North Sea pays off for Cairn
CAIRN Energy has said the hefty investment it has made in the North Sea has begun paying off following the start of production from two big fields and highlighted its faith in the exploration potential of the area.
Edinburgh-based Cairn said it expects to start generating significant amounts of cash in coming months from the Kraken and Catcher fields off Scotland, which it brought onstream with partners last year.
“2017 was a year when Cairn’s investments in the Catcher and Kraken developments started to bear fruit,” said chief executive Simon Thomson.
He added: “These two major UK North Sea developments will continue to ramp up to plateau production rates, with peak net production to Cairn of approximately 25,000 barrels oil per day, delivering significant cash flow and capacity for reinvestment.”
Cairn still has more than $1 billion riding on the outcome of a long running tax dispute in India, which it expects to come to a head in August.
The company could use the cash generated in the North Sea to fund the work needed to bring the giant SNE find it made off Senegal in 2014 into production.
Mr Thomson noted the company completed appraisal drilling on the SNE find last year. The results of the campaign have increased directors’ confidence the discovery is on a major scale and may have opened up a significant new basin.
The company hopes to win approval from the Senegal government this year to develop the field, with a view to producing first oil in the 2021 to 2023 period.
The North Sea production base could also support an ambitious exploration programme. This will include work in relatively under-explored areas such as the Atlantic Margin off Ireland.
Cairn revealed yesterday that it has been awarded exploration acreage in the Atlantic off the South American state of Suriname, which has a population of around 600,000.
The company won licences off Mexico last year, which it thinks could contain one billion barrels plus.
However, Cairn also made clear it sees the potential to make big finds in the UK North Sea.
Mr Thomson said Cairn expects to start drilling the Ekland exploration well off eastern Scotland in the third quarter, as the operator leading work. He told reporters the firm might operate other UK exploration wells.
Cairn has enjoyed huge success leading exploration campaigns in countries such as India.
It applied for more UK exploration licences in the latest round.
The company returned to the North Sea under Mr Thomson by taking minority interests in acreage operated by other firms, through the acquisition of Nautical Petroleum and Norway-focused Agora in 2012, in deals worth more than £500m in total.
“The UK and Norway region is a key focus for Cairn and we have successfully built an extensive portfolio across a variety of play types,” said Mr Thomson.
Cairn expects to start producing oil from the Nova find off Norway in 2021.
The company initiated an exploration programme off Senegal which has helped put the country on the map for majors such as BP.
Cairn’s achievement in finding and developing the giant Mangala field in India paved the way for big payouts to investors.
The company sold a majority interest in its former subsidiary in India to Vedanta for $5.5bn in 2011.
It has been prevented from selling its remaining $1.1bn (£0.8bn) stake amid the Indian tax dispute, which started in 2014.
Cairn expects the international arbitration panel considering the dispute to hold a final hearing in August. It insists it has paid all taxes due.
The group made a $105m operating loss in 2017, net of $22m North Sea revenue and $10m royalties in respect of a historic interest in Mongolia. Cairn lost $148.2m in 2016.