‘Globally-significant’ Senegal oil finds are ‘jewels’ in Edinburgh-based Cairn’s crown


Cairn energy flag photoEdinburgh-based Cairn Energy – the low profile Scottish oil exploration company – has ‘struck oil’ in terms of its City fan club.In its latest analysis, Edison Investment has gushed: “It should be stressed that Cairn stands out among the UK-listed E&P peer group as a fully-funded explorer and developer – a good position to be in in the current low oil price environment.”

In her latest research note on the Edinburgh oil play, analyst Kim Fustier analyst has highlighted the progress made at Cairn Energy, saying the company had been transformed in the last five years.

She also flagged up the fact Cairn is developing the giant Kraken and Catcher finds in the UK North Sea and has made two discoveries off Senegal last year.  The company acquired the acreage concerned under the leadership of Simon Thomson, who became chief executive in 2011.

Fustier also noted the outcome of the £1 billion tax dispute which Cairn is embroiled in India but noted: “In an environment where many independents are struggling to secure funding, Cairn is in the comfortable position of being fully funded until first oil from Catcher and Kraken in mid-2017.”

The Edison Investment note says: “Cairn’s transformation over the last five years has given birth to a new full-cycle E&P company; our RENAV of 216p/share offers reasonable upside at a much lower risk profile than many E&Ps.

 “The jewel in Cairn’s portfolio is Senegal, where it made one of the world’s largest offshore oil discoveries in 2014. While the market will be closely watching Cairn’s Senegal drilling campaign starting in Q415, an even more material valuation lever for the stock is the outcome of the $1.6bn Indian tax dispute.

 “The 330mmbbls discovery in Senegal is key as it is Cairn’s main operated asset and only real exploration success over the last five years.

 “The $1.6bn Indian tax dispute has been a thorn in Cairn’s side but has not affected its investment plans or strategy. Assuming the liability is not likely to be enforceable outside India, the maximum downside would be a write-off of the entire $530m (59p/share) Cairn India stake, which we think is already priced in by the market

 “In an environment where many independents are struggling to secure funding, Cairn is in the comfortable position of being fully funded until first oil from Catcher and Kraken in mid-2017. Cairn’s conservative strategy may reflect its mixed track record on past frontier exploration outside Senegal and M&A.

Cairn Energy is a $1.5bn UK-listed E&P with assets in the UK, Senegal, Norway, Mauritania, Morocco and Greenland. After the exit from India in 2010-11, the return of $4.5bn to shareholders and a wave of acquisition and disposal activity in 2012-13 to rebuild the upstream portfolio, Cairn has repositioned itself as a full-cycle E&P centred on Atlantic Margin exploration and North Sea exploration and production.

In contrast to many E&P peers, the company is fully funded by a large cash pile and credit facilities until mid-2017 when the Catcher and Kraken projects are scheduled to start up.

Fustier added:  “Cairn has transformed itself in the last five years, following the disposal of a 40% stake in Cairn India for $5.5bn in 2010-11 and the return of $3.5bn of cash to shareholders in early 2012. The sale of the Cairn India stake left the company with no producing assets and over $2bn of cash at its disposal.


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