SHARES in the former Cairn Energy have surged seven per cent following signs the company’s move into Egypt is paying off, as it shows faith in the potential of the North Sea amid the gas price surge.

The Edinburgh-based firm, which is now called Capricorn Energy, noted it is generating significant profits in Egypt and is moving fast to assess the potential of North Sea exploration acreage that it bought into last year.

The update came as an analyst noted that a firm that won backing from US billionaire Warren Buffett for a plan to develop North Sea finds, IOG, looks set to “reap a significant gas price windfall” in coming months.

IOG expects to start production in February from two finds that bigger fish left undeveloped.

Developments at Capricorn and IOG highlight the scale of the boost that companies are set to enjoying following the sharp rises seen in the prices of oil and gas amid the recovery from the pandemic.

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The gas price rise has been particularly dramatic. It may have further to run if supplies from Russia are disrupted as a result of the country taking military action against Ukraine.

North Sea industry body OGUK said yesterday: “Warnings of Europe-wide gas shortages, linked to Russia’s threatened invasion of Ukraine, have reinforced the need to maintain the UK’s present and future offshore gas supplies.”

Capricorn probably pleased shareholders yesterday by reiterating that it expects to make bumper payouts to investors in coming weeks as the end to a lengthy tax saga in India appears to draw near.

“With balance sheet strength and financial flexibility, Capricorn enters 2022 positioned to make another significant capital return to shareholders,” said chief executive Simon Thomson.

He noted that Capricon has taken all the steps required to trigger a refund from the Indian authorities that will be worth around $1bn. Capricorn has said it will pay out up to $700m of the proceeds to investors.

HeraldScotland: Capricorn Energy chief executive Simon Thomson by the site of a big find made by the firm in India while it was known as Cairn EnergyCapricorn Energy chief executive Simon Thomson by the site of a big find made by the firm in India while it was known as Cairn Energy

The company has been embroiled in a dispute with the Government of India that started in 2014, years after it made a series of big finds in the country. It resorted to trying to seize Indian government-owned properties in Paris to try to enforce an award granted in its favour by an international tribunal.

After agreeing a compromise deal with the government in September Capricorn stopped such proceedings.

In November is said it had agreed to change its name to Capricorn from the following month.

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The update on trading in 2021 showed the company has made progress in spite of having to devote management time to the Indian tax dispute.

In March it agreed deals to sell stakes in two big producing fields in the UK North Sea to Waldorf Production for an initial $460m and to buy a half share in a big portfolio in Egypt from Shell for $320m.

Mr Thomson decided the Egyptian portfolio offered better growth potential than the Catcher and Kraken fields, which the company developed off Scotland with partners.

He noted yesterday: “We are very encouraged by the initial operating performance of our newly acquired Western Desert Assets in Egypt, with production growth ahead of expectations.”

Capricorn generated $56m revenues in Egypt between completion of the Shell deal in September and December 31. Production costs totalled $22m.

The company expects to receive $76m from Waldorf in respect of production revenues generated from Catcher and Kraken last year.

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In August Capricorn acquired stakes in five North Sea exploration licences from Deltic Energy.

Capricorn said yesterday that processed seismic survey data data expected in the second quarter will enable the firms to fast-track an assessment of prospectivity in the licence area concerned. Capricorn also has exploration acreage in other countries including Israel and Mexico.

IOG has faced challenges in recent weeks with its attempt to start production from the Blythe and Elgood finds in the Southern North Sea.

Work on onshore facilities that will handle production has taken longer than expected.

HeraldScotland: IOG chief executive Andrew Hockey IOG chief executive Andrew Hockey

Chief executive Andrew Hockey said yesterday the delay was frustrating but added: “An expanded team is working days and nights aiming to be ready for back-gassing in mid-February, with First Gas expected approximately a week later.”

Work on a well on the Southwark field has been delayed while seabed challenges are addressed.

IOG said costs on the first phase of its North Sea development may exceed the £305m budget by up to 25%. However, no additional financing requirement is currently expected.

A firm owned by Mr Buffett bought a stake in the development in 2019.

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Regarding the recent setbacks, Jonathan Wright at house broker finnCap said: “ These issues are frustrating, but we expect will melt away once the Blythe and Elgood fields come onstream into a rampant UK gas market. IOG remains well placed to reap a significant gas price windfall.”

While operating under the Cairn name, Capricorn enjoyed exploration success off Senegal as well as in India.

The company paid a special dividend of $257m last year following the $400m sale of its Senegal operations to Woodside Energy.

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The company insists it has paid all taxes due in India. It sold a controlling stake in its former Cairn India subsidiary to Vedanta Resources for $5.5bn in 2011 and paid $3.5bn of the proceeds to shareholders.

Mr Thomson succeeded former Scotland rugby internationalist Sir Bill Gammell as chief executive in 2011.

Shares in Capricorn Energy closed up 12.3p at 199p yesterday. IOG shares closed up 0.5p at 32.25p.