Annual General Meeting Chief Executive’s Statement
12 May, 2016
Simon Thomson, Chief Executive of Cairn Energy PLC made the following statement at the Company’s Annual General Meeting for shareholders in Edinburgh at 12noon, May 12th 2016. The Company will announce half-year results on August 16th 2016.
Cairn seeks to create, add and realise value from a balanced portfolio, offering material growth potential from exploration and appraisal activity, supported by established development and production assets with a strong balance sheet behind them. Our portfolio balance is provided from a combination of exposure to a full lifecycle mature basin position in the North Sea alongside Cairn-operated exploration in emerging and frontier basins with a current focus on Senegal.
We remain fully funded in respect of all our commitments and have financial flexibility to review appropriate strategic opportunities. As at 30 April 2016, our cash position was ~$502m and our $575m reserve based lending facility (which we expect to draw approximately $260m by year end 2017) remains undrawn.
Over the last 18 months, we have drilled five successful wells in Senegal, with the results from the sixth, SNE-4, expected shortly. Senegal is a very significant and exciting part of the portfolio and we are delighted with the results to date of the multi-well evaluation programme, which has confirmed the scale and potential of this world class asset.
In March this year, following the results of the discovery well and first appraisal well, SNE-2, we upgraded our 1C contingent resource assessment by 30% to 200 million barrels and our 2C resources to 385 million barrels. We plan to make further resource revisions at our half-year results in August, which will take into account full analysis of results from the SNE-3, BEL-1 and SNE-4 wells.
Operations in Senegal are ahead of schedule and substantially under budget. The three year evaluation period approved at the beginning of the year by the Government of Senegal allows the joint venture sufficient time to properly appraise the SNE discovery and to pursue further exploration on the block.
We have gathered a very large volume of data from operations to date and we look forward to progressing our long-term, multi-field, multi-phase exploitation plan to maximise value in Senegal. We see clear potential to access additional cost savings from the current lower operating environment in respect of planned future activity.
Alongside our activities in Senegal, we have continued to deliver and build our attractive mature basin position in the North Sea. Our two key development projects, Catcher and Kraken, both remain on schedule and under budget for first oil in 2017, delivering the cash flows that will sustain our balanced portfolio over the longer term. We took the opportunity to increase our equity stake in Kraken by 4.5% to 29.5% in a value accretive transaction and we continued to build our exploration portfolio in the region with the award of five Norwegian licences earlier in the year, including our first as an Operator in Norway.
We continue to be unable to access the value of our ~10% shareholding in Cairn India Limited and together with accrued dividends, this is currently valued at ~$445m. We have filed a claim under the UK-India Investment Treaty and a formal arbitration process is now underway with a view to resolving the matter. As we have previously stated, the issue is confined to our Indian assets.
In summary, Cairn’s strategy of providing exploration-led growth from a fully-funded, balanced portfolio remains central to our strategic delivery. Key to this strategy is the creation, addition and realisation of value across the portfolio. When we look at our emerging and frontier basin positions we are always seeking to access large acreage interests which offer the potential for follow on in the event of success and are also technically and commercially attractive in a lower oil price environment.
Our track record of returning over $4.5billion to shareholders in the last ten years clearly demonstrates a consistent focus on routes to monetisation and potential further returns. A combination of financial strength and continued exposure to material growth opportunities leaves Cairn well placed to deliver additional value for shareholders.”
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|Patrick Handley||Brunswick Group LLP||0207 404 5959|
|David Litterick||Brunswick Group LLP||0207 404 5959|
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