Operational Update

RNS Number : 1504A

Cairn Energy PLC

27 January 2011

 



FOR IMMEDIATE RELEASE                                                                                            27 January 2011

CAIRN ENERGY PLC ("Cairn")

Operational Update

Cairn intends to announce its preliminary results for the year to 31 December 2010 on Tuesday 22 March 2011.  In advance of these results, Cairn is providing information on recent operations and guidance in respect of the Group's trading performance in 2010.  This information is unaudited and is subject to further review.

2010 Group Production

Gross daily production for 2010 of 130,952 barrels of oil equivalent per day (boepd) represents an increase of 70% from daily production in 2009.

Production (boepd)	Rajasthan	Ravva	CB/OS-2	Sangu*	Total
Gross field	76,171	37,953	12,225	4,603	130,952
Working interest	53,319	8,539	4,890	1,726	68,475
Entitlement interest	56,408	4,251	3,479	1,154	65,292

*the disposal of Cairn Energy Sangu Field completed on 20 December 2010

Fourth Quarter 2010 Group Production

Production (boepd)	Rajasthan	Ravva	CB/OS-2	Sangu*	Total
Gross field	124,822	39,434	9,988	2,571	176,815
Working interest	87,376	8,873	3,995	964	101,208
Entitlement interest	92,256	4,328	2,890	775	100,249

*the disposal of Cairn Energy Sangu Field completed on 20 December 2010

In 2010 Group production sold was 63,359 boepd on an entitlement basis, realising an average price per barrel of oil equivalent (boe) of US $69.18 (2009: $50.02).

COMMENTARY

Finance

At 31 December 2010 the Group's net cash balances were US $404 million (m).  Cairn India had net cash of US $217m, comprising US $891m cash and US $674m debt.  PLC / Capricorn's net cash balances were US $187m.

The Mangala field in Rajasthan commenced pipeline sales in June 2010 and since then gross field revenues are approaching US $1.6 billion.

Costs to Cairn for the 2010 Greenland drilling programme were in the region of US $400m, in line with previous guidance.

Completion of the proposed transaction with Vedanta Resources Plc ("Vedanta") will provide the Group with the funding to continue an active programme offshore Greenland, consider other opportunities and return a substantial proportion of the proceeds to shareholders. 

To provide the liquidity required to enable the Group to agree contracts for two state of the art drilling vessels for its 2011 dual rig exploration programme offshore Greenland, Cairn has entered into a stand-by secured revolving debt facility of US $900 million, which will also provide funding for general corporate purposes.  The facility is provided by Standard Chartered Bank, Bank of Scotland Plc, Crédit Agricole Corporate and Investment Bank, HSBC Bank PLC and Société Générale.

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.  Cairn currently expects to conclude the transaction before 15 April 2011.

At the Company's general meeting held on the 7 October 2010, shareholders voted overwhelmingly in favour (99%) of approving the proposed part sale of Cairn's shareholding in Cairn India to Vedanta.

At the Vedanta general meeting held on 13 December 2010, shareholders voted overwhelmingly in favour (97.35%) of approving the proposed part sale of Cairn's shareholding in Cairn India to Vedanta.

OPERATIONAL

India

Ø Cairn India has completed more than one year of successful production from the Mangala field and achieved in excess of 27.5 million barrels (mmbbls) of oil sales to domestic refiners - current production 125,000 bopd

Ø Mangala development drilling - 122 development wells drilled to date, of which 81 are complete

Ø The Mangala Enhanced Oil Recovery (EOR) pilot production and injection wells have been drilled and completed - pilot production and injection commenced in Q3 2010

Ø The Bhagyam development has commenced with 11 wells drilled and contracts have been awarded for the construction of Train Four at the Mangala Processing Terminal

Greenland

Ø In December 2010 the Government of Greenland announced the results of the Baffin Bay Bid Round. Cairn was awarded three blocks called Ingoraq, Napariaq and Pitu.  Other recipients of block awards included Shell, Statoil, GDF, Conoco-Phillips and Maersk

Ø 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 entitlement interests in these two blocks are now Cairn (Operator) 87.5% and Nunaoil 12.5%

Ø The acquisition of the Lady Franklin and Atammik blocks provide additional prospectivity and operational flexibility as these blocks are usually free of sea ice all year round

Ø Cairn now holds 102,000 km² in Greenland which is equivalent to 15 quadrants in the UK North Sea

Ø Cairn continues to evaluate the results of its 2010 three well exploration drilling campaign on the Sigguk Block in the Disko Bay area.  The wells found both gas (biogenic and thermogenic gas) and oil (geochemical evaluation has now identified three oil types) although significant target reservoir rocks were not encountered. 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 During 2010 Cairn acquired more than 15,000 km of 2D seismic on the Eqqua, Ingoraq, Napariaq, Pitu, Sigguk and offshore south Greenland blocks, bringing its total 2D seismic database in Greenland to over 30,000 km

Ø Cairn has secured two state of the art dynamically positioned drilling vessels for its planned 2011 dual rig exploration programme offshore Greenland.  The "Leiv Eiriksson", a fifth generation semi-submersible drilling rig and the "Ocean Rig Corcovado", a sixth generation drillship, have been contracted to operate in the 2011 drilling season on Cairn's offshore Greenland exploration programme.  Both drilling vessels are operated by Ocean Rig. By contracting two vessels Cairn has increased operational capability and flexibility and continues to demonstrate its focus on safety

Ø Subject to approval from the Government of Greenland, Cairn plans to drill up to four exploration wells in 2011. For reasons of operational flexibility evaluation efforts are focused on maintaining between 10 and 12 separate potential exploration well locations in a variety of operating environments and geological settings for as long as possible. The final selection of prospects and well targets for the proposed 2011 exploration campaign will be made in May 2011

Ø Cairn has now been operating offshore operations in Greenland for thirteen consecutive months so demonstrating the capability of all year round work - current activity is focused on acquiring environmental survey data in preparation for the 2011 drilling programme

Ø Cairn plans to undertake a 3D seismic acquisition programme in Greenland during 2011, subject to the necessary approvals. Two 3D seismic survey vessels are expected to be contracted to acquire up to five separate 3D surveys in different areas

Ø Negotiations are underway with oilfield service contractors to provide the necessary support for the 2011 exploration programme and Environmental and Social Impact studies are ongoing

Mediterranean

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

Bangladesh

Ø On 20 December the disposal of Cairn Energy Sangu Field Limited to the Australian oil and gas exploration and production company Santos Ltd. was completed and Cairn no longer holds any interest in Bangladesh

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

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

In Greenland the results from our 2010 drilling programme were encouraging and the goal of our future exploration efforts will be to establish reservoir and potential commercial resources. We are delighted to have secured two state of the art drilling vessels for the 2011 programme."

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.

Ø 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 62.37% interest in Cairn India.

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

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

 

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