Interim Management Statement

RNS Number : 9429O

Cairn Energy PLC

18 October 2012

 



For Immediate Release                                                                                               18 October 2012

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

Interim Management Statement

Re-balancing the business to deliver exploration-led growth

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

Simon Thomson, Chief Executive, Cairn Energy PLC said:

"Cairn is pleased with the progress made this year in re-balancing the portfolio for exploration-led growth underpinned by sustainable cash flow.

Cairn's balance sheet strength, entrepreneurial exploration skills and operational capabilities allow it to target high impact wells across transformational frontier and mature basins whilst accessing further growth from the Company's development and production assets."

Highlights

Finance

·      Group cash at 30 September 2012 of ~US$1.6 billion (bn)

·    On-market sales of an aggregate 11.5% shareholding in Cairn India Limited (CIL) for a net cash consideration of ~US$1.3 bn.  Cairn retains ~10% shareholding in CIL with current market value of ~US$1.2 bn 

Frontier Exploration

·      Acquired two operated frontier exploration blocks in Morocco with first well targeted Q4 2013, subject to Government of Morocco approval

·      In Greenland, interpretation of 3D seismic on the Pitu Baffin Bay block and southern Greenland acreage well advanced.  Targeting exploration drilling in Pitu in 2014, subject to Government of Greenland approval

·      Farm-down of a 30.625% interest in the Pitu block to Statoil ASA now completed

·      Results expected by end 2012 on bids submitted in Cyprus and Trinidad & Tobago licensing rounds

·      Key frontier exploration blocks target >4 bn barrels of Yet to Find potential

UK and Norwegian North Sea

·      Net 2C resources totaling ~130 million barrels of oil (mmbbls) from UK and Norwegian North Sea (including Skarfjell oil discovery)

·      Active North Sea development programme in next 12 months

·      Over the next 12 months, Cairn expects to participate in multiple exploration and appraisal wells in the North Sea 

·      Cairn submitted 18 bids in the UK 27^th Licensing Round earlier this year and has participated in the Norwegian Continental Shelf APA 2012 Licence Round

Enquiries to:

Analysts / Investors
Simon Thomson, Chief Executive
Mike Watts, Deputy Chief Executive
Jann Brown, Managing Director and CFO
David Nisbet, Corporate Affairs                                                                Tel: [phone]

Media
Patrick Handley, David Litterick
Brunswick Group LLP                                                                             Tel: [phone]

FINANCE & CORPORATE

Cairn held ~US$1.6 bn in cash and cash equivalents as at 30 September 2012 which will be used to fund ongoing capital expenditure on its pre-development and exploration assets, plus new business opportunities.  This cash position follows the return of ~US$3.5 bn to shareholders in February and April; the net cash consideration paid for Agora Oil & Gas AS in May of ~US$196 million(m)* and Nautical Petroleum plc in August of ~US$558 m; and the sale of an aggregate shareholding of 11.5% in CIL (3.5% in June and 8% in September) for net proceeds of ~$1.3 bn. Cairn's residual ~10% shareholding in CIL has a current market value of ~US$1.2 bn.   

FRONTIER EXPLORATION

Cairn continues to seek to re-balance its business to deliver exploration-led growth by building a series of high-impact, sustainable exploration opportunities, underpinned by a cash flow growth engine.  The Company is currently focused on the Atlantic Margin, including Greenland and Morocco along with the Mediterranean, as it builds significant exploration opportunities.

Atlantic Margin

Greenland

The second phase of Cairn's exploration programme in Greenland is focused on the Pitu block which is located in the Melville Basin, off the North-West coast of Greenland, where there is extensive industry interest.  Interpretation of 3D seismic acquired over parts of Pitu in 2011 is well advanced. Depending on the outcome of the mapping and technical evaluation, exploration drilling of Pitu is currently targeted for 2014, subject to Government of Greenland approval.

Cairn has participated this year in a joint regional and shallow (up to 800 metre) borehole drilling programme in Baffin Bay, operated by Shell on behalf of an industry consortium which includes Conoco Phillips, GdF, Nunaoil, Maersk and Statoil. This extensive core gathering programme has now completed 11 boreholes and is providing valuable information to help stratigraphic correlations across the undrilled Melville Basin.

In South Greenland, where Cairn acquired a 3D seismic survey in 2011, interpretation of the 3D seismic is ongoing.  A seabed geochemical sampling survey is completed and the results are on their way to laboratories to be analysed.  Work is planned for 2013 to find a farm-in partner before considering any further significant activity.

Morocco                                                                                                                                               

This frontier acreage is a significant addition to Cairn's exploration portfolio and the drilling of one deep water exploration well in the Foum Draa blocks is targeted for Q4 2013.  These blocks are adjacent to and north of the Juby Maritime I - III blocks, which Cairn now operates and where a 3D seismic programme is planned for Q4 2012.

Trinidad & Tobago                                                                                                                          

Cairn and its partner, Trinity Exploration and Production, have submitted a bid in the recent Trinidad & Tobago licence round (Cairn - Operator 80%).  This is a competitive licence round with a number of other international companies seeking acreage. Results are expected later in 2012.

Mediterranean
Cairn plans to participate in the offshore Lebanon bid round, expected to be announced later this year with bids in 2013. In Cyprus, the company is participating, along with consortium partners, including Marathon Oil Company, in the current offshore competitive bid round. Awards are expected towards the end of 2012.   Cairn also holds licences in the Valencia Basin, offshore Spain.

UK AND NORWEGIAN NORTH SEA EXPLORATION

Over the next 12 months, Cairn expects to participate in multiple North Sea exploration and appraisal wells.  In seeking to build on its North Sea edge and prospective block inventory (27 offshore licences in the UK and Norway), while providing a portfolio of lower risk exploration opportunities, Cairn submitted 18 bids in the UK 27^th Licensing Round earlier this year and participated in the Norwegian Continental Shelf APA 2012 Licence Round. During 2012, six wells have been drilled and three are currently operating.

UK AND NORWEGIAN NORTH SEA PRE-DEVELOPMENT

·      Greater Catcher area (Cairn 30%) The field comprises excellent quality injectite reservoir sands. New 3D seismic data is being interpreted and, in view of its material position, Cairn is presently working very closely with the operator, Premier Oil, and other joint venture partners on the sub-surface interpretation and the development concept selection process ahead of submitting a Field Development Plan (FDP).

·      Kraken development (Cairn 25%) The Kraken oil sands are very high quality reservoirs.  Cairn and the operator, EnQuest, currently estimate gross 2C resources of 160 mmbbls with further appraisal drilling required to better define the field size. A FDP is planned for submission in 2013.

·      Mariner (Cairn 6%) The field is one of the largest undeveloped fields in the UK North Sea.  It is a heavy oil field with high well deliverability and the operator, Statoil, is working towards Project Sanction in 2012/13. Cairn's interest in block 9/11 is 6%, but the Company has an 80% operated interest in block 9/11c to the south into which Mariner may extend.

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.

Ø "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries as appropriate.

Ø The current issued share capital of Cairn is 602,417,020.

Ø Cairn currently holds approximately 10% of the issued share capital of Cairn India Limited (CIL).  Production from CIL's Rajasthan operations is 175,000 bopd.

Ø Cairn (including Capricorn) is run from Edinburgh with operational offices in London, Nuuk, Madrid, Stavanger and Kathmandu.

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 in 2010 by Cairn and five by Cairn in 2011.

Cairn in North West Europe

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 and expects to participate in the offshore Lebanon bid round later this year.

Ø Cairn is participating along with consortium partners in the current bid round offshore Cyprus.

Ø Cairn has exploration interests in Morocco with drilling targeted for Q4 2013.

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 the Business Principles, which are available on the Cairn website at http://www.cairnenergy.com/index.asp?pageid=282.

Ø Cairn's approach to sustainability and performance in accordance with the Global Reporting Initiative Guidelines is detailed in the annual Corporate Responsibility (CR) Reports, available at http://www.cairnenergy.com/index.asp?pageid=279&year=latest

For further information on Cairn please see: www.cairnenergy.com

* = total consideration was approximately US$453 m, which included 47,662,603 ordinary Cairn shares

 

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