3rd Jul 2006 07:01
Cairn Energy PLC03 July 2006 EMBARGOED FOR RELEASE AT 0700 3 JULY 2006 CAIRN ENERGY PLC Pre-Close Operational and Trading Update Cairn intends to announce its interim results for the six months to 30 June 2006on Tuesday, 5 September 2006. In advance of these results, Cairn is providing anupdate on recent operations and guidance in respect of the Group's tradingperformance in 2006. This information has not been audited and is subject tofurther review. Operational Highlights Final Government of India approval received for first four FieldDevelopment Plans (FDPs) for the Mangala, Aishwariya, Saraswati and Raageshwarifields in Block RJ-ON-90/1, Rajasthan. $1 billion bank facility signed. $850 million to be allocated to fundingCairn's share of the above field developments in Rajasthan. A hydraulic fracture programme in Rajasthan has highlighted the potentialfor new reserves in low permeability reservoirs. The Company continues to target Q4 2006 to Q1 2007 for the partialInitial Public Offering (IPO) of the Indian business on Bombay Stock Exchange. Sir Bill Gammell, Chief Executive said: "Obtaining Government approval for the Mangala, Aishwariya, Saraswati andRaageshwari fields in Rajasthan and securing finance for the first phase of thedevelopments is a significant achievement on the path to first oil." Enquiries to: Cairn Energy PLC: Tel: 0131 475 3000Analysts/Investors Bill Gammell Chief Executive Kevin Hart Finance Director Mike Watts Exploration DirectorMedia David Nisbet Head of Group Communications Brunswick Group LLP: Tel: 0207 404 5959 Patrick Handley, Mark Antelme Corporate Following our recent successes in India and the consequential changing nature ofthe business, Cairn indicated that a partial IPO of the Indian business wouldtake place. Work on progressing the IPO is well underway and on track to allowthe Company to meet its aim of listing on the Bombay Stock Exchange in the lastquarter of 2006 or early 2007 subject to market conditions. Rahul Dhir, the new Chief Executive Officer appointed in April 2006 to lead theIndian business, is now resident in Gurgaon, near Delhi. The formation of themanagement team, operations team and organisation required to run the Indiabusiness on a stand alone basis is well advanced. Rajasthan RJ-ON-90/1 Overview Development The Company's main focus is to bring Mangala on stream at the earliestopportunity, currently scheduled for Q4 2008, followed by Bhagyam and Aishwariyaapproximately one year later. A detailed update will be provided with theInterim Results in September. The Government of India (GoI) has given its final approval for the FieldDevelopment Plans (FDPs) for the Mangala, Aishwariya, Saraswati and Raageshwarifields in Block RJ-ON-90/1, Rajasthan, North West India. The FDPs were approvedby the Management Committee (MC - Directorate General Hydrocarbons representingthe Government of India, ONGC and Cairn) in May. This final approval follows theearlier agreement on the FDPs reached at the joint venture Operating Committee(OC - Cairn and ONGC). In order to fund its 70% share of the Northern Fields development project, Cairnhas signed a $1 billion bank facility with the International Finance Corporation(IFC), The Royal Bank of Scotland plc and several other international banks; tofinance the first phase of the development. Subsequent development costs areanticipated to be funded out of cash flow. The first commercial production from the Saraswati and Raageshwari fields isplanned for Q4 2006. The initial combined target plateau rate of between 2,000and 3,000 barrels of oils per day (bopd) will be constrained by having to exportthe produced oil via road tanker. However, once the Mangala exportinfrastructure is installed, it is planned, subject to capacity, that theSaraswati and Raageshwari fields, as well as other southern discoveries, will betied in to the export system. Under the terms of the Production Sharing Contract(PSC) the construction of the export system is the responsibility of the GoIthrough its nominated buyer, MRPL (a subsidiary of ONGC). The Declaration of Commerciality (DoC) for the Bhagyam and Shakti fields wasapproved by the OC on 1 February 2006, which is the first step in thedevelopment approval process under the Production Sharing Contract (PSC). The MCis currently considering a Development Area extension to cover the Bhagyam, N-I,Shakti and N-E fields. The Bhagyam and Shakti FDP is expected to be submitted tothe OC in Q4 2006 and once approved it will be submitted to the MC. Facilities and Engineering design for Mangala is ongoing with a specialist teamfrom Cairn working alongside the contractors, Mustang, in Houston. The FDP for the Guda field in the south is expected to be submitted in Q3 2006.The oil quality of the southern fields is lighter and is found in a variety ofdifferent reservoirs which are generally of poorer quality than those in thenorthern fields. Nevertheless, wells such as Guda 2, 3 and 7; which flowed at >1,000 bopd of 38 degree API oil, show that locally these reservoirs can be veryproductive for onshore wells. Northern Appraisal Area (Cairn 100%) In June 2005, Cairn was granted an 18 month extension to complete its appraisalactivities in three areas covering 2,884 km2, to the north and west of theDevelopment Area. An extensive 3D seismic programme is underway in the southern part of thisappraisal area, south of the Barmer airbase, which is to be followed by earlydrilling, given the November 2006 deadline for completion of activities.Following NP-2, three appraisal wells on the northern end of the NP structureclose to the airbase have been drilled with mixed results. One well encountered19m of oil bearing Fatehgarh reservoir, with a heavy 16 degree API crude. In twoother wells in separate fault blocks 745m and 3.2km to the west the Fatehgarhsection was missing. Further drilling on and around the structure will berequired to delineate the NP field. Reservoir Stimulation Programme A programme of hydraulic fracture stimulation on various lower permeabilityreservoirs is nearing completion. Results on the Raageshwari deep gas field from a single tested zone inRaageshwari 5 indicated a two-fold increase in productivity. Testing onRaageshwari 7 is currently on-going following a three stage fracture stimulationtreatment. Mechanical problems have curtailed the programme for Raageshwari 4-Z. Gas from the Raageshwari wells will be utilised as fuel for the Mangaladevelopment and subsequent northern area developments. The first fracture stimulation of the Barmer Hill formation at Mangala wasconducted on the Mangala 6 well and resulted in up to 150 bopd. Test productionusing a sucker rod pump has been completed, producing a total of 1,200 barrelsof oil (bbls) in approximately four weeks. A second fracture stimulation operation of the Barmer Hill formation atAishwariya was conducted on the Aishwariya 4 well and resulted in initial flowrates of 400 to 500 bopd. The well has been tested for several weeks with anincreasing gas oil ratio (GOR) indicating a possible gas-cap. The test results from the two Barmer Hill wells are very encouraging inhighlighting the potential to unlock material reserves in the Mangala andAishwariya Barmer Hill reservoirs. Additional work is needed to quantify thepotential. This work is likely to be completed by September. The Vijaya, Vandana, N-R and southern fields are also potential candidates forfuture fracture stimulation to access new reserves or accelerate production. Ravva The Ravva field has remained on plateau in the first half of 2006. An offshoredrilling programme of 6 Ravva infill wells and 1 exploration well is due tocommence in September. An onshore exploration well, RX-9, is currentlyoperating. Western India Lakshmi and Gauri production is up for the year to date, in barrels of oilequivalent (boe) terms, due to increased oil and condensate production. In viewof the encouraging performance further evaluation of the oil play is planned. Northern India The ONGC operated exploration well at the Tisua prospect in the Ganga Valley isexpected to spud shortly. NELP VI The sixth Indian Government exploration bidding round, NELP VI, closes 15September 2006. Cairn will be an active participant in this round. Bangladesh A winter 2006/2007 offshore drilling programme is being planned in Block 16 todrill Sangu infill wells, a Sangu south appraisal well and at least oneexploration well. Nepal The Company continues to monitor security developments in Nepal with a view tocommencing field operations at the earliest opportunity. Group Production The Group estimates entitlement production for the first six months of 2006 tobe approximately 27,301 barrels of oil equivalent per day (boepd) net to Cairn(2005: 27,909boepd). -------------- --------- --------- ----------- ----------Production (boepd) Ravva Sangu Lakshmi & Gauri Totalto 30 June 2006 (approximate)-------------- --------- --------- ----------- ----------Gross field 62,700 24,200 24,800 111,700-------------- --------- --------- ----------- ----------Working interest 14,100 18,100 9,900 42,100-------------- --------- --------- ----------- ----------Entitlement interest 6,400* 10,300* 10,600* 27,300*============== ========= ========= =========== ========== * provisional figures Due to the Group's current production mix being heavily gas biased and theexistence of contractual caps on the price received for this gas, the averageprice realised for the six months to 30 June 2006 is expected to be in theregion of $30 per boe (H1 2005: $24.39). 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. Cairn has now made 18 discoveries in Rajasthan block RJ-ON-90/1. •Cairn operates Block RJ-ON-90/1 under a Production Sharing Contract (PSC) signed on 15 May 1995. The Development Area (1,858 km2), which includes Mangala, Aishwariya, Saraswati and Raageshwari; is shared between Cairn and ONGC, with Cairn holding 70% and ONGC having exercised their back in right for 30%. •India currently imports approximately 2,000,000 barrels of oil per day (bopd). It produces approximately 650,000 bopd 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. For further information on Cairn see www.cairn-energy.plc.uk Notes: No action will be taken to permit the shares to be offered in the IPO(the "Shares") to be sold in a public offer in any jurisdiction outside India.In particular, no offer of the Shares to the public will be made in any MemberState of the European Economic Area or in the United States. The Shares have notbeen and will not be registered under the US Securities Act of 1933, as amended. There are matters discussed in this Statement that are forward looking. Allsuch forward-looking statements are based on our management's assumptions andbeliefs 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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