are anticipated to be
approximately £28m to £33m.

As stated in the announcement made in October, following findings of the
Arbitration Hearing in respect of the interpretation of the Ravva PSC, the Group
has reviewed its provisioning in respect of this liability. As a consequence,
the Group is expected to report an additional exceptional charge net of tax of
approximately £8m to £10m.

Capital expenditure for the Group in 2004 was approximately £127m, comprising
£90m exploration/appraisal expenditure, £35m development expenditure, and £2m
other fixed assets.

At the year end the Group had no gearing and net funds of circa £70m. In
addition, pre tax proceeds of approximately $135m from the previously announced
ONGC transaction are expected to be received in early 2005. The Group currently
has $240m of unutilised unsecured revolving credit facilities.

The 2004 financial statements are being prepared in accordance with the
principles of UK GAAP. Reporting under International Financial Reporting
Standard (IFRS) is mandatory for the Group for periods ending after 1 January
2005 with restatement of 2004 comparatives resulting. Guidance on the impact of
IFRS on Cairn's financials will be provided to analysts as part of the
transition process.



Enquiries:-

Cairn Energy PLC
Analysts/Investors
Bill Gammell Chief Executive                              Tel: [phone]
Dr Mike Watts Exploration and New Business Director       Tel: [phone]
Kevin Hart Finance Director                               Tel: [phone]

Media                                                     Tel: [phone]
David Nisbet, Head of Group Communications

Brunswick Group PPL                               Tel: [phone]
Patrick Handley, Mark Antelme





Notes to Editors:

   • Cairn focuses its activities on the geographic region of South Asia. The
     Group holds material exploration and production positions in west India,
     east India and Bangladesh along with new exploration rights in northern
     India and Nepal.

   • This focus on South Asia has already resulted in a significant number of
     oil and gas discoveries. In particular, the company made a major oil
     discovery (Mangala) in Rajasthan in the north west of India at the 
     beginning of 2004.

   • Cairn has received formal approval from the Government of India for a
     Declaration of Commerciality in respect of the Mangala, Aishwariya,
     Saraswati and Raageshwari discoveries. The approval secures Cairn an
     extensive Development Area of 1,858 km(2) which also incorporates the, 
     GR-F, Kameshwari, N-R and Guda discoveries, which are at various stages of
     appraisal.

   • The Development Area is the equivalent in size of 12 North Sea Blocks.

   • The Development Area is currently retained until 2020 with options for
     further extension subject to mutual agreement with the Government of India.

   • Plateau rates for the Mangala and Aishwariya (formerly N-A field) fields
     are currently targeted at between 80,000 and 100,000 barrels per day.

   • ONGC took up its option to acquire a 30% participating interest in the
     Mangala and Aishwariya discoveries in January 2005.

   • India currently imports 2 million barrels of oil a day. It produces
     650,000 barrels a day itself of which 50,000bopd comes from the Cairn
     operated Ravva field.

   •'Cairn' where referred to in this release means Cairn Energy PLC and/or
    its subsidiaries, as appropriate.

This announcement contains certain operational and financial information in
relation to 2004, which is subject to final review and has not been audited.
Furthermore, it contains certain forward-looking statements that are subject to
the usual risk factors and uncertainties associated with the oil & gas
exploration and production business. Whilst the Group believes the expectations
reflected herein to be reasonable, the actual outcome may be materially
different owing to factors either within or beyond the Group's control, and
accordingly no reliance may be placed on the figures contained in such forward
looking statements.

For further information on Cairn see www.cairn-energy.plc.uk



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