TIDMCNE
RNS Number : 5904C
Cairn Energy PLC
23 January 2018
For Immediate Release 23 January 2018
CAIRN ENERGY PLC
Operational Update
("Cairn" or "the Company")
Cairn intends to announce its preliminary results for the year
to 31 December 2017 on Tuesday 13 March 2018. In advance of these
results, Cairn is providing an update on recent operations and the
Group's trading performance in 2017 together with guidance for
2018. This information is unaudited and is subject to further
review.
Simon Thomson, Chief Executive, Cairn Energy PLC said:
"Over the last twelve months, Cairn has achieved several
strategic milestones and is well positioned to deliver on its
strategy in 2018. Both the Kraken and Catcher developments in the
UK North Sea have delivered first oil production. In Senegal, Cairn
completed a successful third phase of drilling with the joint
venture now targeting development approval for the world class SNE
field by the end of 2018.
This year, we will begin a sustained drilling campaign in the UK
and Norway where Cairn has built an extensive portfolio. We also
expect development sanction for the Skarfjell discovery in the
first half of the year.
Cairn is funded in respect of all capital commitments with a
strong balance sheet and growing production cash flows. We continue
actively to assess and pursue new ventures within the context of a
balanced exploration and production portfolio. We are excited by
the potential of the recently awarded blocks offshore Mexico where
we anticipate the start of exploration drilling in 2019."
UK
Ø The Catcher (Cairn 20% working interest (WI)) and Kraken
(Cairn 29.5% WI) developments in the UK North Sea both achieved
first oil in 2017 and are ramping up to plateau production,
following which they are expected to deliver significant cash flows
for reinvestment.
Ø First oil from the Catcher Area development was successfully
delivered in late December. The Operator has reported that the
first two production wells from the field have been tested at rates
in excess of 20,000 barrels of oil per day (bopd) each, in-line
with expectations and reflecting the high productivity from initial
flush production. As planned, production levels are being held at
20,000 bopd while commissioning of the full gas processing modules
and the water injection systems on the FPSO are carried out.
Production will continue to ramp up in phases over the next few
months with full production of 60,000 bopd targeted in H1 2018.
Total project capex is forecast by the Operator to be 30% less than
the original project sanction estimate.
Ø First oil from Kraken was achieved during H1 2017. On the
basis of current well performance and subject to continued progress
on plant uptime, the Operator expects production to reach 50,000
bopd gross during H1 2018. Full cycle gross Kraken project capex is
forecast to be 25% less than the original sanctioned project
cost.
Ø Full year production, net to Cairn, for 2018 is estimated to
be 17,000 to 20,000 bopd with plateau production from Catcher and
Kraken achieved by mid-year.
Senegal
Ø SNE field (Cairn 40% WI) appraisal and concept select
definition are concluding for the first phase of development of the
extensive resource base. The JV aims to have a Government- approved
exploitation plan in place by the end of 2018 with a target of
first oil in 2021-2023.
Ø The field exploitation plan will cover the development of the
entire SNE resource base estimated at 563 million barrels of oil
(mmbbls)*.
Ø The first phase of the development is expected to have an
initial well count of up to 25 wells, targeting 240 mmbbls,
principally in the S500 lower reservoir with an initial target
plateau range of 75-125,000 bopd.
*ERC Equipoise Limited (ERCE) estimate
Norway
Ø An extensive exploration drilling campaign is underway for
2018/19, with plans to drill up to ten wells,* targeting >1.5
boe gross unrisked resources across a variety of play types in the
UK and Norway, including the Barents Sea.
Ø Cairn was awarded non-operated interests in four licences in
the Norwegian Sea and North Sea following APA 2017 awards in
January 2018.
Ø The Skarfjell (Cairn 20% WI) JV plan for development and
operation (PDO) is anticipated in H1 2018, with first oil targeted
in 2021 and expected plateau production of 50,000 bopd (10,000 bopd
net to Cairn). Skarfjell is a light oil development which offers
significant potential in adjacent acreage. It is situated in the
northeastern North Sea, 20 km southwest of the Gjøa platform and
130 km northwest of Bergen. Based on the proposed plan,
hydrocarbons from the Skarfjell reservoir will be developed with
two subsea templates tied back to the Gjøa platform for processing
and export. Gjøa will also provide lift gas to the field and water
injection for pressure support. Skarfjell has been renamed Nova by
the Operator and the development will be known as such in
future.
*Subject to partner approval
Mexico
Ø Cairn secured two new licences in the Mexico offshore bid
round in H1 2017. The licences, one operated and one non-operated,
are located in the highly prolific yet under-explored Sureste
basin. Cairn anticipates exploration drilling to commence in 2019
on both blocks.
Corporate and Finance
Ø Cairn offloaded its first Kraken cargo of 386,000 barrels (net
of the Flowstream 4.5% share) in Q4 2017 recording revenue of
US$20m. Pricing of Kraken crude relative to Brent is strengthening
as the market is established.
Ø The first cargo of Catcher oil has been pre sold at a premium
to Brent.
Ø Group net cash at 31 December 2017 was US$56m, comprising cash
balances of US$86m and drawings under the Norway Exploration
Finance Facility of US$30m. The 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.
Ø Capital expenditure for H2 2017 was US$205m, principally
comprising US$75m development expenditure and US$130m exploration,
appraisal and new venture expenditure. A US$30m exploration rebate
in respect of previous Norwegian E&A activity was received in
H2 2017. At 31 December 2017, remaining cash outflows in respect of
activities undertaken in 2017 are expected to be US$35m.
Ø Forecast Kraken and Catcher development expenditure for 2018
is US$125m; and currently committed E&A expenditure for 2018 is
estimated at US$75m. Outstanding Norwegian exploration rebate
receivables are US$35m.
Ø Having moved into production, Cairn has commenced a hedging
programme in order to protect debt capacity and support committed
capital programmes. To date, Cairn has hedged 2m barrels of 2018
oil production using collar structures with a weighted average
floor price of US$58.4/bbl.
Cairn India
Ø 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. 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.
Ø Cairn is currently unable to access the value in its 5%
shareholding in Vedanta Limited, valued at US$1.1billion at 31
December 2017 or accrued dividend payments due of US$104m.
Enquiries to:
Analysts / Investors
David Nisbet, Corporate Affairs Tel: 0131 475 3000
Media
Linda Bain, Corporate Affairs Tel: 0131 475 3000
Cairn Energy PLC
Patrick Handley, David Litterick Tel: 0207 404 5959
Brunswick Group LLP
NOTES TO EDITORS
Cairn is one of Europe's leading independent oil and gas
exploration and development companies and is listed on the London
Stock Exchange. Cairn has discovered and developed oil and gas
reserves in a variety of locations around the world.
Cairn's business operations are now focused on frontier
exploration acreage in North West Europe, North West Africa and the
North Atlantic, underpinned by interests in development assets in
the North Sea. Cairn has its headquarters in Edinburgh, Scotland
supported by operational offices in London, Norway, Senegal and
Mexico.
For further information on Cairn please see:
www.cairnenergy.com
This information is provided by RNS
The company news service from the London Stock Exchange
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