10th Mar 2015 08:35
LONDON (Alliance News) - Cairn Energy Tuesday reported a significantly narrower pretax loss for 2014 after recording fewer impairments and lower costs for unsuccessful exploration compared to 2013, and said the current downturn on oil prices will allow it to complete its 2015 appraisal and exploration programme in Senegal for less money.
The FTSE 250 oil company, which does not currently generate any revenue, reported a pretax loss from continuing operations of USD559.1 million, significantly narrower than the USD1.09 billion loss reported at the end of 2013 after recording fewer impairments in 2014.
Cairn booked an a USD208.4 million charge on unsuccessful exploration in 2014, USD64.5 million in operating expenses, USD46.9 million in impairments of exploration and appraisal assets and USD54.8 million in pre-award costs.
This led the company to an operating loss of USD372.3 million, compared to a USD879.1 million loss a year earlier.
It also recorded a USD194.3 million impairment of available-for-sale financial assets, which represents the company's remaining 10% stake held in Cairn India Ltd after it was restricted by the Indian Income Tax Department from selling its shares in, or receiving dividends declared by, Cairn India Ltd.
"In January, Cairn was notified of the previous Indian government's decision to freeze our 10% holding in Cairn India Ltd, following the introduction of retrospective tax legislation," said the company.
Although Cairn reported significant impairments in 2014, they were substantially lower than in 2013 when it recorded higher unsuccessful exploration costs, impairment charges on exploration and appraisal assets and a USD324.2 million impairment of goodwill, whereas it did not record any impairment of goodwill in 2014.
At the end of the period, the company reported net cash of USD869 million.
"During the second half of the year and continuing into 2015, oil prices have fallen sharply, causing all players in the sector to reassess capital plans and focus on cost efficiency...As a result of the reduction in oil prices, Cairn is able to benefit from substantially lower industry costs as we prepare for the 2015 appraisal and exploration programme (in Senegal)," said the company.
Cairn is planning a programme consisting of three firm wells and three optional exploration and appraisal wells in Senegal during 2015, it said.
"On a more positive front, the Senegal discoveries in Cairn's significant acreage position offshore West Africa provide a material opportunity for the company to create substantial shareholder value from a potentially world class asset," said Cairn.
"We start 2015 in a strong position to deliver an exciting programme across the portfolio, especially in Senegal, which has the potential to add substantial value beyond the discoveries made to date. We have built a diverse and balanced portfolio and created the financial flexibility to progress our exploration, appraisal and development programmes and ensure ongoing strategic delivery," said Chief executive Simon Thomson.
Cairn Energy shares were down 3.2% to 191.80 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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