31st Jan 2008 07:01
Cairn Energy PLC31 January 2008 EMBARGOED FOR RELEASE AT 0700 31 January 2008 CAIRN ENERGY PLC OPERATIONAL UPDATE Cairn is providing information on recent operations and guidance in respect ofthe Group's trading performance in 2007. This information is unaudited and issubject to further review. HIGHLIGHTS Operational • Gross operated production for 2007 87,031 boepd (2006: 105,028 boepd)• Average net entitlement production 19,809 boepd (2006: 24,523 boepd)• Average price realised per boe US$40 (2006: US$32) Cairn India • Mangala plateau production potential increased by 25% to 125,000 bopd• Major contracts awarded for construction of Mangala processing facility and related infrastructure• Pipeline Front End Engineering and Design (FEED) complete, line pipe and Engineering Procurement Construction (EPC) contracts awarded or pending Capricorn • Magnama-1 well offshore Bangladesh plugged and abandoned with gas shows in a secondary objective. Hatia-1 exploration well currently operating• Planned commencement of exploration drilling offshore Tunisia Q4 2008• New exploration acreage position established offshore west Greenland Sir Bill Gammell, Chief Executive said: "The potential of Mangala to produce up to 125,000 barrels of oil per day hasled to a review of the optimum scale and scope of the Rajasthan development andwe are confident of achieving first oil in the second half of 2009. Capricorn continues to build new acreage positions, including Greenland whereexploration is at an embryonic stage." Enquiries to: Cairn Energy PLCSir Bill Gammell, Chief ExecutiveJann Brown, Finance Director Tel: 0131 475 3000Mike Watts, Exploration & New Business DirectorDavid Nisbet, Corporate Communications Brunswick Group LLP: Tel: 0207 404 5959Patrick Handley, Mark Antelme, These materials contain forward-looking statements regarding Cairn, ourcorporate plans, future financial condition, future results of operations,future business plans and strategies. All such forward-looking statements arebased on our management's assumptions and beliefs in the light of informationavailable to them at this time. These forward-looking statements are, by theirnature, subject to significant risks and uncertainties and actual results,performance and achievements may be materially different from those expressed insuch statements. Factors that may cause actual results, performance orachievements to differ from expectations include, but are not limited to,regulatory changes, future levels of industry product supply, demand andpricing, weather and weather related impacts, wars and acts of terrorism,development and use of technology, acts of competitors and other changes tobusiness conditions. Cairn undertakes no obligation to revise any suchforward-looking statements to reflect any changes in Cairn's expectations withregard thereto or any change in circumstances or events after the date hereof. CAIRN INDIA Rajasthan (Block RJ-ON-90/1) (Cairn India 70% (Operator); ONGC 30%) Development - Upstream An upgrade of the Mangala Stock Tank Oil Initially in Place (STOIIP) andresources has been submitted to the Rajasthan Joint Venture and the Governmentof India (GoI). An FDP addendum will be submitted in 2008 for GoI approval. The addendum willcontain a recommendation to increase the Mangala field plateau production rateconsistent with the increased potential of 125,000 bopd. This could represent anincrease of up to 25% on the Mangala production rate contained in the originalFDP submitted in 2005. The civil works and process facilities construction contracts have been awardedfor the Rajasthan upstream project. All access roads to the four hundred acresite have been built and work on the civil works contract for the terminal hasstarted. The increase in the Mangala resource potential has instigated an ongoing reviewto optimise the scale and scope of the Rajasthan development. This review isalso addressing ways of mitigating the impact of the increasing cost challengeson the project, which has been driven by the general demand for engineeringresources and materials in the industry. Accordingly, the Class II costestimates will be available by mid-2008. The FDP for Bhagyam, the second largest field in the block, is awaiting approvalby the GoI on the basis of a planned plateau production rate of 40,000 bopd. TheBhagyam and Shakti fields are contained within a second Development Area of 430km2. The Aishwariya FDP, which has already received GoI approval, has a plannedplateau production rate of 10,000 bopd. Enhanced Oil Recovery Laboratory studies on EOR have been completed for Mangala and Bhagyam andsimilar studies are planned on Aishwariya. Additional laboratory work iscurrently underway using Mangala core and fluids which are designed to confirmand refine the EOR design for Mangala. A report on the EOR potential for the Mangala field has been submitted to theRajasthan Joint Venture and the GoI. Development - Midstream - (Cairn India 70% (Operator); ONGC 30%) The FEED for the project is now complete. The procurement process for most ofthe long lead items has also commenced and key contracts have been awarded orare pending. The GoI has agreed to grant Rights of Use for the pipeline and the process tosecure access to the land along the proposed pipeline route is well advanced. Discussions are ongoing with the GoI regarding the potential inclusion of themidstream infrastructure within the FDP for cost recovery purposes. Northern Appraisal Area (Cairn India 100%) A Declaration of Commerciality (DoC) for the three discoveries made in this area(Kameshwari West 2, 3 and 6) has been approved by the Operating Committee, alongwith a proposed new Development Area of 1,178 km2. The DoC is now awaitingapproval from the GoI. These three discoveries have opened up a new play in the Barmer Hill/LowerDharvi Dungar sands on the western margin of the Rajasthan basin. Exploration and Appraisal A 120 km2 high definition 3D seismic survey was completed over the Mangala fieldand processing of the data has started. A 220 km2 appraisal 3D seismic programme of the Kameshwari light oil andcondensate discovery has been completed. Processing of the 3D dataset isongoing. Cambay Basin - Western India Block CB/OS-2: (Cairn India 40% (Operator)) Average gross production from CB/OS-2 for 2007 was 12,746 barrels of oilequivalent per day (boepd) (comprising average oil and condensate production of4,407 bopd and average gas production of 50.03 mmscfd). An offshore drilling programme for the further development of Lakshmi and Gauriis well underway. The programme comprises four infill oil and gas developmentwells plus three workovers. Two wells have been drilled and completed. Firstproduction from these two wells is expected early in 2008. The result of thedrilled wells has been encouraging. Oil production from CB/OS-2 was higher than anticipated due to improvedperformance in some wells, although gas production was less than forecastprimarily as a result of mechanical problems in other wells. The currentdrilling programme will aim to address this issue. Krishna-Godavari Basin - Eastern India Ravva (Cairn India 22.5% (Operator)) Average gross production from the Ravva field for 2007 was 60,441 boepd(comprising average oil production of 48,078 bopd and average gas production of74.18 mmscfd). An extensive offshore infill development and exploration drilling programme onRavva commenced in October 2006 and has recently been extended following theresults of the RX-8 exploration well. The RX-8 exploration well spudded in July 2007. Oil and gas was encountered infour Miocene reservoirs. The total hydrocarbon bearing sands intersected in fourpay zones is 44 metres net. A well (RB-4) is currently drilling to appraise theextent of this discovery. Production has now commenced from three new infill wells and one appraisal well.In addition, two water injection wells have been drilled and put into service toenhance the reservoir water-flood scheme. A further three workover wells areplanned to maintain production capacity Rest of India Work on Cairn India's 5 Operated and 6 non-Operated exploration blocks in Indiais at various stages of evaluation with 1550 km of 2D seismic data and 200 km2of 3D seismic data planned onshore India and 3100 km 2D seismic data plannedoffshore during 2008. Further details will be provided in the preliminaryresults announcement in March. New Exploration Licensing Policy (NELP-VII) The GoI announced the Seventh Exploration Licensing Round under the NewExploration Licensing Policy (NELP-VII) on 13 December 2007. This latestlicensing round includes a total of 57 blocks for award and is scheduled toclose on 11 April 2008. Cairn India looks forward to being an active participantin NELP-VII. CAPRICORN Capricorn continues to build an asset base for exploration led growth.Subsequent to the successful acquisitions of Plectrum and medOil in 2007,Capricorn has recently further strengthened its exploration portfolio byacquiring a new acreage position in Greenland. Capricorn now has assets in south Asia (northern India, Bangladesh, and Nepal),Greenland, the Mediterranean (Tunisia, Albania and pending licence awards inSpain and Sicily), Peru, PNG, Australia and the UK (West of Shetlands). Arationalisation programme is underway as part of a ranking process of potentialhidden value, which may lead to a reduced equity in some non-core assets. BANGLADESH Production and Development An offshore drilling campaign in Block 16 commenced in January 2007 during whichtwo wells (South Sangu-3 and Sangu-10) were drilled. South Sangu-3, which wasdrilled to evaluate the earlier South Sangu discovery, encounteredsub-commercial quantities of gas. Sangu-10, which was drilled as an extendedreach delineation well in the main Sangu field, did not encounter gas in themain reservoir horizon but encountered small, potentially producible, quantitiesof gas in a separate upper horizon and was suspended. It is intended to commenceproduction from this upper horizon in Sangu-10 before the end of Q1 2008. The results of the Sangu-10 well have been integrated into the field model and areview of the poor production performance of Sangu is underway. A number ofremedial steps are being considered including well interventions which areplanned to be undertaken during Q1 2008. An update on Sangu reserves will beprovided with the final results in March, following the completion of theintervention work and partner review. Exploration and Appraisal Operations have now commenced on the Hatia-1 exploration well, which is located12 km north-west of Sangu. Hatia is the second prospect to be drilled in thecurrent two well exploration programme in Block 16 offshore Bangladesh. Hatiahas a pre-drill unrisked P50 reserve estimate of around 1 trillion cubic feet ofgas. The first exploration well, Magnama-1, was drilled at a crestal location withthe primary objective of evaluating the potential for gas in abnormally highpressured sands beneath those productive at Sangu and elsewhere in thebasin. The well encountered a series of well developed sands in the deepestsection drilled, but these were not gas charged and the well was subsequentlyplugged and abandoned. Magnama-1 also encountered a number of thin gas bearingsands which may thicken on the flanks of the structure and may be subject tofurther evaluation at a later date. NEPAL The security situation in Nepal continues to be monitored closely. Contractualforce majeure remains in place in Capricorn's acreage in Nepal precluding newseismic acquisition. As soon as the security situation permits, planning forseismic field operations will commence. GREENLAND Capricorn announced on 10 January, that it has an interest in six hydrocarbonlicences offshore west Greenland, having recently been awarded four blocks andacquired an interest in a further two blocks from EnCana Corporation. The sixexploration blocks cover a combined total area of approximately 52,000 km2.Capricorn's interests are as follows:- • an 87.5% operated interest in two blocks (Sigguk and Eqqua) awarded in the Disko West Licensing Round;• a 92% operated interest in two blocks (Saqqamiut and Kingittoq) awarded in the Open Door Area; and• a 40% non-operated interest in two blocks (Atammik and Lady Franklin) acquired from EnCana. It is the intention to acquire 8,000km of 2D seismic over the operated blocks in2008/2009. An electromagnetic survey is being planned over the Atammik and LadyFranklin blocks during 2008 by EnCana, the operator. In line with its licence agreements, Capricorn is working with the national oilcompany, Nunaoil A/S, and the Greenlandic and Danish authorities to ensurecompliance with the environmental regulations and procedures coveringexploration activities offshore Greenland. TUNISIA A key objective of the Plectrum and medOil acquisitions was to acquire amaterial acreage position in Tunisia and Capricorn now has a 50% interest in theNabeul permit and a 100% interest in the Louza permit, both of which are locatedoffshore Tunisia. It is currently planned to drill two to four exploration wellsin Tunisia between Q4 2008 and Q4 2009. OTHER ASSETS (Albania, Sicily, Peru, Spain, Australia, UK, Papua New Guinea) An update on activity plans in other areas will be provided in the preliminaryresults announcement in March 2008. Group Production The Group's entitlement production for 2007 was 19,809 boepd net to Cairn,compared to 24,523 boepd in 2006. Production (boepd) Ravva CB/OS-2 Sangu Total Gross field 60,441 12,746 13,844 87,031Working interest 13,599 5,098 9,765 28,462Entitlement interest 7,124 4,878 7,807 19,809 Cairn's current entitlement interest production is 63% gas: 37% oil. The averageprice per boe realised in 2007 was approximately US$40, compared with US$32 in2006. The average price realised by Cairn India for oil was US$73.54/bbl (2006:US$66.32/bbl) and for gas was US$23.65/boe (2006: US21.03/boe). The averagerealised price for gas in Capricorn was US$17.60/boe (2006: US$17.59/boe) On commencement of oil production from Rajasthan the vast majority of Groupproduction will be oil and, as a consequence, the Group will become much morehighly geared to prevailing oil prices GLOSSARY OF TERMS The following are the main terms and abbreviations used in this announcement: Corporate Cairn Cairn Energy PLC and/or its subsidiaries as appropriateCairn India Cairn India Limited and/or its subsidiaries as appropriateCapricorn Capricorn Energy LimitedGoI Government of IndiaGroup the Company and its subsidiariesIPO initial public offering (of shares in Cairn India Limited)medOil MedOil plcNELP New Exploration Licensing PolicyNELP-VII Seventh New Exploration Licensing Policy roundONGC Oil and Natural Gas Corporation LtdPlectrum Plectrum Petroleum PLC Technical 2D/3D two dimensional/three dimensionalboe barrel(s) of oil equivalentboepd barrels of oil equivalent per daybopd barrels of oil per daybscf billion standard cubic feet of gasEOR enhanced oil recoveryFDP field development planFEED front end engineering and designmmscfd million standard cubic feet of gas per daySTOIIP Stock Tank Oil Initially in Place Notes to Editors: • Cairn Energy PLC ("Cairn") is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange. Following the IPO of Cairn India in January 2007, there are two separate arms to the business: • Cairn India limited ("Cairn India") is now an autonomous business listed on the Bombay Stock Exchange and the National Stock Exchange of India and has interests in a total of 15 Indian acreage blocks. Cairn retains a 69% interest in Cairn India. • Capricorn Energy Limited ("Capricorn"), a subsidiary of Cairn is the exploration focused arm. Capricorn now has assets in Bangladesh, Nepal, Northern India, Greenland, Tunisia, Peru, UK (West of Shetlands), Albania, Australia, and pending licence awards in Spain and Sicily. • "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries (including Cairn India and Capricorn), as appropriate. • "Cairn India" where referred to in the release means Cairn India Limited and/or its subsidiaries, as appropriate. • "Capricorn" where referred to in this release means Capricorn Energy Limited and/or its subsidiaries as appropriate. • The Group holds material exploration and production positions in west India, east India and Bangladesh along with new exploration rights in India and Nepal. • Cairn has focused its activities on the geographic region of South Asia, which has already resulted in a significant number of oil and gas discoveries. In particular, Cairn made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. Cairn has now made more than 20 discoveries in Rajasthan block RJ-ON-90/1. • The exploration-led business of Capricorn has, through the acquisitions of Plectrum Petroleum PLC and MedOil plc in September 2007, acquired new exploration interests in Tunisia, Peru, UK (West of Shetland), Albania, Australia and pending licence awards in Spain and Sicily. In addition, Capricorn has separately acquired licence interests offshore west Greenland. • Cairn India is headquartered in Gurgaon on the outskirts of Delhi, with operational offices in Chennai, Gujarat, Andhra Pradesh and Rajasthan. • Cairn Energy PLC (including Capricorn) will continue to be run from Edinburgh with operational offices in Dhaka, Chittagong and Kathmandu. For further information on Cairn see www.cairn-energy.plc.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Capricorn Energy PLC