12th Mar 2019 08:55
LONDON (Alliance News) - Cairn Energy PLC posted a significant swing to an annual loss on Tuesday, despite revenue surging due to a first full year of production.
Cairn's pretax loss for 2018 was USD1.27 billion, after a USD272.8 million pretax profit in 2017.
Profit was hurt by impairments, as well as a USD713.1 million loss on its investment in Indian copper miner Vedanta Ltd. After Cairn sold its shares, the proceeds were seized by India.
Cairn is currently seeking compensation for the action, though said on Monday it does not now expect a decision until at least late 2019.
Cairn's revenue, however, surged to USD410.3 million from USD33.3 million, with the company registering a first full year of output.
The Catcher and Kraken fields both come on stream during 2017. Production from Catcher in 2017 was 43,000 barrels of oil equivalent per day, while Kraken's was 30,300 barrels a day.
Catcher did well, Cairn said, with oil production ahead of nameplate capacity. However, Kraken missed expectations, held back by outages on the floating production and storage system, bad weather, and higher water-cut than expected.
Cairn's 2018 net production was 17,500 barrels of oil equivalent per day, with oil and gas sales revenue USD396 million.
Looking to 2019, the company is guiding for net output of 19,000 barrels to 22,000 barrels of oil per day, at a slightly lower cost than 2018.
Cairn is planning to drill up to four exploration wells in the UK and Norway in 2018, while in Mexico, it has three exploration wells planned.
In Senegal, development of the SNE field is on track for first oil in 2022, while development of the Nova field in Norway is also on schedule to first produce in 2021.
Chief Executive Simon Thomson said: "Cairn plans a material exploration programme in 2019 targeting a billion barrels of gross resources, supported by cash flow from our production base. With active development projects within the portfolio, we look forward to additional sustained production and cash flow generation over the long term.
"Cairn offers shareholders multiple catalysts for value creation. Our financial flexibility and continued focus on capital discipline ensure that the company remains strongly positioned to deliver an active programme."
Cairn also said it has reduced slightly Kraken's proved and probably reserves, reflecting current performance, leading to a USD166.3 million impairment.
However, Kraken's operator EnQuest PLC on Tuesday released its own statement saying its own estimate of the 2P reserve remains unchanged.
"EnQuest and Cairn utilise different technical approaches to Kraken production forecasting in preparing their reserve profiles for their respective auditors, which has led to this difference in reserves estimates," said EnQuest.
EnQuest, scheduled to release 2018 results on Thursday next week, will not be booking any Kraken impairment.
Cairn shares were 1.6% lower on Tuesday at 171.87 pence each, while EnQuest's were 8.5% lower at 16.92p.
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