Interim Management Statement

RNS Number : 1645H

Cairn Energy PLC

15 May 2014

 



For Immediate Release                                                                                   15 May 2014

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

Interim Management Statement

Cairn intends to announce its half year results for the six months to 30 June 2014 on Tuesday 19 August 2014.  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 has reached a key milestone for the Kraken and Catcher fields in the North Sea.

BNP Paribas has agreed to fully underwrite a debt facility to part fund the development of the North Sea assets.  The cash flow from these fields will underpin delivery of future exploration programmes with appropriate capital allocation within a balanced portfolio.

The current fully funded programme continues with the first of two planned exploration wells in Senegal while in India the Company is actively seeking resolution of the Indian tax matter."  

Highlights

Finance

Ø Cairn has entered into an agreement with BNP Paribas who will fully underwrite a seven year debt facility of US$575m which, subject to final documentation, will be available to fund part of the Catcher and Kraken development projects and as letters of credit or bank guarantees required for Cairn's operational activity.

Ø Group net cash at 31 March 2014 of US$1.2bn.

Ø By end 2017, Cairn expects to have spent approximately US$1bn on its development assets, funded by existing cash resources and debt.

Ø ~10% residual shareholding in Cairn India Limited (CIL) valued at ~US$1.1bn at 31 December 2013 which, while interactions are ongoing with the Indian Income Tax Department, Cairn is currently not able to sell. 

Exploration

Ø The first of two planned exploration wells offshore Senegal (Cairn 40% WI) began in April.

Ø One exploration well is planned to commence on the Cap Boujdour Contract Area (Cairn 20% WI) in Q4 2014 with Kosmos Energy (operator) and the Moroccan National Oil Company (ONHYM).

Ø Two non-operated North Sea exploration wells (Aragon (Cairn 32.5% WI) and West of Kraken (Cairn 25% WI)) are scheduled in 2014 with one further well (Tulla) scheduled for 2015 (Cairn 50% WI).

North Sea development

Ø The Catcher FDP has received board approvals from all the JV partners and DECC approval is expected shortly (Cairn 30% WI) with first oil targeted mid 2017.

Ø The Kraken development is progressing on schedule with first oil expected H2 2016/H1 2017 (Cairn 25% WI).

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 2014, the Company's net cash balance stood at US$1.2bn. 

Debt facility

Cairn has entered into an agreement with BNP Paribas who will fully underwrite a seven year debt facility of US$575m which, subject to final documentation, will be available to fund part of the Catcher and Kraken development projects and as letters of credit or bank guarantees required for Cairn's operational activity. The amount available to fund the Catcher and Kraken development projects will be determined by standard reserves based lending calculations and by reaching certain project milestones, and the amount available as letters of credit or bank guarantees will be up to a maximum of US$175m. BNP Paribas is commencing the process of syndicating the loan facility, with syndication and final documentation expected to be completed in H1 2014. 

India

In January 2014, Cairn received a request from the Indian Income Tax Department for information relating to a group reorganisation completed in 2006. This reorganisation was compliant with tax legislation in place at the time in each relevant jurisdiction, including India.

The Indian Income Tax Department has cited legislation introduced in 2012, with retrospective effect, as the reason for these current enquiries.  While these are being dealt with, Cairn has been denied access to the value of its shareholding in Cairn India Limited (CIL), either through disposal or future dividend income which will be assessed for impairment at the next reporting date. 

Cairn continues to engage with the Indian Income Tax department and will also pursue the matter with the Indian Government formed after the result of the Indian General Election is announced on May 16, 2014.  Cairn UK Holdings Ltd (CUHL) has filed a nil return for the year in question on the grounds that none of the transactions undertaken by it during that fiscal year is chargeable to tax in India.  As announced in April Cairn has received two further notices from the Indian Income Tax Department: a request to Cairn Energy PLC to file a tax return for the Indian fiscal year ended 31 March 2007 and a notice to CUHL to show cause for not withholding tax on dividends paid to its parent company, Cairn Energy PLC. Cairn has filed a nil return for the 2006-7 year.

Board

As previously announced, as part of the Company's long term succession planning, Sir Bill Gammell, Chairman, Dr Mike Watts, Deputy CEO, and Jann Brown, Managing Director and CFO will not seek re-election and will stand down as Executive Directors of the Company with effect from the AGM today.  In addition, Dr James Buckee has decided not to stand for re-election at the AGM.  Ian Tyler and James Smith will take over the roles of Chairman and Finance Director, respectively, with effect from the conclusion of the AGM.

OPERATIONS
Exploration - Atlantic Margin

Senegal

Cairn's planned two well exploration programme offshore Senegal began in April using the 'Cajun Express,' a 5th generation semi-submersible drilling unit. 

Operations continue on the FAN-1 well, located on the North Fan Prospect in 1,427m water depth in the Sangomar Deep block approximately 100km offshore Senegal. This well is targeting multiple stacked deepwater fans. 

In light of required rig maintenance and to optimise the rig schedule, the top hole section has also been drilled on the second exploration well SNE-1, located on the Shelf Edge Prospect in 1,100m of water.  The rig has returned to FAN-1 to continue drilling the deeper sections. After drilling operations on FAN-1 are complete the rig will then return to the SNE-1 location.

Cairn (Operator) has a 40% WI in the three blocks offshore Senegal (Sangomar Deep, Sangomar Offshore, Rufisque Offshore) and is working with JV partners: ConocoPhillips 35% WI; FAR Ltd 15% WI and Petrosen, the Senegal National Oil Company, retaining a 10% WI in the exploration phase. In the event of a commercial success, ConocoPhillips will have the option to operate the future development of the resource. 

Morocco

Cairn has established a position in both the Jurassic carbonate shelf and the emerging deep-water Mesozoic clastic exploration plays. The region is attracting industry interest, with other operators taking licences in the area and the industry planning to drill ~10 wells to 2016.

Cairn has drilled two wells in Morocco in 2013/14 and is planning a well on the Cap Boujdour Permit with its joint venture partner Kosmos Energy. The Cap Boujdour Permit (Cairn WI 20%, non operator) operated by Kosmos and partnered by ONHYM is located ~50km offshore and covers an area of 22,265km² in the Aaiun Basin in water depths of 1,000 - 3,000m.  The permit is covered by a regional 2D grid and 2,000km² of 3D seismic surveys and preparations are being made for a further exploration 3D survey.

Kosmos has identified several prospects within the existing 3D area, with the largest of these, Gargaa, targeted for drilling to commence in Q4 2014.

The two earlier wells in Morocco were both plugged and abandoned. One of the wells (FD-1 (Cairn 50% WI, Operator)) confirmed an active thermogenic petroleum system; however, it did not encounter clastic reservoirs in the target interval. The other well (JM-1 (Cairn WI 37.5%, Operator)) confirmed the presence in the secondary objective of heavy oil over a gross interval of 110 metres as originally tested in the 1968 MO-2 well, some 2km from the JM-1 well.  Traces of light oil were found in the fractures in the Middle Jurassic primary objective; however, the ~200 metres of limestone penetrated had poor reservoir quality. Work is ongoing to assimilate the core and log data from JM-1 with the other three wells on the Cap Juby structure to evaluate the extent of moveable hydrocarbons and how any further assessment should be conducted.

Mauritania

Interpretation and mapping of the 3,500km² 3D seismic on block C19 offshore Mauritania, which Cairn farmed into in H2 2013 with Chariot Oil and Gas, is ongoing.

Ireland

Due to the availability of the Blackford Dolphin rig, timing of the Spanish Point appraisal well offshore West of Ireland (Cairn 38% WI, Operator) is under review and will now be drilled subject to rig scheduling and regulatory approval.

Tenders have been submitted and planning is under way for a minimum 500km² 3D seismic survey to begin in Q2 2014 on acreage adjacent to the Spanish Point discovery on exploration licence FEL 1/14 (Cairn 38% WI, Operator).  

Greenland

Cairn remains encouraged by the opportunity in the Pitu exploration block (Cairn 56.875% WI, Operator), with combined prospects within the 3D area confirming a potential multi-billion boe prospective resource, and is targeting a drilling decision in 2015. The mapping and evaluation of the 3D seismic on Pitu has identified a number of prospects. 

Exploration - UK and Norwegian North Sea

Two firm non operated exploration wells are currently planned to be drilled in the UK sector in 2014 and one in 2015:

Ø Aragon (UK Continental Shelf (UKCS), MPX operator during exploration phase, Cairn 32.5% WI) due to commence Q2 2014

Ø West of Kraken (UKCS, EnQuest operator, Cairn 25% WI) due to commence Q3 2014

Ø Tulla (UKCS, TAQA operator, Cairn 50% WI) due to commence Q1 2015

Development - UK and Norwegian North Sea

UK

Work is continuing on the Kraken development (Cairn 25% WI) targeting first oil in H2 2016/H1 2017 with EnQuest as operator.  The detailed locations for the initial development wells from the first two drill centres (DC1 and DC2) have been agreed.  BUMI is continuing to carry out detailed engineering of the FPSO and the donor vessel has arrived in the shipyard in Singapore. 

 
Work is continuing on the Catcher development (Cairn 30% WI) and a contract was awarded on 30 April 2014 to BW Offshore for provision of an FPSO. The Catcher FDP has received board approvals from all the JV partners and DECC approval is expected shortly (Cairn 30% WI) with first oil targeted mid 2017.

Norway

The partners on the Skarfjell licence are now examining possible development concepts for both oil and gas, together with undeveloped fields in the surrounding area.

NOTES TO EDITORS

"Cairn" or the "Group" or the "Company" as the context requires refers to Cairn Energy PLC and/or any of its subsidiaries.

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.

Cairn's business operations are now focused on frontier exploration acreage in Morocco, Senegal, Republic of Ireland, Greenland, Mauritania 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, Morocco and Senegal. 

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

Ø Cairn became a participating company in the Extractive Industry Transparency Initiative (EITI) in September 2013. The EITI is a coalition of governments, companies and civil society, who have adopted a multi-stakeholder approach to applying the EITI global standard promoting transparency of payments in the oil, gas and mining sectors http://eiti.org/

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

 

END

 

 

IMSLIFLEEFIELIS