Cairn Energy makes solid progress in 2016, CEO says
(ShareCast News) - Investors in Cairn Energy were gathering in Edinburgh on Friday for the company's annual general meeting, with chief executive Simon Thomson set to update them on the firm's strategy to deliver "sustainable value growth" for shareholders from a "balanced portfolio" of exploration, development and production assets.
The FTSE 250 company's exploration focus was on acreage in frontier and emerging basins which offered the greatest value potential, Thomson was set to say, funded from production assets and balance sheet strength.
"In the past year, we have made excellent progress on our strategic objectives.
"We have created a strong platform for future growth, with active positions in various geographies providing significant acreage positions of technical and commercial value."
In Senegal, the company confirmed the scale and potential of the "world class" SNE field, Thomson claimed, having successfully drilled nine wells in three years.
"Following appraisal success in 2016 which saw us upgrade our resource estimates, we commenced the third phase of drilling in January and have drilled three successful wells this year with a further exploration well shortly commencing.
"The near-term focus in Senegal is defining the scale and phasing of the overall SNE field development including the balance between the number of drilling centres, type and number of wells and the subsea infrastructure."
As Cairn's board had previously indicated, the company aimed to submit an exploitation plan to the Government of Senegal in 2018 with a final investment decision within twelve months thereafter and first oil in the period 2021 to 2023.
"Cairn currently anticipates providing an update on contingent resource estimates at the half year in August when the results of the latest wells will be further analysed and incorporated into the design and development plan for the SNE field.
"In the UK North Sea, both the Catcher and Kraken developments remain significantly below their original budgets and both are on schedule to target first oil this year," Thomson explained.
"Together they will deliver around 25,000 barrels of oil a day on plateau net to Cairn, generating significant cash flows for reinvestment."
Elsewhere, the company secured additional licences both in the North Sea and Barents Sea and farmed in to a number of "interesting prospects" offshore Ireland, where it planned to drill an exploration well in the Southern Porcupine basin in the summer.
"We are fully funded to deliver this programme, and meet all our commitments.
"We currently have $254m cash on our balance sheet, while our reserve-based lending facility is undrawn."
Thomson said international arbitration proceedings were progressing in respect of Cairn's claim under the UK-India Bilateral Investment Treaty for the restitution of $1bn of assets frozen in 2014, with a date set for the final arbitration hearing in January 2018.
"We expect a ruling soon thereafter and remain confident in our position.
"To conclude, 2016 was a year of excellent progress, providing a strong platform for further activity in 2017.
"This year, we will commence production in the North Sea, progress the SNE field towards development, drill material exploration wells in Senegal and Ireland, and continue to work on new exploration and development opportunities both from the existing asset base and from new ventures."