TIDMCNE
RNS Number : 2213M
Cairn Energy PLC
20 January 2021
FOR IMMEDIATE RELEASE 20 January 2021
CAIRN ENERGY PLC
Pre-Close Update
("Cairn" or "the Company")
Ahead of announcing its preliminary results for the year to 31
December 2020 on 9 March 2021, Cairn today provides an update on
its operations and trading performance together with guidance for
2021. This information is unaudited and subject to further
review.
Simon Thomson, Chief Executive, Cairn Energy PLC said:
"Cairn enters 2021 with balance sheet strength and financial
flexibility. The sale of the company's interests in Senegal and
return of capital to shareholders demonstrates continued strategic
delivery and differentiation. The company is well-positioned to be
opportunistic in the current market as it seeks to diversify and
grow its production base.
A significant milestone was achieved in December 2020 with a
unanimous award in favour of Cairn in its arbitration with the
Government of India under the UK-India Bilateral Trade Investment
Treaty. We have engaged with the Government of India regarding
adherence to the tribunal's ruling and are taking all necessary
steps to protect our rights to the award.
The safety of our people and the people we work with remains at
the forefront of our thinking against the backdrop of the ongoing
global impact of COVID-19."
Production Highlights
Ø Combined 2020 oil production net to Cairn from the Catcher
(Cairn 20% WI) and Kraken (Cairn 29.5% WI) fields averaged just
over 21,000 bopd, in line with guidance
Ø Full year oil production, net to Cairn, for 2021 is estimated
to be 16,000 - 19,000(1) bopd
Corporate and Finance Highlights
Ø Completion of sale of Senegal assets to Woodside with US$250m
to be returned to shareholders by way of special dividend
Ø The International Tribunal established to rule on Cairn's
claim against the Government of India found unanimously in Cairn's
favour and awarded damages of US$1.2 bn plus interest and costs
Ø Group cash at year end was US$570m, with no drawn debt
Ø Oil and gas sales revenue was US$324m, at an average realised
price of US$42.23/boe (before hedging gains of US$7.27/boe)
Ø Average production cost was US$20/boe
Ø Capital expenditure from continuing operations during the year
was US$135m, in line with guidance
Ø Cash outflows in respect of capital activity, adjusting for
working capital, totalled US$160m (producing assets US$35m,
exploration and appraisal activities US$125m)
Ø Capital expenditure for 2021 is currently forecast at
US$85m:
Ø Kraken and Catcher expenditure of US$10m
Ø Exploration and appraisal expenditure of US$75m, with drilling
activity focused in the UK and Mexico
Ø To date, Cairn has hedged 1m barrels of 2021 oil production:
0.5m barrels using swaps with a weighted average strike price of
US$45.20/bbl, and 0.5m barrels using three-way collar structures
with weighted average ceiling, floor and sub-floor prices of
US$55.00/bbl, US$48.27/bbl and US$35.00/bbl respectively
Production
The North Sea production assets performed above expectations in
the first half of 2020 with net production previously reported for
H1 of 22,400 bopd. Our full year production guidance was
subsequently revised from the original range of 19,000 - 23,000
bopd to 21,000 - 23,000 bopd. Kraken continued to deliver strong
performance throughout the rest of the year, however production
from Catcher was constrained during the fourth quarter as
previously outlined by the Operator due to the produced water plant
being offline. Consequently, Cairn's full year net production was
just over 21,000 bopd. Crude sales from both fields averaged close
to the dated Brent benchmark pricing or better during the
period.
Both fields are expected to enter into their natural decline
phase during 2021, and our focus is therefore on arresting the
underlying decline rate and potentially extending field life by
maximising FPSO performance efficiency, process optimisation and
maturing further drilling opportunities. The next step on Catcher
will involve a new 4D seismic programme in 2021 to better define
reservoir targets and potentially unswept oil, prior to a potential
infill and satellite drilling programme incorporating some of the
deferred activities from 2020. Additional potential in the Kraken
field lies in the western flank where work continues.
Our current 2021 net production guidance range is 16,000 -
19,000 bopd, subject to ongoing discussions with the respective
Operators regarding the timing and duration of planned shutdowns
and understanding the impact of the ongoing gas injection trials on
Catcher.
Senegal sale and return of cash to shareholders
Cairn completed the sale of its interests in Senegal to Woodside
in December 2020. Cash received at completion was US$525m,
comprising the US$300m acquisition consideration and a US$225m
reimbursement of expenditure incurred on the sale assets since 1
January 2020. A further payment of up to US$100m will be payable to
Cairn if certain conditions are met relating to the date of first
production from the Sangomar development and the prevailing oil
price at that time.
Cairn will pay a special dividend of 32 pence per eligible
ordinary share, expected to be paid on 25 January 2021, amounting
to a return of approximately US$250m to shareholders.
On 7 January, the company completed a consolidation of Cairn's
ordinary share capital reducing the number of Cairn's issued
ordinary shares by an amount that reflects the value of the Return
of Cash to Shareholders relative to the market capitalisation of
Cairn prior to the Return of Cash.
India
In December, the tribunal established to rule on Cairn's claim
against the Government of India under the UK-India Bilateral
Investment Treaty found in Cairn's favour. The tribunal ruled
unanimously that India had breached its obligations to Cairn under
the Treaty and awarded to Cairn damages of US$1.2billion plus
interest and costs, which are now payable.
Exploration
Cairn took early action in 2020 with significant reductions and
deferrals to its planned capital programme to preserve liquidity in
response to the changed market conditions. The flexibility of the
exploration portfolio allowed the deferral of major capital
projects without relinquishing any licences or acreage.
In 2021, Cairn is planning a drilling programme in both Mexico
and the UK:
Ø In Mexico, operator Eni will drill an exploration well on
Block 10 and there is an optional drilling opportunity for an
appraisal well of the Saasken discovery (Cairn 15% WI)
Ø In the UK, Cairn will participate in the Shell-operated Jaws
exploration well on P2380 (Cairn 50%WI)
In Côte d'Ivoire, Cairn has assumed Operatorship (90% WI) in
blocks CI-301 and CI-302 from Tullow which has exited both
licences. Cairn remains in the Tullow-operated CI-520 (30% WI). The
JV has exited blocks CI-518, CI-519, CI-521 and CI-522 effective
end December 2020 with all minimum work commitments fulfilled. The
2021 work programme for blocks CI-301 and CI-302 is focussed on
completing the planned 2D seismic acquisition, once it is safe to
do so.
Chair
Nicoletta Giadrossi became Chair of the Company on 1 January
2021, succeeding Ian Tyler. Nicoletta was one of the Company's
existing non-executive directors and was first appointed to the
Board in January 2017.
(1) FlowStream's production entitlement in 2020 averaged 1,011
bopd and is expected to be 400 to 470 bopd in 2021
Enquiries to:
Analysts / Investors
David Nisbet, Corporate Affairs Tel: 0131 475 3000
Media
Linda Bain, Corporate Affairs Tel: 0131 475 3000
Patrick Handley, David Litterick Tel: 0207 404 5959
Brunswick Group LLP
About Cairn Energy PLC
Cairn is one of Europe's leading independent oil and gas
exploration and development companies and has been listed on the
London Stock Exchange for 30 years. Cairn has explored, discovered,
developed and produced oil and gas in a variety of locations
throughout the world as an operator and partner in all stages of
the oil and gas lifecycle.
Cairn's exploration activities have a geographical focus in the
North Sea, West Africa and Latin America, underpinned by interests
in production and development assets. Cairn has its headquarters in
Edinburgh, Scotland supported by operational offices in London and
Mexico.
For further information on Cairn please see:
www.cairnenergy.com
Glossary
bopd barrels of oil per day
boe barrels of oil equivalent
bbl barrel of oil
bn billion
FPSO Floating Production Storage and Offloading vessel
m million
mmbbls million barrels
WI working interest
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