Simon Thomson, Chief Executive, Cairn Energy PLC said:
"Cairn has an active drilling programme in 2014 that is complemented and balanced by its sustainable development and production portfolio.
The strategy continues to focus on an attractive mix of frontier and mature basin exploration. By building a growing prospect and lead inventory, from which to select and high grade prospects for drilling, we aim to offer shareholders material potential growth opportunities over the long term.
Cairn is committed to resolving the Indian tax situation and in the meantime can, if required, adapt forward capital and equity exposures."
HIGHLIGHTS
Financial
Ø Group net cash at 31 December 2013 of US$1.25 billion (bn)
Ø ~10% residual shareholding in Cairn India Limited (CIL) valued at ~US$1.0bn at 31 December 2013 which, while interactions are ongoing with the Indian Income Tax Department, Cairn is not able to sell.
Ø The Group was compliant with tax legislation in place at the time in each relevant jurisdiction, including India. The Group will take whatever steps are necessary to protect its interests.
Ø Following the restriction imposed on our ability to access the value of our shareholding in CIL, Cairn is committed to all of its planned operations in 2014 while capital allocation for future programmes will depend primarily on:
Ø the progress of Catcher through to project sanction;
Ø the conclusion of debt facilities for both Catcher and Kraken; and
Ø the results of our 2014 drilling programme.
Ø The existing portfolio provides many opportunities and we are looking closely at the allocation of capital for the programme beyond 2014, which will be guided by three core principles:
Ø creating value through exploration
Ø maintaining a balanced portfolio, with a strong operating cash flow in the future; and
Ø capital discipline
Ø The Board has decided to suspend the previously announced share buy-back programme as of 21 March 2014 until the position regarding the CIL shareholding is resolved. To date 25,180,201 shares for an aggregate consideration of ~US$94.7 million (m) have been repurchased as part of the buy-back programme. The total number of voting rights in Cairn, as at the date of this announcement is 578,189,219.
Frontier basin exploration
Atlantic Margin Operated Programme (three wells, Q2-Q4 2014)
Ø The JM-1 well (Cairn 37.5% Working Interest (WI) and Operator) drilled to evaluate Upper Jurassic and Middle Jurassic objectives reached a total depth of 3,711m TVDSS and has been plugged and abandoned without testing.
Ø As previously announced in December 2013, the FD-1 exploration well was plugged and abandoned. The primary target of the well was a Late Jurassic/Early Cretaceous deep-water turbidite slope fan and channel complex. While gas shows confirmed an active thermogenic petroleum system, the well did not encounter clastic reservoirs.
Ø The first of two planned exploration wells offshore Senegal (Cairn 40% WI) will commence in April after operations in Morocco have been completed
Ø Operations offshore West of Republic of Ireland on the Spanish Point appraisal well are targeted to commence Q2/Q3 2014 (Cairn 38% WI)
Atlantic Margin Non Operated Programme (one well, Q4 2014)
Ø One exploration well is planned to commence on the Cap Boujdour Contract Area in 2014 with Kosmos Energy (operator) and the Moroccan National Oil Company (ONHYM) (Cairn 20% WI) subject to Government approval
Mature basin exploration (three wells Q2 2014 - Q1 2015) and development
Ø Two non-operated North Sea exploration wells (Aragon and West of Kraken) are scheduled in 2014 with one further well (Tulla) scheduled for 2015
Ø The second Skarfjell appraisal well successfully delineated the field and the partners are now examining possible development concepts for Skarfjell (Cairn 20% WI)
Ø The Kraken Field Development Plan (FDP) received approval from the Department of Energy and Climate Change (DECC) with first oil expected H2 2016/H1 2017. Consequently, Cairn has booked 30 million barrels of oil equivalent (mmboe) 2P reserves. Peak forecast production is 50,000 barrels oil per day (bopd) (12,500bopd net to Cairn) (Cairn 25% WI)
Ø The Catcher FDP approval is expected by the operator in Q2 2014 (Cairn 30% WI)
