20th Apr 2006 13:02
Cairn Energy PLC20 April 2006 20th April 2006 CAIRN ENERGY PLC Annual General Meeting The following statement was made by Cairn's chairman, Norman Murray at theCompany's Annual General Meeting (AGM) held in Edinburgh today:- "The Board is delighted that Cairn experienced another year of exceptionalgrowth and further evolution in 2005. In particular, the exploration anddevelopment of the world class Rajasthan asset in north west India continuedapace. As part of the natural transition of the business towards increased autonomy inIndia, the Company continues to examine and progress a partial initial publicoffering (IPO) of the Indian exploration and production (E&P) business on theBombay Stock Exchange. Before giving a brief review of the Group's activities in both 2005 and 2006 todate, I wish to highlight specific events which have occurred since thePreliminary Results were reported in March, namely: • The appointment of a Chief Executive Officer to take forward the Indian business and its IPO. • First oil from the Mangala field in Rajasthan is scheduled to commence in approximately 30 months following Field Development Plan (FDP) approval and project sanction by the Cairn Board. • A new oil discovery in Rajasthan. • The commencement of a hydraulic fracture stimulation programme in Rajasthan which although at the very early stages, is already highlighting possible new reserves. IPO With the continuing success in the northern fields in Rajasthan and the growingresource base, we believe the time is right ahead of first oil from Mangala toprogress the creation of two world class businesses, one based in the UnitedKingdom and one in India. To this end, I am pleased to report that we have appointed Rahul Dhir to beChief Executive Officer of the new Indian business, which subject to marketconditions Cairn is aiming to list through an IPO on the Bombay Stock Exchangein the last quarter of 2006 or early 2007. Rahul Dhir will join Cairn in Mayfrom Merrill Lynch where he is currently a Managing Director and co-head ofEnergy and Power Investment Banking. A separate announcement on this appointmenthas been released today. Operations Development Rajasthan, India During 2005, Cairn continued with its evaluation and pre-development of theMangala field, the largest oil discovery in India for more than two decades,against a backdrop of India emerging as an area of world focus for futureindustry activity and investment. Our estimate of the Rajasthan 2P reserve andcontingent resource base for the three main northern fields; Mangala, Bhagyamand Aishwariya, has grown significantly and is now around 800 million barrels(mmbbls) of oil. At current oil prices, the Rajasthan fields are capable ofgenerating many billions of dollars of revenue over the life of the project forstakeholders, including the Government of India (GoI). The FDPs for the Mangala, Aishwariya, Saraswati and Raageshwari fields have beenagreed by the joint venture Operating Committee (OC) and are awaiting final GoIapproval. These approvals are a precursor to formal sanctioning of thedevelopment project by the Cairn Board. The Bhagyam FDP is currently beingprepared for submission to the joint venture and to the GoI. The present focus is to bring Mangala on stream at the earliest opportunityfollowed by Bhagyam and Aishwariya. First oil from the Mangala field inRajasthan is scheduled to commence in approximately 30 months following FieldDevelopment Plan (FDP) approval and project sanction by the Cairn Board. Firstoil from Bhagyam and Aishwariya is targeted to commence a year after Mangala. The initial development investment for Mangala and Raageshwari gas by the jointventure to first production is estimated to be in the region of $800 million andwe are on track to have financing in place to fund our share of the project.Credit approval from all the relevant banks has been requested during May andformal signing of the facility is planned in June 2006. Appraisal Rajasthan, India In a little over two years since discovering the world class Mangala field, wehave conducted an extensive exploration programme across the basin which hasprimarily targeted prospects with structural traps. We now believe that there isin excess of 3.5 billion barrels of oil in place within our acreage and theresource base continues to grow. Today we can announce a further discovery in Rajasthan which is the 18th on theblock. The N-P exploratory well drilled on the flank of the Barmer airfield highstructure has encountered 16 metres of log evaluated oil bearing Fatehgarhsands. The surface location for this first vertical well was two kilometres (km)within the extended Development Area and 6.4 km south east of the N-E-1discovery. At this stage, the updip potential and associated oil in placevolumes are uncertain. An appraisal drilling programme, commencing with asidetrack well which will be cored, is required before determining thesignificance of this discovery. An exploratory well on the NX structure was dry. An extensive 3D seismic programme is to commence in May 2006 in the Appraisalarea to the south of the Barmer airbase. The survey will be acquired in phasesto allow processing, interpretation and follow on drilling prior to the presentNovember 2006 deadline for completion of activities in this area. An applicationto extend the appraisal time period in this area for a further six months hasbeen made. An extensive programme of hydraulic fracture stimulation (fraccing) has recentlycommenced on the acreage. Early results on the Raaageshwari deep gasaccumulation from a single tested zone in Raageshwari-5 indicate a two foldincrease in productivity. The first frac test on the Barmer Hill formation at Mangala was conducted on theMangala-6 well and resulted in up to 150 bopd flowing to surface. Testproduction using a pump is planned. This is a very encouraging early result asit indicates the potential for reserves addition from the Barmer Hill formationwhere the in place volumes are considered to be large. The Mangala Barmer Hillformation will be further evaluated during the main phase of developmentdrilling for the highly productive Fatehgarh reservoir. The next Barmer Hillformation well stimulation by fraccing will take place at Aishwariya. Appraisal drilling activity in the next few months is to be focused on the N-Poil and GSV gas discoveries and nearby prospects. Operations Elsewhere in India, Bangladesh and Nepal The deep drilling rig Cairn has been using in its Rajasthan programme is beingmobilised to drill two exploration prospects on the onshore part of the Ravvacontract area. Operations are expected to commence in June 2006. In the light ofrecent and nearby discoveries by other operators, the exploration potential ofthe Cretaceous formations at Ravva is being reviewed. A development infill programme at Ravva of four to five wells is plannedcommencing August 2006 using a Cairn contracted drilling rig. This activity isdesigned to extend the Ravva plateau production period. In the KG Basin, deep water block KG-DWN-98/2 (Cairn 10%), the fourthexploration well in the current six well programme, discovered modest quantitiesof gas and current operations continue on the fifth well. The large ultra deepwater prospect in the south of the block has been reviewed with ONGC with thepossibility that this will be drilled as a seventh exploration well prior toSeptember 2006. The Tisua exploration well (Cairn 30%) on block GV-ONN-97/1 in the HimalayanForeland Basin is expected to spud at the end of April. Two other non-operatedexploration wells are also planned during the summer of this year on blockCB-ONN-2001/1 in the Cambay Basin (Cairn 30%). In Bangladesh, we are planning an infill drilling campaign for Sangu along withan appraisal well in South Sangu and at least one exploration well during thewinter of 2006/2007. The Government of Bangladesh has recently granted formalapproval for Cairn's participation (45%) in Block 7 which is operated by Chevron(formerly Unocal). A 2D seismic survey is presently being acquired over thisblock. Despite invoking contractual Force Majeure on the Nepalese blocks in August2005, in view of the present security troubles, Cairn held a joint reviewmeeting in Kathmandu with Government officials during March 2006 to discuss theresults of ongoing technical studies. Indian Exploration Bid Round (NELP-VI) For more than ten years India has been a focus for Cairn. The NELP-VI (NewExploration Licensing Policy) bid round is currently underway with GoI road showpresentations taking place around the world. Cairn has been involved in a numberof these presentations. The company expects to be an active participant in the bidding for some of the55 blocks that are on offer. The closing date for bids is set for 15th September2006 with the announcement of awards by the GoI expected in December 2006. Staff Preparing the business for an IPO will represent a challenging time for staffacross the Group and I would like to place on record my thanks and appreciationfor the commitment and dedication all employees have shown since the companymade the IPO announcement in March. I am also pleased to announce that Group General Manager and Board Director,Malcolm Thoms, has been appointed Chief Operating Officer. Concluding remarks The new financing and the strength of our balance sheet will enable us to moveforward on the key projects in Rajasthan while maintaining an active explorationand drilling programme providing potential for further growth across South Asia. The future offers us challenges and opportunities and we always work in a spiritof partnership and co-operation with Governments and our joint venture partners.Cairn has a clear and consistent strategy and, with the growing industry andinvestment interest in South Asia, has an optimal opportunity to capitalise onits competitive edge through a proposed partial IPO of its Indian business." Enquiries to: Cairn Energy PLC: Analysts/Investors Bill Gammell Chief Executive Tel: 0131 475 3000 Kevin Hart Finance Director Mike Watts Exploration Director Media David Nisbet, Head of Group Communications Brunswick Group LLP: Patrick Handley, Mark Antelme Tel: 0207 404 5959 A presentation by the Executive Directors at today's AGM is available on theCompany's website at www.cairn-energy.plc.uk . Notes to Editors: •Cairn focuses its activities on the geographic region of South Asia. The Group holds material exploration and production positions in west India, east India and Bangladesh along with new exploration rights in India and Nepal. •This focus on South Asia has already resulted in a significant number of oil and gas discoveries. In particular, the Company made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. •India currently imports two million barrels of oil a day. It produces 650,000 bopd a day itself of which 50,000 bopd comes from the Cairn operated Ravva field on the east coast of India. •Cairn has recently opened a new Indian headquarters at Gurgaon on the outskirts of Delhi to provide improved support for the Rajasthan project team and to manage the Company's business interests in India. • "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries, as appropriate. • "ONGC" is the Oil and Natural Gas Corporation Ltd •Unless otherwise stated any reference to reserves refers to gross life of field 2P reserves. Any reference to resource base refers to gross 2P reserves plus contingent resources. For further information on Cairn see www.cairn-energy.plc.uk Note: There are matters discussed in this Statement that are forward looking.All such forward-looking statements are based on our management's assumptionsand beliefs in light of information available to them at this time. Theseforward-looking statements are, by their nature, subject to significant risksand uncertainties and actual results, performance or achievements may bematerially different from those expressed in such statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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