CAIRN Energy has shown its faith in the potential of the North Sea although the latest drilling off Senegal has underlined the appeal of other areas.
Edinburgh based Cairn said best estimates of the size of a find it made off the West African country have increased to 563 million barrels oil equivalent from 473mboe following successful appraisal drilling this year.
Chief executive Simon Thomson said the company had made significant progress in the first half with its plans to bring the SNE find into production.
He also emphasised Cairn expects to achieve attractive returns on the hefty investment it has made in the North Sea in spite of the challenges posed by the crude price plunge.
Cairn started production from the giant Kraken field off Shetland in June with Enquest. It expects to bring the Catcher field onstream off Aberdeen with Premier Oil later this year.
“It’s worth noting both these projects are coming in 25 per cent under budget and they are extremely attractive economically,” Mr Thomson told journalists.
Cairn expects to produce 25,000 barrels oil equivalent daily from the fields next year, at an operating cost of just $17 per barrel. Brent crude fetched around $52 per barrel yesterday.
Mr Thomson said Cairn is screening potential acquisition opportunities in the North Sea.
It faces significant competition for quality assets in the North Sea, although some firms have been trying to reduce their exposure to what is seen as a high cost area following the fall in crude prices since 2014.
The company expects to drill up to 10 wells off the UK and Norway by the end of 2019, targeting over one billion barrels resources.
It has added exploration acreage off Mexico and Ireland in recent months.
Kraken gave Cairn the first production the company has had since selling a controlling stake in its former Indian subsidiary to Vedanta in 2011.
It could use cash generated from Kraken and Catcher to fund work on other assets.
Cairn hopes an arbitration panel will resolve its long running tax dispute with the Indian government early next year.
The company is seeking $1bn (£0.8bn) damages from the Indian government, which has prevented it from selling its remaining holding in the Indian business. It insists it has paid all taxes due.
The government seized $105m dividends due to Cairn in India in the first half.
It is seeking $1.6bn from Cairn. The retrospective tax claim concerns events leading up to the 2007 flotation of Cairn India. This held the giant fields Cairn discovered in India under founder Sir Bill Gammell.
Cairn earned $11m revenue in the first half covering royalties due from Petrochina on producing fields in Mongolia. It demonstrated its right to the royalties following successful international arbitration proceedings.
The company did not book any revenue in respect of Kraken in the first half.
It lost $28 million after administrative costs in the period, against $53m last time.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here