CAIRN Energy has underlined the profitability of its operations in the North Sea where the company is generating huge amounts of cash from two big fields.

Edinburgh-based Cairn has attracted international attention recently after approving a plan to develop a bumper find it made off Senegal.

This helped burnish Cairn’s credentials as an exploration company specialising in what are seen as frontier areas.

Cairn Energy approves plan to develop bumper oil field

However, an update from the company yesterday made clear the scale of the rewards the company is enjoying for less glamorous work completed in the North Sea.

Cairn said it generated $504 (£390m) million sales revenue last year. This was all attributable to the stakes the company has in the Kraken field off Shetland and the Catcher development east of Aberdeen.

The company has increased sales revenues from $33m in 2017. It brought Kraken onstream in June of that year following a long period in which it had focused on exploration.

After ramping up production from both North Sea fields, Cairn’s share of the output from them averaged around 23,000 barrels of oil daily last year.

The company is achieving very high profit margins on the output.

Cairn said yesterday that it received an average $64.52 per barrel for North Sea sales.

With operating costs averaging just $17.5/bbl, the company made around $47/bbl operating profit.

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Its success could encourage other companies to invest in the mature North Sea.

A range of American firms shifted investment from the North Sea to focus on what they regarded as more exciting opportunities in the shale fields of the US following the plunge in the crude price from 2014.

Cairn maintained investment in the area amid the resulting downturn.

It developed the Kraken heavy oil field with EnQuest. Advances in technology helped improve the economics of the field, which was left undeveloped for years.

Cairn developed Catcher with Premier Oil, which discovered the field in 2010.

Cairn can use the cash generated in the North Sea to fund work in other areas. The company is in line to receive $100m in respect of the sale of its Norwegian operations to Solveig Gas, which was announced in November.

Cairn's $100m exit from Norway puts lucrative UK North Sea operations in focus

It will complete the $4billion Sangomar development off Senegal with Australian firms Woodside and FAR.

Cairn is drilling a well on relatively under-explored acreage off Mexico.

The company is waiting to hear the outcome of a tax case in India which has taken up lots of management time since it started in 2014.

Cairn is seeking $1.4bn compensation from the Indian government and insists it has paid all taxes due in the country.

An international tribunal is expected to deliver an opinion in the summer.

Oil and gas firms are coming under sustained attack from campaigners amid concerns about climate change.

Oil and gas firms could do much more to tackle climate change says watchdog

On its website Cairn says that protecting the environment is a high priority. The company says it recognises that oil and gas exploration, development and production may have an impact on the environment and seeks to understand and minimise that impact using the precautionary principle.

Cairn discovered huge amounts of oil in India under the leadership of its founder Sir Bill Gammell.

It has been led since 2011 by Simon Thomson.

The Sangomar field, which Cairn discovered in 2014, is in line to be the first developed in Senegal.

Cairn generated $400m North Sea revenues in 2018.

Meanwhile Aberdeen-based engineering giant Wood is set to capitalise on efforts by Saudi Arabia to maximise the potential of its gas reserves.

The company said yesterday that it had won an extension of a contract to support Saudi Aramco in a programme to produce and deliver significant volumes of gas from shale and tight gas reservoirs.

Wood said unconventional gas will be key to meeting the Kingdom of Saudi Arabia’s growing energy needs, with cleaner burning natural gas for domestic power generation.

Dave Stewart, who runs the Wood division that will work on the contract, said: “Saudi Aramco is a strategically important customer in the region, and we look forward to continuing our close partnership with them and furthering our commitment to building capability in-Kingdom.”

Wood judged to be ahead of oil services pack on renewables

Last week an analyst said Wood had been faster to respond to the climate change challenge faced by oil and gas services firms than some other sector players.

Amy Wong, at UBS, included Wood in a group of oil services firms that were “ahead of the pack” noting the progress it has made to win work in sectors such as wind power and solar energy.

Oil and gas services work remains an important revenue source for Wood.