Simon Thomson, Chief Executive, Cairn Energy PLC said: "Cairn’s strong cash flow generation, active portfolio management and year end net cash provide financial flexibility for continued strategic delivery across our balanced portfolio. We are delighted to have achieved FID in Senegal and we look forward to the results of our exploration drilling programme in Mexico. The sale of our Norwegian business through two attractively-priced transactions demonstrates the company’s continued focus on capital discipline and monetisation."
- Combined oil production net to Cairn from the Catcher and Kraken fields in 2019 averaged ~23 000 bpd, at upper end of guidance of ~21 000 to 23 000 bpd
- Catcher (Cairn 20% WI) averaged ~63 600 bpd (gross)
- Kraken (Cairn 29.5% WI) averaged ~35 600 bpd (gross)
- Full year oil production, net to Cairn, for 2020 is estimated to be 19 000 to 23 0001 bpd
Corporate and finance
- Oil and gas sales revenue was US$504 million at an average realised price of US64.52/boe (before hedging gains of US$1.39/boe)
- Average production cost was US$17.5 per boe
- Group cash at year end was US$154 million, and excludes expected proceeds from the sale of Capricorn Norge of ~US$100 million
- Net oil sales receivable at year end was US$18 million
- Company’s US$575 million RBL debt facility was undrawn at year end
- Capital expenditure during the year was ~US$245 million - Cash outflows in respect of development and pre-developments activities were ~US$100 million
- Cash outflows in respect of exploration and appraisal activities were ~US$125 million
- There was an increase in working capital relating to capex of ~US$20 million during the year (remaining cash outflows in respect of the previous year’s capital programme increased from ~US$25 million at the start of 2019 to ~US$45 million at the start of 2020)
- Capital expenditure for 2020 is currently forecast at ~US$595 million: - Kraken and Catcher near field developments of ~US$60 million
- To date, Cairn has hedged 2.8 million barrels of 2020 oil production, 1.9 million barrels using collar structures with a weighted average floor price of US$62.09/bbl and a weighted average ceiling price of US$74.89/bbl and 0.9 million barrels using swaps with a weighted average strike price of US$61.85/bbl
- Senegal of ~US$400 million (based on a 36.4% participating interest in the Sangomar field)
- Current forecast exploration and appraisal expenditure of ~US$135 million, predominantly related to Mexico, UK, Suriname and Côte D’Ivoire
- The Catcher Area fields continued to outperform during 2019 achieving excellent operating efficiency from the FPSO. On Kraken, FPSO performance was significantly improved during H2 2019 and this has continued. Planned shut-downs for maintenance and tie-ins of new satellite wells on both Catcher and Kraken will occur during 2020. Both fields continue to realise prices in excess of Brent.
- In Senegal, the JV has taken FID of the Sangomar Field Development following receipt of the 25-year Exploitation Authorisation from the Government of Senegal. Phase 1 of the development will target estimated 2P recoverable oil reserves of 231mmbbls. Over the life of the field, total recoverable oil resources are estimated to be ~500mmbbls with the development also planning gas export to shore. Operator Woodside has completed the purchase contract for the FPSO facility and issued full notices to proceed for the drilling and subsea construction and installation contracts. The FPSO facility is expected to have a production capacity of ~100 000 bpd with first oil targeted in early 2023.
- In the UK, development of the two Catcher Area satellite oilfields, Catcher North and Laverda, is progressing to plan and scheduled to be drilled mid-2020, along with an additional Vardero production well. First oil from both wells is targeted for 1H21 and together with the infill well, will help to offset natural decline from the Catcher Area.
- Two wells (a producer and injector pair) are planned to be drilled on the western flank of the Kraken field (Worcester accumulation) and be tied in and onstream before the year end. Drilling operations are expected to commence in 1H20.
- In Mexico, drilling is ongoing on Cairn’s operated Bitol-1 well (50% WI5) in Block 9 and on the ENI operated Saasken-1 exploration well (Cairn 15% WI5) in Block 10 in the Sureste Basin. When these operations are complete, the Ensco 8505 rig will drill the ENI operated Ehecatl-1 well in Block 7 (Cairn 30% WI).
- In Suriname (Cairn 100% WI), the 4500 km of 2D seismic data acquired in 1H19 has been fully processed and the products received. Block-wide interpretations and an update of the prospect inventory are ongoing, with a decision on future 3D seismic acquisition to be made later this year and view to potential drilling activity thereafter.
- The Arbitral Tribunal has indicated that it expects to be in a position to issue the Award in the summer of 2020. Cairn continues to have a high level of confidence in the merits of its claims in the arbitration and is seeking full restitution for losses of more than US$1.4 billion.
Norway asset disposals
- Completion of farm-out agreement for the sale of 10% interest in the Nova development to ONE-Dyas AS for US$59.5 million in 4Q19.
- Agreement to dispose of the entire share capital of Capricorn Norge AS to Solveig Gas Norway AS for US$100 million plus working capital adjustments. The transaction is effective from 1 January 2020 and expected to complete in 1Q20.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/22012020/cairn-energy-provides-operational-update/