News

Pre-close Update

17 January, 2017

Cairn intends to announce its preliminary results for the year to 31 December 2016 on Wednesday 8 March 2017. In advance of these results, Cairn is providing information on recent operations and guidance in respect of the Group’s trading performance in 2016. This information is unaudited and is subject to further review.

Simon Thomson, Chief Executive, Cairn Energy PLC said:

“The next 12 months will be an eventful period for Cairn.  We will shortly embark on further exploration and appraisal drilling in Senegal and we continue to work towards first oil and cashflow from our North Sea assets.  

With six successful wells drilled to date in Senegal, Cairn has established a significant and growing resource base.  The 2017 drilling programme aims to further define the SNE field for development and target additional exploration upside on the acreage.

Cairn is fully-funded in respect of all of our capital commitments and we continue to actively assess and pursue new ventures within the context of a balanced portfolio.”

Senegal Exploration & Appraisal

  • Third phase of drilling to commence late January 2017 with further evaluation of the SNE discovery
  • SNE-5 and SNE- 6 wells to be drilled in the south of the SNE structure with the aim of providing key connectivity and deliverability data from upper reservoirs by conducting well tests, including  interference testing
  • Joint Venture (Cairn 40% Working Interest (WI)) finalising the selection of further optional exploration and appraisal wells to follow the two firm wells and ensure efficient evaluation of the full licence area
  • Stena DrillMAX, sixth generation drillship, contracted for two firm wells in the exploration and appraisal campaign with multiple follow-on options
  • Rig contract and support services secured in current lower cost environment providing significant flexibility
  • Data gathered will enable calibration of the reservoir model for upper reservoirs, critical for optimising recovery factors by ensuring potential development wells are designed appropriately in number, placement and orientation
  • Current conceptual development plans envisage a range of options including phased development to capture potentially extensive resource base 
  • Information from first two phases of drilling and additional seismic work continue to be integrated to build and refine the understanding of the full hydrocarbon potential of the area

Developments

  • Catcher and Kraken developments in the UK North Sea on track for first oil in 2017; peak net targeted production to Cairn of ~25,000 boepd
    • Kraken  (Cairn 29.5% WI) development progressed well in 2016 finishing the year ahead of budget and on schedule for first oil in Q2 2017* 
    • Following mechanical completion, bulk of commissioning activities onboard the Kraken FPSO completed in the Far East. FPSO currently in Rotterdam for inspection and certification
    • Drilling programme made excellent progress in 2016 and drilling continues throughout 2017; results from the producer and injector wells drilled and completed, met or exceeded pre-drill predictions with four producer and five water injectors completed
    • Subsea installation programme completed with all three Drill Centres fully connected to submerged turret production buoy for hook up to FPSO and last mooring pile and wire/chains installed 
    • Catcher (Cairn 20% WI) is targeting start-up and first oil H2 2017*
    • Total project capex is now forecast at US$1.6 billion, US$600 million (m) lower than the original sanctioned estimate
    • Eight development wells have been completed: all have come in at or better than prognosis in terms of reservoir quality and deliverability.  Due to strong well results and well placement optimisation, the well count has reduced to 20 wells, capturing further savings
    • 2016 saw the completion of the installation of all of the subsea equipment. Focus is now on final mechanical completion and the pre-commissioning work scopes
    • Sail-away of the FPSO from Singapore is expected around mid-year
  • Skarfjell JV (Cairn 20% WI) working towards concept selection for field development; decision expected Q1 2017

Corporate and Finance 

  • US$335m Group net cash at 31 December 2016
  • Reserves Based Lending bank facility remains undrawn; debt availability to fund UK development assets increasing with project progress, with availability expected to reach US$350m at peak; additional US$175m available in the form of Letters of Credit
  • Total cash expenditure for H2 2016 was US$114m, principally comprising US$43m development expenditure and US$66m exploration and appraisal (E&A) expenditure (the majority of which related to Senegal including cash outflow for activity in H1). A US$35m tax rebate in respect of previous Norwegian E&A activity was received in H2 2016
  • Forecast development expenditure for 2017, taking the UK development projects through to cashflow generation, is US$170m; and remaining currently committed drilling E&A expenditure for 2017 is estimated at US$125m, predominantly in Senegal. Outstanding Norwegian tax rebate receivables are US$31m.  At 31 December 2016, remaining cash outflows in respect of activities undertaken in 2016 are expected to be US$45m

Cairn India

  • Cairn is currently unable to access the value in its ~10% residual shareholding in Cairn India Limited (CIL) valued at US$656m at 31 December 2016, accrued dividend payments due of US$51m
  • International arbitration proceedings are progressing in respect of Cairn’s claim under the UK-India Bilateral Treaty.  Cairn is seeking restitution for losses resulting from the attachment of its shares in CIL and failure to treat Cairn and its investments fairly and equitably
  • Cairn has a high level of confidence in its case under the UK-India Investment Treaty, and in addition to resolution of the retrospective tax dispute, its statement of claim to the arbitration panel is seeking damages equal to the value of Cairn’s residual shareholding in CIL at the time it was attached (approximately US$1 billion)

Enquiries:

Analysts/Investors    
David Nisbet Corporate Affairs 0131 475 3000
Media    
Patrick Handley Brunswick Group LLP 0207 404 5959
David Litterick Brunswick Group LLP 0207 404 5959

 

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