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  4. Cairn Energy announces cuts in 2020 CAPEX

Cairn Energy announces cuts in 2020 CAPEX

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Oilfield Technology,

Further to its Preliminary Results disclosure on 10 March 2020 and in light of current market conditions, Cairn is proactively reviewing each of its assets and related CAPEX programmes. Significant reductions and deferrals have already been identified for the 2020 programme, representing an overall 23% reduction in CAPEX for the year. Further initiatives relating to the whole forward programme are under active discussion with joint venture (JV) partners and other stakeholders. These changes are not expected to impact the company's previously disclosed production and production cost guidance for 2020.

Producing assets

Planned 2020 CAPEX on the UK producing assets is expected to be below US$45 million, reduced from the original forecast of US$65 million as a result of cost savings identified and the deferral of certain activities planned for the Catcher fields.

Development assets

The Sangomar JV partnership is working collaboratively to assess several substantial initiatives to reduce and re-phase CAPEX on the Sangomar Development Project. At this stage, based on initiatives already identified, Cairn’s expectation is that net CAPEX on Sangomar in 2020 will be below US$330 million, reduced from the original forecast of US$400 million. A broader review of CAPEX for 2020 and future years is ongoing with the JV, and an update on the results of that will be provided in due course.

Exploration

All forward CAPEX on exploration and appraisal activity is now deferred with the exception of ongoing operations on the Eni operated Ehecatl well in Mexico. CAPEX on exploration in 2020 is now anticipated to be approximately US$100 million, reduced from the original forecast of US$150 million.

The company remains well funded from existing sources of financing:

  • 2020 opening cash position of US$255 million (proforma for the sale of the Group’s Norwegian subsidiary which completed in February).
  • Cashflows from UK production, which is expected to be in the range of 19 000-23 000 bpd in 2020 with 36% of mid case production hedged at US$62/bbl Brent and a targeted all-in production cost of below US$20/boe.
  • Undrawn US$575 million reserves-based lending facility, which includes an “accordion” option to increase lending commitments by up to an additional US$425 million on the inclusion of Sangomar in the borrowing base assets. An update on the actual additional debt capacity determined by the inclusion of Sangomar in the facility will be provided as discussions with lenders progress.

Simon Thomson, CEO, Cairn Energy PLC said; “The health and safety of our staff and contractors remains our primary focus in these challenging times. We have also moved quickly to adjust our forward capital programme to current market conditions.

Our balance sheet remains strong and we are proactively reviewing options for further CAPEX savings and deferrals, whilst retaining the financial flexibility to add value on an ongoing basis.”

Read the article online at: https://www.oilfieldtechnology.com/offshore-and-subsea/27032020/cairn-energy-announces-cuts-in-2020-capex/

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