Final Results - Year Ended 31 December 1999 - Pt 1

Cairn Energy PLC
8 March 2000


PART I

CAIRN ENERGY PLC

PRELIMINARY RESULTS ANNOUNCEMENT


HIGHLIGHTS - RECORD TURNOVER, PRODUCTION & PROFITS


*    Turnover up 87% to £76.8m

*    Average daily production up 59% to 21,196 boepd

*    Operating cashflow quadrupled to £36.6m

*    Operating profit before exceptionals of £24.7m

*    £26.7m spent on share buy-backs

*    Drilling success in Sangu and Rajasthan

*    Enhanced acreage position in India


Bill Gammell, Chief Executive, commented:

'These strong results reflect a rationalisation of the Group's
portfolio as well as an emphasis on profit and cash
generation. Cairn is now extremely well positioned to benefit
from the strategic value of its core position in the Indian
sub-continent.'



Note: 'Cairn' as referred to throughout this announcement
means Cairn Energy PLC and/or its subsidiaries as appropriate.


Enquiries to:

Cairn Energy PLC:-
Bill Gammell, Chief Executive    Tel: mobile [phone]
Mike Watts, Exploration
    & New Business Director      Tel: mobile [phone]
Kevin Hart, Finance Director     Tel: mobile [phone]
Maryth Guild, 
Assistant Company Secretary      Tel: mobile [phone]

Buchanan Communications:-
Isabel  Petre                    Tel:  [phone]


CHAIRMAN'S STATEMENT

Results
1999 saw a strong recovery for Cairn. Average daily production
for the year increased by 59% to a record 21,196 boepd. Group
turnover increased by 87% year on year to £76.8m and operating
cash flow quadrupled to a record £36.6m. Operating profit on
continuing operations before exceptional items was £24.7m
(1998: £2.8m). Profit after tax was a record £16.3m. The Group
benefited from a higher average price per boe of £9.64 (1998:
£8.44).

The results demonstrate that the Group's cashflow and
profitability are robust in both high and low oil price
environments.  Production costs are down 10% to a record low
of £3.16 per boe. The Group's two main producing fields, Ravva
and Sangu, also provide contractual downside price protection.

Sangu production steadily increased during 1999 resulting in a
full year average of 103 MMscfd. Average production for the
first two months of 2000 was 142 MMscfd with a substantially
higher sales gas price compared to the equivalent period in
1999.

Despite the continued strength of the oil price and record
Group production and profits Cairn continues to trade at a
discount to asset value. During November and December 1999 the
Company purchased over 20 million of its own shares in the
market at a cost of £26.7m at prices ranging from £1.30 to
£1.40 per share. The Board intends to seek additional
authority at the 2000 Annual General Meeting to continue to
buy back shares.

Strategy
In order to create shareholder value in a cyclical industry,
exploration and production companies must have a compelling
competitive edge. Cairn's core area of focus is the Indian sub-
continent where the Group has built a commanding strategic
position over the last eight years. Cairn's acreage positions
in India and Bangladesh have significant exploration upside
potential and the Group is poised to take full advantage of
rapidly growing energy markets.

Cairn's strategy in Bangladesh has been to provide domestic
energy solutions and ally with value-adding partners.  In
parallel with satisfying the domestic market, Cairn has sought
to demonstrate the reserve potential for gas export together
with other companies in the industry who share the same
vision.  This strategy has recently been rewarded with the
discovery of additional reserves in the South Sangu-1 well
which is currently targeting additional potential pay zones in
deeper  overpressured reservoirs.

Negotiations between the Cairn/Shell Joint Venture and the
Government of Bangladesh for Production Sharing Contracts
('PSCs') for Blocks 5 and 10 are nearing completion.

In India, Cairn's strategy has been to establish early
production and utilise the resultant cashflow in an
exploration programme with high impact potential. During 1999,
formal consent was received for a 50,000 bopd rate at Ravva,
and a development plan was submitted to the Indian Government
for the production and sale of additional, shallow non-
associated gas volumes. The Ravva field produces approximately
8% of India's domestic oil production.

The Cairn/Shell Joint Venture had success with the Guda-2
exploration well in Block RJ-ON-90/1 onshore Rajasthan, which
was the first oil discovery by a foreign oil company since the
commencement of licensing rounds in 1981. After completing
intensive seismic programmes, new exploration wells are
targeted for Q4 2000 in Rajasthan, Block CB-OS/2 in the Cambay
Basin offshore Western India and Block KG-OS/6 in the Krishna-
Godavari Basin ('K-G Basin') offshore Eastern India. In
addition, Cairn has recently been awarded a 100% interest in
Block KG-DWN-98/2 which lies to the south of Ravva and is
adjacent to Block KG-OS/6.

Board
I am pleased to report that Norman Murray was appointed to the
Board as Non-Executive Director in October 1999. Mr Murray's
appointment adds to the expertise, strength and independence
of the non-executive element of the Board.

Outlook
It is anticipated that Cairn's strategy of seeking to add
value for shareholders through its high impact exploration
programme in the Indian sub-continent will provide additional
growth during the next twelve months. This strategy is
supported by strong, long-life cashflow from low operating
cost producing properties.


Norman Lessels CBE
Chairman

7 March 2000

OPERATIONAL REVIEW

Cairn operates the Ravva oil and gas field offshore India and
has a substantial interest in the Sangu gas field offshore
Bangladesh. In addition, the Group has non-operated interests
in producing properties in the UK and Dutch sectors of the
North Sea.

The Group's exploration interests are primarily in the Indian
sub-continent, specifically Bangladesh, Eastern India and
Western India (including Rajasthan). The Group disposed of all
of its interest in its Chinese exploration assets, Blocks
15/26 and 15/35, to Santa Fe Snyder Corporation ('SFS') in
November 1999.

Reserves
The table below shows reserves information on an entitlement
basis for the Group.

                             Reserves as at    Reserves as at
                            31 December 1999     31 December
                                  Mboe              1998
                                                    Mboe
North Sea                         6,465             7,766
South Asia                       79,816            89,484
Total                            86,281            97,250

On a direct working interest basis, reserves as at 31 December
1999 totalled 111,800 Mboe (1998: 119,987 Mboe).

BANGLADESH

Cairn's operations in Bangladesh made significant progress
during 1999. The transfer of operatorship to Shell was
completed with effect from 1 July 1999; contractual
relinquishments of acreage in Blocks 15 and 16 were made;
negotiations commenced for PSCs for Blocks 5 and 10 and are
nearing completion; there was a substantial increase in
average daily production from the Sangu field, and the Group
commenced an offshore drilling programme.

The first well in the offshore drilling programme, South Sangu-
1, in which Cairn was carried 100% by Shell, commenced in
September 1999 utilising Cairn's drilling rig, the EEIV. The
well discovered an extension of the Sangu gas field in January
2000 and is currently operating in deeper horizons. The next
well in the five well sequence will be Sandwip-1 on Block 15.

Offtake from the Sangu field (Cairn 37.5%) was lower than
anticipated for the first half of 1999, averaging 96 MMscfd,
but increased significantly in the second half resulting in a
full year average of 103 MMscfd. This compares with a minimum
average daily take or pay requirement in the Sangu Gas Sales
and Purchase Agreement ('GSPA') of 128 MMscfd. Offtake for the
first two months of 2000 has averaged 142 MMscfd and a record
daily production level of 211 MMscf was achieved on 22
February 2000. Production volumes are published monthly on the
Company's website.

Under the terms of the GSPA an invoice for the 1999 deficiency
volume (which is the take or pay volume less the actual sales
volume for the contract year), offset by any make-up volume
above 128 MMscfd produced during Q1 2000, will be submitted to
PetroBangla on 10 April 2000. Cairn's net share is currently
estimated to be $4m (£2.5m).

In addition, there is a reserve dependent provision
in the GSPA to increase the Daily Contract Quantity ('DCQ') to
200 MMscfd. In view of reserve additions from the Sangu field
development phase and further likely additions from the
results of the South Sangu-1 well to date, the Cairn/Shell
Joint Venture is currently negotiating an increased DCQ with
PetroBangla.

INDIA

The Group's Indian position has been considerably
strengthened, primarily as a result of increased exploration
acreage. The Company has demonstrated that it is capable of
moving quickly to secure material positions in highly
prospective areas. The Board believes that India may have
significant exploration upside potential and it therefore
remains a core area for the Group.

Eastern India
Cairn operates two Blocks and has recently been awarded a
further Block in the K-G Basin offshore Eastern India.

Cairn has a 22.5% operated interest in the Ravva oil and gas
field which produced an average of 49,500 bopd and 25 MMscfd
of associated and non-associated gas during 1999. Formal
consent was received in the first half of 1999 to maintain
production from the Ravva field at a rate of 50,000 bopd.
Ravva cumulative production reached 50 million barrels of oil
on 22 February 2000.

Cairn has submitted a development plan to the Ravva joint
venture and the Indian Government seeking approval to develop
the non-associated gas from satellite fields in the Ravva
Contract Area. Assuming all required approvals are received
early in 2000, Cairn anticipates delivering first gas from
this incremental development by July 2001.

At the end of 1999, Cairn commenced a 310 km2 3D seismic
survey over the entire Ravva Contract Area, with the intention
of defining additional reserves through an exploration and
appraisal programme planned for 2001.

Cairn also operates the KG-OS/6 Contract Area (Cairn 50%)
adjacent to the Ravva field in the K-G Basin, where it
acquired and processed 1,500 km of 2D seismic data and
reprocessed 3,400 km of data during 1999. This has led to a
much enhanced database over the 6,090 km2 Contract Area and
identification of a number of leads and prospects. A further
750 km2 of 3D seismic data will be acquired and processed
during the first half of 2000 to support commencement of
exploration drilling in Q4 2000.

In January 2000 Cairn was awarded Block KG-DWN-98/2, also in
the K-G Basin, pursuant to India's New Exploration Licensing
Policy ('NELP'). Cairn has a 100% interest in the Block, which
lies to the south of the Ravva field and is adjacent to Block
KG-OS/6, thereby consolidating and complementing the Group's
existing interests offshore Eastern India and its strategy of
further developing the K-G Basin as a core area.

Western India
During the year Cairn increased its equity interest in two
acreage blocks in Western India, namely Block RJ-ON-90/1
onshore Rajasthan and Block CB-OS/2 in the Cambay Basin
offshore Western India, to 50% and 75% respectively.

Cairn funded the first of two Shell operated wells that were
drilled on Block RJ-ON-90/1 during 1999, thereby earning a
27.5% interest in the Block. Encouraged by the results of the
first well, which was plugged and abandoned with oil shows,
Cairn increased its interest to 50% in exchange for paying the
first $2.1m costs of drilling the second well, Guda-2. The
Guda-2 well flowed oil to surface at a stabilised rate of
2,000 bopd during a 36 hour test and was completed as a
potential future producer. This was the first oil discovery
made in India by a foreign oil company since the commencement
of licensing rounds in 1981.

Cairn assumed operatorship of Block RJ-ON-90/1 with effect
from 1 January 2000 and is undertaking a comprehensive seismic
acquisition programme consisting of 1,000 km of 2D seismic
across the Contract Area and 200 km2 of 3D seismic adjacent to
the Guda discovery. Further drilling is planned to commence in
Q4 2000.

Cairn increased its operated interest in Block CB-OS/2 from
45% to 75% by acquiring an additional 30% interest from TATA
Petrodyne Limited and completed a 2,500 km 2D seismic
acquisition programme on the Block in Q1 2000 with a view to
commencing drilling an exploration well in Q4 2000.

NORTH SEA

Cairn's 1999 net production from the Gryphon field in Block
9/18b, in which it has a 10% interest, averaged 2,039 bopd
(1998: 2,512 bopd). A 115 km2 4-C 3D seismic survey was
conducted over the Gryphon field and its associated satellites
during 1999. The Gryphon field operator conducted a workover
on the W4 injector well in late 1999 pursuant to which water
injection was re-established.

Two delineation wells,  9/18b-31Z and 9/18b-31Y, were drilled
during Q1 2000, and both have been plugged and abandoned. A
third well, 9/18b-31X, drilled as a pilot hole for a potential
producer, has also been plugged and abandoned. In light of
these results the Gryphon Joint Venture is currently
considering its options with regard to further drilling during
2000.

Cairn's 1999 Netherlands net production averaged 1,823 boepd
(1998: 2,130 boepd). The decrease was due to the natural
decline of the fields. Agreement was reached in November 1999
between the P6 and Q4 groups regarding the processing and
transportation of Q4 gas via the P6 platform and pipeline.  As
well as providing tariff income for the P6 co-venturers the
agreement should extend the economic life of both P6 (Cairn
9.75%) and P12 (Cairn 6.944%).

During the year, operators of Cairn's Netherlands acreage
interests drilled two wells. P12-6 (ST1), an appraisal side
track, was plugged and abandoned. P9-8, an exploration well,
tested gas during May 1999 and although volumes are currently
estimated to be sub-commercial, the well has been suspended as
a potential tie-back in the event of future exploration
success in the vicinity. Drilling commenced in January 2000 on
P6-SW Extension, an appraisal/development well on P6 which is
currently operating.

FINANCIAL REVIEW

First half and full year results demonstrate that the Group's
cashflow generation and profitability are robust in both a
high and low oil price environment due to the low production
costs and contractual downside price protection applicable to
the Group's two main producing fields, Ravva and Sangu.

                                                        %
Key Statistics                1999         1998     Increase/
                                                   (Decrease)
                                                        
Production (boepd)           21,196       13,330       59
Average price per boe (£)     9.64         8.44        14
Turnover (£m)                 76.8         41.0        87
Average production  costs     3.16         3.52       (10)
per boe (£)
Gross profit (£m)             31.8         11.5        177
Operating cashflow (£m)       36.6         9.3         294

Turnover/Gross Profit
Turnover has increased by 87% year on year to £76.8m,
primarily as a result of increased average daily production
volumes and a significantly improved oil price environment.

Total production for the year was a record 7,737 Mboe (1998:
4,866 Mboe), up 59% on 1998 due to increased production from
Ravva and Sangu.

Operating Profit
Operating profit before exceptional items was £24.7m (1998:
£2.8m).

The Board has continued its conservative approach to asset
values, maintaining its flat long-term real oil price
assumption of $12/bbl for the purposes of Financial Reporting
Standard ('FRS') 11.  Despite retaining this prudent
assumption, an exceptional write-back of £2.6m has been
credited to the profit and loss account in respect of the
North Sea producing pool.  This write-back is mainly as a
consequence of the P6 field in the Netherlands securing
additional third party tariff income, thus enhancing
underlying value.

The Board considered it appropriate to write-off the entire
value of the Group's Chinese exploration assets following the
disposal of these assets to SFS. This write-off has been
netted against the FRS11 write-back.

A depreciation charge of £3.1m is included for the first time
for the EEIV following commencement of operations with the rig
in Bangladesh. In addition, the EEIV has been written-down by
£2.3m to be valued at £15.5m, excluding inventory, which is
its deemed value in use.

The results include an exceptional administration charge of
£1.6m relating to the Group's share of the costs associated
with the transfer of operatorship to Shell and costs incurred
in the restructuring of the Group.

After exceptionals, the Group generated an operating profit of
£19.6m (1998: loss £58.4m).

Profit for the Year
Administrative expenses for the year were £7.1m excluding
exceptional costs (1998: £8.7m).

The Group disposed of its entire shareholding in SOCO
International plc in December 1999, realising a net gain of
£2.1m.

Net interest received was £1.3m (1998: net paid £1.2m),
including a foreign currency exchange gain of £1.0m (1998:
loss £0.4m).

The majority of the £6.7m tax charge (1998: £3.6m) arises on
profits in India. This resulted in profit after tax of £16.3m
(1998: loss £74.8m).

Cashflow
Group net cash inflow from operations was a record £36.6m
(1998: £9.3m).

Proceeds of £39.4m from the sale in 1998 of part of the
Group's assets in Bangladesh to Shell and £13.4m of associated
back costs were received in January 1999, and were
subsequently utilised to repay outstanding bank debt.

During November and December 1999, the Company purchased over
20 million of its own shares in the market at a cost of
£26.7m.

Capital Expenditure
Capital expenditure during 1999 was £29.9m.  The majority of
capital expenditure was spent on exploration activities.  The
Group continues to benefit from a carried position in
Bangladesh.

Net Debt and Gearing
Group net debt at 31 December 1999 was £9.6m (1998: £31.6m)
which represents a balance sheet gearing of 3.8% at that date
(1998: 12.3%).

Minimal gearing and substantial operating cashflow provide the
financial strength and flexibility to allow the Group to
pursue further opportunities in its chosen strategic areas.



Kevin Hart
Finance Director

MORE TO FOLLOW

FR DGGGFNNDGGZM