Cairn Energy Says Funded Through to Forecast Free Cash Flow in 2017
LONDON, Aug 19 (Reuters) – British-based oil explorer Cairn Energy Plc believes its cash reserves of $1.1 billion plus additional bank facilities are enough to fund its exploration and development plans until it expects to start turning a profit in three years' time.
Cairn, whose operations are spread from Greenland to Morocco, on Tuesday posted a reduced first-half loss of $62 million and said its finances were adequate to carry it through to the forecast delivery of free cash flow in 2017.
The company, which signed a $575 million facility with French bank BNP Paribas in May, plans to drill seven exploration and appraisal wells in the coming 12 months.
"With a new facility to finance development projects and cash balance of $1.1 billion, Cairn appears to be well funded in the near term," said analysts at Bernstein Research.
Shares in Cairn were trading down 4 percent at 180 pence by 0820 GMT, reversing a similar gain made on Monday. The stock remains well below a record 561p set in mid-2010.
Cairn said it had made a $3 million provision in its first-half results to cover proposed redundancies and further provisions would be needed in the second half as it cuts costs.
"We've looked hard at our internal disciplines, what we require to retain in terms of our core technical, operational and commercial skills," Chief Executive Simon Thomson told reporters on a conference call, adding that the process was expected to last until the end of the year.
FULLY COMPLIANT
The group's reduced loss compares with a $219 million after-tax deficit a year earlier, when it was hit hard by impairments booked in relation to its former Indian subsidiary in which it retains a 10 percent stake.
Indian tax authorities are investigating Cairn's tax payments dating back about seven years, having already targeted companies including oil major Shell, South Korea's LG Electronics and France's Cap Gemini in a broad crackdown as India seeks to reduce its budget deficit.
"Cairn has re-confirmed with its advisers that throughout its history of operating in India the group has been fully compliant with the tax legislation in force in each year," the company said.
The inquiry means the parent firm is unable to tap its $1.1 billion stake in the business which it was planning on selling.
Cairn plans to focus on drilling fields in mature as well as emerging basins, with capital expenditure on its flagship Kraken and Catcher North Sea projects expected to reach $1 billion between 2015 and 2017.
UK government approval in June of the Catcher development, operated by Premier Oil Plc, boosted Cairn's total reserves to 56.1 million barrels of oil equivalent through its 30 percent stake in the project.
Catcher and Kraken are expected to start producing oil in 2017, at which point they will also commence generating revenue for Cairn.
(Editing by Keiron Henderson and David Holmes)
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