Cairn Energy makes strong progress in six months to June
Staff Writer |
Cairn Energy reports it made strong progress in the six months to June as royalties from activities in Mongolia returned the group to revenue generating.
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Cairn Energy generated revenues of $10.8 million (£8.4 million) in the six months to 30 June (H1 2016: nil) from royalty payments from Petrochina on producing fields in Mongolia.
Cairn recently reported another find in a successful drilling programme offshore Senegal in the “world class†SNE field, where planning is now underway for a phased development.
The group is targeting production rates of between 75,000-125,000 barrels of oil per day (bopd) for the SNE field, with first oil planned 2021-2023.
Cairn is forecasting it could realise circa 240 million barrels of oil equivalent in the first phase of the SNE field development.
Cairn notes it drilled three exploration and appraisal wells in the first half, costing $69 million (£53.6 million) and two further wells in July and August, will all five drilled “under budgetâ€.
Development expenditure totalled $71 million (£55.1 million) in the first half, relating to costs of the Kraken and Catcher developments.
Cairn, which has a 29.5 per cent working interest in Kraken, notes no revenue was recognised in the first half relating to production from Kraken.
However it states it realised $75 million in proceeds from a stream agreement with FlowStream Commodities in exchange for an initial 4.5 per cent share of production from Kraken.
The stream agreement with FlowStream Commodities will reduce to a 1.35 per cent share once FlowStream achieves a 10 per cent return.
The Catcher development, in which Cairn has a 20 per cent interest, is “on target†to deliver first oil by the end of the 2017 year.
Remaining capital expenditure for Catcher and Kraken development projects in 2017 is estimated at $35 million (£27.1 million) and $75 million (£58.2 million).
In the Norwegian North Sea, Cairn notes the Skarfjell development, in which it holds a 20 per cent interest, is targeting a final investment decision in the first half of 2018 and is forecast will yield between 60 and 140 million barrels of oil and gas equivalents.
Cairn expects to spend $150 million (£116.5 million) on exploration and appraisal expenditure across the portfolio in the second half of 2017, predominantly in Senegal.
The group notes it ended the first half with $254 million (£197.3 million) in cash and has an as yet undrawn reserve lending facility with expected peak availability of $350-400 million and circa $210 million at year end 2017.
On the long-running tax dispute with authorities in India, Cairn notes it remains “unable to access†its circa 5.0 per cent shareholding of Vedanta Limited pending the outcome of the tax dispute, valued at $824 million (£640.1 million at 30 June and outstanding dividends to date totalling $105 million (£81.5 million).
Cairn is seeking restitution under the UK India Bilateral Investment Treaty for losses resulting from the attachment of its shares, and it notes those proceedings are “well progressed†and Cairn has “a high level of confidence in its caseâ€.
Cairn has booked $28 million (£21.5 million) in operational and administrative expenses for the first half, down from $53 million (£41.1 million) last year, though first-half expenses were mitigated by a $25 million in tax credits (H1 2016: $3 million).
A further $29 million in tax credits from the Norwegian authorities are to be booked in the second half.
Looking ahead, Cairn notes it secured new licences in three countries - Norway, Ireland and Mexico - in 2017, with drilling expected in 2018-2020. ■