Cairn Cites Preliminary Results for 2010
Cairn provided information on recent operations and guidance in respect of the Group's trading performance in 2010. This information is unaudited and is subject to further review.
2010 Group Production
Gross daily production for 2010 of 130,952 barrels of oil equivalent per day (boepd) represents an increase of 70% from daily production in 2009.
In 2010 Group production sold was 63,359 boepd on an entitlement basis, realizing an average price per barrel of oil equivalent (boe) of US $69.18 (2009: $50.02).
At December 31, 2010 the Group's net cash balances were US $404 million (MM). Cairn India had net cash of US $217MM, comprising US $891MM cash and US $674MM debt. PLC / Capricorn's net cash balances were US $187MM.
The Mangala field in Rajasthan commenced pipeline sales in June 2010 and since then gross field revenues are approaching US $1.6 billion.
Costs to Cairn for the 2010 Greenland drilling program were in the region of US $400MM, in line with previous guidance.
Completion of the proposed transaction with Vedanta Resources Plc ("Vedanta") will provide the Group with the funding to continue an active program offshore Greenland, consider other opportunities and return a substantial proportion of the proceeds to shareholders.
To provide the liquidity required to enable the Group to agree contracts for two state of the art drilling vessels for its 2011 dual rig exploration program offshore Greenland, Cairn has entered into a stand-by secured revolving debt facility of US $900 million, which will also provide funding for general corporate purposes. The facility is provided by Standard Chartered Bank, Bank of Scotland Plc, Crédit Agricole Corporate and Investment Bank, HSBC Bank PLC and Société Générale.
Cairn continues to work with the Government of India (GoI) to secure the necessary consents and approvals for completion of the proposed transaction with Vedanta. Cairn currently expects to conclude the transaction before April 15, 2011.
At the Company's general meeting held on the October 7, 2010, shareholders voted overwhelmingly in favor (99%) of approving the proposed part sale of Cairn's shareholding in Cairn India to Vedanta.
At the Vedanta general meeting held on December 13, 2010, shareholders voted overwhelmingly in favor (97.35%) of approving the proposed part sale of Cairn's shareholding in Cairn India to Vedanta.
- Cairn India has completed more than one year of successful production from the Mangala field and achieved in excess of 27.5 million barrels (mmbbls) of oil sales to domestic refiners - current production 125,000 bopd
- Mangala development drilling - 122 development wells drilled to date, of which 81 are complete
- The Mangala Enhanced Oil Recovery (EOR) pilot production and injection wells have been drilled and completed - pilot production and injection commenced in Q3 2010
- The Bhagyam development has commenced with 11 wells drilled and contracts have been awarded for the construction of Train Four at the Mangala Processing Terminal
- In December 2010 the Government of Greenland announced the results of the Baffin Bay Bid Round. Cairn was awarded three blocks called Ingoraq, Napariaq and Pitu. Other recipients of block awards included Shell, Statoil, GDF, Conoco-Phillips and Maersk
- In January 2011 the Government of Greenland confirmed Cairn as the Operator of the Atammik and Lady Franklin blocks and Cairn has acquired the 47.5% interest previously held by Encana. The entitlement interests in these two blocks are now Cairn (Operator) 87.5% and Nunaoil 12.5%
- The acquisition of the Lady Franklin and Atammik blocks provide additional prospectivity and operational flexibility as these blocks are usually free of sea ice all year round
- Cairn now holds 102,000 km2 in Greenland which is equivalent to 15 quadrants in the UK North Sea
- Cairn continues to evaluate the results of its 2010 three well exploration drilling campaign on the Sigguk Block in the Disko Bay area. The wells found both gas (biogenic and thermogenic gas) and oil (geochemical evaluation has now identified three oil types) although significant target reservoir rocks were not encountered. The Alpha-1S1 exploration well has been suspended to allow possible re-entry to sidetrack or deepen the well at a later date. The T8-1 and T4-1 exploration wells have been plugged and abandoned
- During 2010 Cairn acquired more than 15,000 km of 2D seismic on the Eqqua, Ingoraq, Napariaq, Pitu, Sigguk and offshore south Greenland blocks, bringing its total 2D seismic database in Greenland to over 30,000 km
- Cairn has secured two state of the art dynamically positioned drilling vessels for its planned 2011 dual rig exploration program offshore Greenland. The "Leiv Eiriksson", a fifth generation semi-submersible drilling rig and the "Ocean Rig Corcovado", a sixth generation drillship, have been contracted to operate in the 2011 drilling season on Cairn's offshore Greenland exploration program. Both drilling vessels are operated by Ocean Rig. By contracting two vessels Cairn has increased operational capability and flexibility and continues to demonstrate its focus on safety
- Subject to approval from the Government of Greenland, Cairn plans to drill up to four exploration wells in 2011. For reasons of operational flexibility evaluation efforts are focused on maintaining between 10 and 12 separate potential exploration well locations in a variety of operating environments and geological settings for as long as possible. The final selection of prospects and well targets for the proposed 2011 exploration campaign will be made in May 2011
- Cairn has now been operating offshore operations in Greenland for thirteen consecutive months so demonstrating the capability of all year round work - current activity is focused on acquiring environmental survey data in preparation for the 2011 drilling program
- Cairn plans to undertake a 3D seismic acquisition program in Greenland during 2011, subject to the necessary approvals. Two 3D seismic survey vessels are expected to be contracted to acquire up to five separate 3D surveys in different areas
- Negotiations are underway with oilfield service contractors to provide the necessary support for the 2011 exploration program and Environmental and Social Impact studies are ongoing Mediterranean
- The Spanish Government has awarded the Cairn Group two hydrocarbon exploration licenses comprising five contiguous blocks in the Gulf of Valencia area, offshore Spain. The total combined area covered by these licenses is approximately 3,992 km2 and the water depths range from 50 meters to >1,000 meters. Cairn has a 100% interest in these blocks
- On December 20, the disposal of Cairn Energy Sangu Field Limited to the Australian oil and gas exploration and production company Santos Ltd. was completed and Cairn no longer holds any interest in Bangladesh
Sir Bill Gammell, Chief Executive, Cairn, said, "Cairn continues to work with the Government of India in a consensual manner to secure the necessary consents and approvals for completion of the Vedanta transaction.
In Greenland the results from our 2010 drilling program were encouraging and the goal of our future exploration efforts will be to establish reservoir and potential commercial resources. We are delighted to have secured two state of the art drilling vessels for the 2011 program."
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