Edinburgh-based Cairn Energy dived into the red with a loss of $230 million in the first half of the year thanks to impairment charges arising from its tax dispute with the Indian government of the company’s subsidiary in the sub-continent.
Following the $177 million impairment charge, Cairn appealed against the draft assessment in India, and filed a Notice of Dispute under The UK-India Investment Treaty in order to protect its legal position and shareholder interests.
The company has also been restricted from accessing its ~10% residual shareholding in CIL with a market value of US$526m. The ~10% residual shareholding was valued at US$1billion on 31 December 2013, which was immediately prior to the imposed restriction.
Cairn however still has considerable financial firepower available for exploration and investment, with £575 million cash in the bank and loans on tap for another £725m and recently announced the agreement of major well development in Senegal.
The Government of Senegal has agreed an extensive evaluation plan submitted by Cairn and its JV partners in Q2 2015. The sequence, location and evaluation targets of the three firm wells are being finalised along with details of the 3D seismic acquisition activity but Cairn’s preliminary analysis and estimates indicate a Contingent Resource range of P90 150 mmbbls, P50 330 mmbbls and P10 670 mmbbls recoverable.
Simon Thomson, Chief Executive, Cairn Energy PLC, said: “We are delighted to have agreement from the Government of Senegal for our extensive evaluation plan which commences shortly with a 3D seismic survey and continues later this year with a multi-well exploration and appraisal programme.
“Cairn estimates that the two discoveries made in Q4 2014 and the currently identified prospects and leads have a gross mean risked resource base of more than one billion barrels.
“Our aim is to maximise the value of our Senegal asset within a balanced, well-funded company. Cairn is well placed to take advantage of this exciting opportunity as we build on the success of last year’s discoveries.”
The Group’s North Sea Catcher and Kraken development projects remain on track and within budget for delivery of first oil in 2017 with targeted peak net production to Cairn of ~22,500 boepd.