Cairn provides update on its operations and trading performance

The North Sea production assets performed above expectations in the first half of 2020 with net production previously reported for H1 of ~22,400 bopd. Our full year production guidance was subsequently revised from the original range of 19,000 – 23,000 bopd to 21,000 – 23,000 bopd.

Kraken continued to deliver strong performance throughout the rest of the year, however production from Catcher was constrained during the fourth quarter as previously outlined by the Operator due to the produced water plant being offline. Consequently, Cairn’s full year net production was just over 21,000 bopd. Crude sales from both fields averaged close to the dated Brent benchmark pricing or better during the period.

Both fields are expected to enter into their natural decline phase during 2021, and our focus is therefore on arresting the underlying decline rate and potentially extending field life by maximising FPSO performance efficiency, process optimisation and maturing further drilling opportunities. The next step on Catcher will involve a new 4D seismic programme in 2021 to better define reservoir targets and potentially unswept oil, prior to a potential infill and satellite drilling programme incorporating some of the deferred activities from 2020. Additional potential in the Kraken field lies in the western flank where work continues.

Our current 2021 net production guidance range is 16,000 – 19,000 bopd, subject to ongoing discussions with the respective Operators regarding the timing and duration of planned shutdowns and understanding the impact of the ongoing gas injection trials on Catcher.

Production Highlights

  • Combined 2020 oil production net to Cairn from the Catcher (Cairn 20% WI) and Kraken (Cairn 29.5% WI) fields averaged just over 21,000 bopd, in line with guidance
  • Full year oil production, net to Cairn, for 2021 is estimated to be 16,000 – 19,0001 bopd

Corporate and Finance Highlights

  • Completion of sale of Senegal assets to Woodside with ~US$250m to be returned to shareholders by way of special dividend
  • The International Tribunal established to rule on Cairn’s claim against the Government of India found unanimously in Cairn’s favour and awarded damages of US$1.2 bn plus interest and costs
  • Group cash at year end was US$570m, with no drawn debt
  • Oil and gas sales revenue was US$324m, at an average realised price of US$42.23/boe (before hedging gains of US$7.27/boe)
  • Average production cost was US$20/boe
  • Capital expenditure from continuing operations during the year was ~US$135m, in line with guidance
  • Cash outflows in respect of capital activity, adjusting for working capital, totalled US$160m (producing assets ~US$35m, exploration and appraisal activities ~US$125m)
  • Capital expenditure for 2021 is currently forecast at ~US$85m:
  • Kraken and Catcher expenditure of ~US$10m
  • Exploration and appraisal expenditure of ~US$75m, with drilling activity focused in the UK and Mexico
  • To date, Cairn has hedged ~1m barrels of 2021 oil production: 0.5m barrels using swaps with a weighted average strike price of US$45.20/bbl, and 0.5m barrels using three-way collar structures with weighted average ceiling, floor and sub-floor prices of US$55.00/bbl, US$48.27/bbl and US$35.00/bbl respectively

Simon Thomson, Chief Executive, Cairn Energy PLC said:

“Cairn enters 2021 with balance sheet strength and financial flexibility. The sale of the company’s interests in Senegal and return of capital to shareholders demonstrates continued strategic delivery and differentiation. The company is well-positioned to be opportunistic in the current market as it seeks to diversify and grow its production base. A significant milestone was achieved in December 2020 with a unanimous award in favour of Cairn in its arbitration with the Government of India under the UK-India Bilateral Trade Investment Treaty. We have engaged with the Government of India regarding adherence to the tribunal’s ruling and are taking all necessary steps to protect our rights to the award.

The safety of our people and the people we work with remains at the forefront of our thinking against the backdrop of the ongoing global impact of COVID-19.”

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