Interim Management Statement

RNS Number : 8791G

Cairn Energy PLC

19 May 2011

 



FOR IMMEDIATE RELEASE                                                                                                           19 May 2011

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. This statement is issued in advance of Cairn's Annual General meeting which is being held in Edinburgh at 12 noon today, 19 May 2011.

HIGHLIGHTS

Ø Completion of the sale of Cairn Energy PLC's 40% shareholding in Cairn India to Vedanta is awaiting Government of India approval.  Following completion Cairn's residual holding would be approximately 22% in Cairn India

Ø Approval has been received from the Greenland Government for the 2011 exploration programme offshore Greenland.  Cairn plans to drill up to four wells this summer season.

Operational

India - Rajasthan

Ø Gross field revenues of more than three billion dollars from Mangala production plateau of 125,000 bopd

Ø Work on the development of the Bhagyam field, the second largest discovery in Rajasthan, has commenced

Ø Rajasthan resource base can support production of 240,000 bopd, subject to further investment and approvals

Ø Construction of Train Four at the Mangala Processing Terminal to increase processing capacity has commenced.

Greenland

Ø Up to four wells planned to be drilled this summer offshore Greenland using a dual rig strategy

Ø A 3D seismic acquisition programme in Greenland during 2011 of up to three 3D surveys in different areas, subject to the necessary approvals is planned.

First Quarter Group Production

Production (boepd)	Ravva	CB/OS-2	Rajasthan	Total
Gross field	33,108	9,934	118,151	161,194
Working interest	7,449	3,974	82,706	94,129
Entitlement interest	4,243	2,968	87,326	94,537

The average realised price per barrel of oil equivalent for Q1 2011, adjusted for stock movements, is $92.1. 

Corporate

Cairn has been informed that the Government of India (GoI) Cabinet Committee on Economic Affairs which met on 6 April 2011 to discuss the Cairn Vedanta transaction has referred the matter to a Group of Ministers (GoM).  The GoM has not yet met.

Accordingly the two companies have agreed to extend the closing date of their Sale and Purchase Agreement in order to secure the necessary consents and approvals from the GoI to complete the transaction.

Cairn has been notified by Vedanta of the results of the Open Offer for Cairn India shares by Sesa Goa Limited (a subsidiary of Vedanta), which closed on 30 April 2011. A total of approximately 155 million Cairn India shares, representing 8.1 per cent of the share capital, have been tendered*.

Following the acquisition of both the 10.4 percent stake from PETRONAS International Corporation Limited announced on 19 April 2011 and the Open Offer shares, Sesa Goa Limited will hold 18.5 per cent of the share capital of Cairn India.

Cairn and Vedanta have agreed that, for the purposes of the formula set out in the Share Purchase Deed entered into in August 2010; these shares will all be treated as if they had been acquired in the Open Offer. Accordingly, on completion of the Transaction, Cairn will sell a stake in Cairn India to Vedanta equivalent to 40 per cent of the share capital, following which Cairn will hold a residual interest of 21.7 per cent of the share capital.

*All figures are quoted on a fully diluted basis

COMMENTARY

Finance

At 31 March 2011, Cairn continued to classify the assets of the Cairn India Group as held-for-sale believing that the necessary approvals to complete the transaction would be received and that the sale remained, under IFRS, highly probable.

The remaining Cairn Group continues to focus on the potentially transformational Greenland drilling campaign which continues this summer.  At 31 March 2011, PLC/Capricorn's net cash balances were $112.3m.  No debt had been drawn from the Group's available $900m stand-by secured revolving credit facility.

Operational

India

The Mangala Processing Terminal ("MPT") is designed to process crude from the Rajasthan fields and will have a capacity to handle 205,000 bopd with scope for further expansion. Trains One, Two and Three are completed while the construction activities for Train Four have commenced and are on track for delivery in H2 2011.

Development drilling and well completion activities are progressing with three drilling rigs and one completion rig operating in the Rajasthan block.

Cairn India has successfully drilled and completed 11 horizontal wells in the Mangala field and all have been put on production. A total of 143 Mangala development wells have been drilled to date, of which 85 have been completed and 62 are currently producing.

Work on the development of the Bhagyam field, the second largest discovery in Rajasthan, has commenced. Development drilling has started with a total of 30 Bhagyam wells drilled to date. Crude oil production from the Bhagyam field is expected to commence in H2 2011 and achieve the FDP approved plateau rate of 40,000 bopd by the end of 2011.

As a result of an increase in the estimated reserves and resources, an assessment of the plateau production potential and design optimisation of the Aishwariya field facilities is currently underway. Production is currently scheduled to commence in H2 2012, subject to obtaining all the necessary approvals.

Exploration

Frontier exploration drilling in Sri Lanka, block SL 2007-01-001 (Cairn India - 100%, Operator), is planned to commence in August. A drillship has been contracted and preparations are ongoing. 

Greenland

Cairn is planning to carry out an exploration drilling programme of up to four exploration wells offshore Greenland in the summer of 2011. This programme follows on from the 2010 three well exploration programme offshore west Greenland in the Baffin Bay basin. 

During 2010, Cairn acquired more than 15,000km of 2D seismic over various areas offshore, north west, west, and south Greenland, bringing its total 2D seismic database in Greenland to more than 85,000km.

For reasons of operational flexibility, evaluation efforts are focused on maintaining up to seven separate potential exploration well locations in a variety of operating environments and geological settings for as long as possible.  The prospect inventory is being finalised for the various target options in the different locations.  Unrisked mean prospective resources range from 0.35 billion to >1 billion barrels for each prospect.  The final selection of prospects and well targets for the 2011 exploration campaign will be announced later this month.  These will include a well in each of the Atammik and Lady Franklin blocks.  

The 2011 drilling programme will once again utilise a dual rig strategy with an emphasis on safety as well as providing increased operational capability and flexibility.  The primary vessel, the 'Ocean Rig Corcovado,' is a 'state-of-the-art' high efficiency, sixth generation dynamically positioned drillship. The second vessel, the 'Leiv Eiriksson', is a fifth generation dynamically positioned semi-submersible. Both rigs are designed and equipped for working in harsh environments.

A number of other vessels have been selected to provide additional operational support including cover for emergency response, rig stand-by, ice management, oil spill response, re-supply operations and helicopter support.

Cairn also plans to undertake up to three 3D seismic surveys planned offshore Greenland in 2011.  One will be in the north of Baffin Bay, one in the south of Greenland and one location will be decided upon based on operational results

West Disko Blocks

Cairn continues to evaluate the results of its 2010 exploration campaign on the Sigguk Block in the Disko Bay area.  The wells found both gas (biogenic and thermogenic) and oil (geochemical evaluation has now identified three oil types) although significant target reservoir rocks were not encountered. The Alpha-1S1 exploration well was suspended to allow possible re-entry to sidetrack or deepen the well at a later date.

Atammik and Lady Franklin blocks

In January 2011, the Government of Greenland confirmed Cairn as the Operator of the Atammik and Lady Franklin blocks and Cairn has acquired the 47.5% interest previously held by Encana. The participating interests in these two blocks are now Cairn (Operator) 87.5% and Nunaoil 12.5%.

The operatorship of the Lady Franklin and Atammik blocks provides additional prospectivity and operational flexibility as these blocks are ice free for up to 10 months per year.  Cairn's exploration programme for 2011 includes drilling a well in each of the Atammik and Lady Franklin blocks.

Southern Greenland

The 2011 programme includes acquiring 3D seismic in some of these blocks.

Forthcoming Greenland Site Visit 23 - 25 May 2011

Cairn Energy PLC is hosting a visit to Greenland for analysts and investors from 23-25 May 2011. 

A webcast of the presentation given to analysts and investors will be available on Tuesday 24 May 2011 on the Cairn Energy PLC website: www.cairnenergy.com.  It will also be available as a telephone recording that you may listen to by calling [phone] and using the passcode 492 319 6#.

A transcript will be available on the website as soon as possible after the event.

Spain

The Spanish Government has awarded Cairn two hydrocarbon exploration licences comprising five contiguous offshore blocks in the Gulf of Valencia area. The total combined area covered by these licences is approximately 3,992km² and the water depths range from 50 metres to more than 1,000 metres.  Cairn has a 100% interest in these blocks.

Cairn is in the very early stages of the exploration process and during the initial two year period will be evaluating and consolidating existing data, as a result of which the Company will consider implementing offshore research in the second discretionary phase.

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:

Cairn Energy PLC

Ø Cairn Energy PLC ("Cairn") is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange. Following the IPO of Cairn India in January 2007, there are two separate arms to the business:

o  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 62.2% interest in Cairn India.

o  Capricorn Oil Limited ("Capricorn"), a 100% subsidiary of Cairn, is focused on exploration. Capricorn 
has assets in Nepal, Greenland, Albania and Spain.

Ø "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries (including Cairn India and Capricorn), as appropriate.

Ø "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 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.

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

 

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