Interim Management Statement

RNS Number : 1707V

Cairn Energy PLC

28 October 2010

 



FOR IMMEDIATE RELEASE                                                                                             28 October 2010

CAIRN ENERGY PLC ("Cairn")

Interim Management Statement

Cairn Energy PLC is today issuing its Interim Management Statement in accordance with the reporting requirements of the EU Transparency Directive.

Third Quarter Group Production

Production (boepd)	Ravva	CB/OS-2	Rajasthan	Sangu	Total
Gross field	38,100	11,227	116,058	4,323	169,709
Working interest	8,573	4,491	81,241	1,621	95,926
Entitlement interest	3,993	3,207	85,779	1,099	94,078

In Q3 2010 Cairn realised an average price per barrel of oil equivalent of US $67.14, adjusted for stock movements.

Gross daily production for Q3 2010 was 169,709 barrels of oil per day (bopd) representing a 94% increase from gross daily production in H1 2010.

Commentary

Finance

At 30 September 2010 Group net cash balance was US $252m.  Cairn India had net debt of US $145m, comprising US $588m cash and US $733m debt.  PLC/Capricorn's net cash balance was US $397m.

The Mangala field in Rajasthan commenced pipeline sales in June 2010.  Gross field revenues since then are approaching US $1 bn.

Total costs for the 2010 Greenland drilling programme are expected to be in the region of US $400m, in line with Cairn's guidance.

The T8-1 and T4-1 wells did not result in commercial discoveries; consequently the well costs, including all associated demobilisation and other costs, of US ~$185m are forecast to be written off in accordance with Cairn's accounting policies.  The primary objectives of the Alpha prospect were not reached, the well has been suspended and any future re-entry work depends on the results of further evaluation.

Completion of the Vedanta transaction will provide the Group with the funding to continue an active programme in Greenland and to return a substantial proportion of the proceeds to shareholders.   The resulting reduction in equity base will re-gear the Group to exploration success.

Corporate

Cairn continues to work with the Government of India (GoI) to secure the necessary consents and approvals for completion of the proposed transaction with Vedanta. 

At the Company's General Meeting held on the 7 October, shareholders voted overwhelmingly in favour (99%) of approving the proposed part sale of Cairn's shareholding in Cairn India to Vedanta.

It is expected that Vedanta's General Meeting will be held on or before 30 November 2010.

Operational

India

Ø Completed one year of successful production from the Mangala field and achieved in excess of 16 million barrels (mmbbls) of oil sales to domestic refiners - current production 125,000 bopd

Ø Safe delivery of 10 mmbbls of Mangala crude through the pipeline to refineries in Q2 2010

Ø Mangala development drilling indicates near term production potential of 150,000 bopd, subject to GoI approval

Ø Mangala development drilling is progressing and the reservoir continues to perform well with 107 development wells drilled to date, of which 74 are complete

Ø Mangala Enhanced Oil Recovery (EOR) pilot production and injection wells drilled and completed - pilot production and injection to commence in Q3 2010

Ø Bhagyam development commenced and contracts for construction of Train Four awarded

Greenland

Ø Cairn announced its result highlights from the 2010 Greenland exploration drilling campaign on Tuesday 26 October. 

Ø All operations concluded at the end of the drilling season as agreed with the Greenland Bureau of Minerals and Petroleum (BMP) and the Stena Forth and Stena Don rigs have been released off contract.  The Alpha-1S1 exploration well has been suspended to allow possible re-entry to sidetrack or deepen the well at a later date. The T8-1 and T4-1 exploration wells have been plugged and abandoned.

Ø As previously announced, the Alpha-1S1 well encountered oil shows in the volcanic section.  In accordance with the BMP regulations, drilling operations ceased as of 30 September 2010.  At this point the well was still in volcanics and the prognosed Mesozoic section had not been reached.

Ø The T4-1 well, which was targeting a Tertiary objective at a different stratigraphic level to T8-1, failed to encounter any significant hydrocarbons and found only thin reservoir sands, although geochemical analyses continue on selective samples.

Ø The T8-1 well, which (as announced on 24 August 2010) encountered gas in thin sands, has been plugged and abandoned.

Ø Geophysical operations in Greenland are still active with a 2,500km 2D seismic survey currently ongoing on the Eqqua Block - some data will also be acquired in the Sigguk block (~ 215km) for well-tie purposes.  In addition, a 7,400km 2D seismic survey was completed during the summer across the offshore south Greenland blocks.

Sir Bill Gammell, Chief Executive, Cairn Energy PLC, said:

"The Vedanta transaction continues to progress as we work with the Government of India in a consensual manner to secure the necessary consents and approvals for completion.

The Mangala field in Rajasthan is now producing 125,000 bopd and generating significant revenues.  Net group production is now near 100,000 boepd.

Exploration in Greenland is at an embryonic stage but the fact that we have encountered both gas and oil during this campaign, in a previously undrilled geological basin, is extremely encouraging. The goal of our future exploration efforts will be to establish significant reservoir potential, leading to potential commercial success."

Enquiries to:

Cairn Energy PLC Sir Bill Gammell, Chief Executive Dr Mike Watts, Deputy Chief Executive Jann Brown, Finance Director David Nisbet, Corporate Affairs	Tel: [phone]
Brunswick Group LLP Patrick Handley David Litterick	Tel: [phone]

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 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 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 (77.5%) is the Operator of the Sigguk block, with joint venture partners, Nunaoil and PETRONAS (10%). Nunaoil is carried through the exploration phase but has a 12.5% stake in any development.

Ø The Sigguk Block is approximately 175 kilometres offshore Disko Island, west Greenland.

Ø Cairn has previously focused its activities on the geographic region of South Asia, resulting 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, Tunis and Kathmandu.

Ø Cairn Energy PLC annual reporting timings are based on a calendar year, while Cairn India's are based on a fiscal year.

For further information on Cairn please go to: www.cairnenergy.com

 

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