Simon Thomson, Chief Executive, Cairn Energy PLC said:
With first oil production from its North Sea developments, Cairn continues to deliver a strong and balanced business with a growing production base supporting further development and a multi-well exploration programme offering significant growth potential.
The SNE field in Senegal is now fully-appraised and the Joint Venture is targeting Government approval of the Exploitation Plan by the end of this year.
The company continues to maintain balance sheet strength and financial flexibility as we focus on creating, adding and realising value for shareholders from a portfolio of attractive exploration, development and production assets. HIGHLIGHTS
Senegal Development
SNE field development concept select achieved with planned key milestones leading up to first oil expected in 2021-2023;
[COLOR=#666666][BCOLOR=transparent][COLOR=#666666][BCOLOR=transparent]Invitations to Tender (ITT) commenced in Q1 2018 with major Floating Production Storage and Offloading Vessel (FPSO) and subsea infrastructure contractors; a redeployed FPSO is the preferred development option[/BCOLOR][/COLOR][/BCOLOR][/COLOR]
[COLOR=#666666][BCOLOR=transparent][COLOR=#666666][BCOLOR=transparent]Evaluation Report in preparation and expected to be submitted to the Government of Senegal in H1 2018[/BCOLOR][/COLOR][/BCOLOR][/COLOR]
[COLOR=#666666][BCOLOR=transparent][COLOR=#666666][BCOLOR=transparent]Front end engineering and design (FEED) to commence in H2 2018[/BCOLOR][/COLOR][/BCOLOR][/COLOR]
[COLOR=#666666][BCOLOR=transparent][COLOR=#666666][BCOLOR=transparent]Formal transfer of Operatorship (TOO) to Woodside expected to take place in H2 2018, subject [COLOR=#666666][BCOLOR=transparent]to Government approval[/BCOLOR][/COLOR][/BCOLOR][/COLOR][/BCOLOR][/COLOR]
[COLOR=#666666][BCOLOR=transparent][COLOR=#666666][BCOLOR=transparent][COLOR=#666666][BCOLOR=transparent]Exploitation Plan targeted for submission and approval in H2 2018 with the Final Investment [COLOR=#666666][BCOLOR=transparent]Decision (FID) to follow: Cairn targeting initial production rate of ~100,000 barrels of oil per day (bopd) and estimates up to 25 wells in initial development phase, targeting ~240 mmbbls principally in S500 lower reservoir: subsequent phases targeting >250 mmbbls in the S400 upper reservoir[/BCOLOR][/COLOR][/BCOLOR][/COLOR][/BCOLOR][/COLOR][/BCOLOR][/COLOR]
Senegal Exploration & Appraisal
Five successful wells drilled in 2017 (Cairn 40% WI, Operator) in third phase of exploration and appraisal activity with operations delivered safely and successfully completed ahead of schedule and under budget
Ongoing evaluation of further Cairn operated exploration opportunities
UK & Norway Production
Catcher (Cairn 20% working interest (WI)) and Kraken (Cairn 29.5% WI) developments in the UK North Sea achieved first oil production in 2017, with total project capex expenditure estimated by the Operators to be ~30% and ~25% below original project sanction
2018 full year production, net to Cairn, estimated to be 17,000-20,000 bopd*, with ongoing project commissioning on both fields expected to be completed in H1 2018
Full capacity production expected to be achieved by mid-year, with peak net production to Cairn of 25,000 bopd, delivering significant cash flow for reinvestment
Nova development (formerly Skarfjell) (Cairn 20% WI) in Norway: JV completed FEED in 2017 and the Plan for Development and Operation (PDO) is anticipated in H1 2018
Nova first oil is targeted in H2 2021 and expected to deliver plateau production of 50,000 bopd, ~10,000 bopd net to Cairn
*excludes 4.5% FlowStream interest in Kraken production Exploration - UK & Norway
In 2017, Cairn continued to build an extensive exploration portfolio primarily focused on light oil
Exploration drilling campaign currently underway for 2018/19, with plans to drill up to ten wells over the next two years targeting more than 1.5 billion boe gross unrisked resources (~725 mmboe net to Cairn unrisked resource) across a variety of play types
Tethys exploration well (35/9-14) has reached TD and operations are continuing on well 35/9-14A
Raudåsen exploration well spudded in Q1 2018 and is currently operating
Cairn awarded non-operated interests in three new licences and one licence extension in APA 2017 in Q1 2018
Applications submitted in UK 30th Licensing Round
Exploration - International
Two new licences in the Mexico offshore bid round in H1 2017; one operated and one non-operated licence located in the prolific yet under-explored Sureste basin
Plan to drill four wells in 2019/2020 on Blocks 7 and 9 which are offsetting recent world class discoveries and targeting more than 1 billion boe gross unrisked potential
Interest in the Boujdour Maritime licence (Cairn 20% WI) offshore Western Sahara was relinquished, alongside the Operator, in Q4 2017
Cairn did not extend its Exploration Study Agreement for Area 3, Blocks 1, 2 and 3 in Malta in H1 2017
Cairn participated in one unsuccessful well on FEL 2/14 in the Porcupine basin offshore Ireland in H2 2017 (Cairn 30% WI)
Extensive new 3D acquired in West Porcupine basin during 2017
New Ventures
In Q1 2018, Cairn was awarded an operated exploration agreement (Cairn 100% WI) and is finalising the Production Sharing Contract (PSC) with Staatsolie (State Oil Company of Suriname), on acreage on the Demerara plateau offshore Suriname, with 2D seismic and contingent 3D seismic activity proposed, beginning in 2019
Financial
Group cash at 31 December 2017 US$86m
Reserves Based Lending (RBL) bank facility was undrawn at year end with expected peak availability of US$350-400m, of which US$200m was available at year end 2017
Drawings under the Norway Exploration Finance Facility of US$30m
Forecast Kraken and Catcher development expenditure for 2018 is ~US$140m* and currently committed E&A expenditure for 2018 is ~US$95m*
Outstanding Norwegian exploration rebate receivables are US$38m at 31 December 2017
* Remaining cash outflows in respect of activities undertaken in 2017 of ~US$35m are included in these forecasts Resources & Reserves
A total of 53.8 mmboe booked as 2P reserves (an increase from 51.5 mmboe in 2016 following reserves upgrade on Catcher)
An aggregate of 215.1 mmboe booked as 2C Contingent Resources (a decrease from 239.1 mmboe in 2016 mainly due to a reclassification of resources in Ireland)
India Tax Dispute
International arbitration proceedings are well advanced with the final hearing of Cairn’s claim under the UK-India Bilateral Investment Treaty scheduled for August 2018 in The Hague
The Tribunal has stated that it will make appropriate arrangements to progress with the drafting of the award as expeditiously as possible after the final hearing
Cairn is currently unable to access the value in its ~5% shareholding in Vedanta Limited (VL), valued at US$1.1billion at 31 December 2017, and the Indian Income Tax Department (IITD) continues to pursue enforcement of the tax demanded
Enquiries:
Analysts/Investors
1
David Nisbet
Corporate Affairs
0131 475 3000
Media
1
Linda Bain
Corporate Affairs, Cairn Energy PLC
0131 475 3000
2
Patrick Handley, David Litterick
Brunswick Group LLP
0207 404 5959
Webcast There will be a live audio webcast of the results presentation available to view on the website (www.cairnenergy.com) at 9am GMT. This can be viewed on PC, Mac, iPad, iPhone and Android mobile devices. An 'on demand' version of the webcast will be available on the website as soon as possible after the event. This can be viewed on PC, Mac, iPad, iPhone and Android mobile devices. Presentation The results presentation slides will be available on the website from 7:00am GMT. Conference call You can listen to the results presentation by dialling in to a listen only conference call at 9am GMT using the below dial-in details.
FAR Price at posting:
8.1¢ Sentiment: Buy Disclosure: Held
(20min delay)