Edinburgh oil agencysees exploration potential in North Sea
BY DENIS BEDOYA ON MAY 21, 2019NEWS SUMMARY
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CAIRN Energy chief executive Simon Thomsonhas said problems suffered with a big field off Shetland have not dented thefirm’s enthusiasm for the North Sea where it sees the potential to make bigfinds.
Bosses of Edinburgh-based Cairn faced agrilling about the Kraken field east of Shetland at the company’s annualgeneral meeting after cutting the valuation of the asset by $166 million(£130m) recently.
Cairn slashes valuation of flagship East ofShetland oil field
Noting production had lagged well behindinitial expectations one shareholder asked what had gone wrong.
Mr Thomson said the heavy oil field had beenplagued by production equipment issues. But he said Cairn has been makingprogress with partners towards improving the performance of the field, withproduction hitting 45,000 barrels per day yesterday.
After the meeting he told journalists theproblems did not in any way put Cairn off the thought of investing in otherNorth Sea field developments.
He pointed out that the Catcher field thatCairn has a stake in east of Aberdeen has been producing ahead of expectations.
North Sea heavyweight eyes growth asinvestment in giant Catcher field pays off
Mr Thomson noted that Cairn is generatinghuge amounts of cash from Kraken and Catcher. The company can use this to buildon the success it has achieved as an exploration firm working in frontierareas.
Cairn announced yesterday that it hasacquired early stage acreage off Nicaragua in Central America.
“It’s a real frontier play and thereforerelatively high risk but it’s very interesting,” said Mr Thomson.
However, he stressed that Cairn reckons thereis still exploration potential left in the well-worked waters off the UK.
“One of the wells that I’m really excitedabout this year is Chimera in the UK,” said Mr Thomson. “It’s a big prospect,relatively high risk but if it comes in it’s extremely valuable.”
Cairn sold a 40 per cent interest in Chimerato Suncor Energy last year and has had approaches from other potential farm-inpartners.
The fact there is extensive productioninfrastructure in place in the UK North Sea increases the appeal of the area.
Mr Thomson said 2018 was a landmark year forCairn, which enjoyed a first full 12 months of production from its UK assets.
BPreported to be eyeing Cairn acreage in Senegal
Thecompany has funding in place to develop the giant SNE find it made off Senegal,from which first oil is expected in 2022.
MrThomson noted Cairn has said it may look to realise some value from its stakein the field when a formal decision to proceed with the development is made bythe firm and partners in the development. A Final Investment Decision isexpected to be made in the second half of this year.
With Cairn expecting to start producing oilfrom the Nova field off Norway in 2021, the company should be well placed forgrowth regardless of the outcome of its long-running tax dispute in India.
Cairn is seeking $1.4 billion damages fromthe Indian government.
Cairn Energy shares plunge after setbackin Indian tax dispute
Mr Thomson said it was frustrating that theinternational arbitration panel that is considering the case is not expected toissue its findings until late 2019.
However, Cairn’s confidence in its case isundiminished.
Mr Thomson reiterated that Cairn expects tomake a significant payout to shareholders if it wins its claim.
Kraken was expected to produce 50,000 barrelsper day at peak when the field was brought onstream in 2017. Production lastyear averaged 30,300 bopd.
The field is operated by EnQuest, which hasnot cut its valuation of the asset.
The Catcher field is operated by Premier Oil,which increased its exposure to the North Sea amid the downturn triggered bythe crude price plunge from 2014 to 2016.
At Premier’s AGM on Thursday directors notedthe potential to bring other finds in the Catcher area onstream.
Premier suffered a revolt on executive pay atthe meeting, with 42% of votes cast opposing the company’s remuneration report.
A spokesperson said yesterday: “TheRemuneration Committee will analyse the voting outcome and will continue toengage with major shareholders to more fully understand their perspectives.”
Premier’s chief executive, Tony Durrant, hasseen his basic pay frozen since 2014 with his total remuneration heavilydependent on the company’s performance.
Cairn Energy’s remuneration report wasapproved by 96.1% of votes cast at the AGM.
Cairn Energy chief sees total pay fall 25%
Mr Thomson succeeded Cairn’s founder SirBill Gammell as chief executive of the firm in 2011.
Cairn made bumper finds in India under SirBill.
The Indian government launched a $1.6bn claimagainst Cairn in 2014, regarding events leading up to the flotation of itsformer subsidiary Cairn India in 2007.
The panel considering the dispute in TheHague had expected to issue an award soon after the conclusion of the mainmerits hearings in August until procedural matters cropped up.
(20min delay)