Cairn Energy pumps out £203m profits

Published on Tuesday 26 August 2008 10:34

CAIRN Energy, the Edinburgh-based oil and gas explorer, today delivered a strong set of first-half profits as it gears up for drilling its first commercial oil in India.

The company's lucrative Rajasthan reserves are expected to contribute a fifth of India's total daily oil when it starts drilling in the second half of next year.

Its Cairn India arm is expected to deliver revenues of up to 1.6 billion a year at the fields.

And the firm's chief executive, former Scotland rugby international Sir Bill Gammell said that the firm is taking on the role of "arctic explorer" by investigating new potential oil in Greenland.

Cairn's Capricorn division has already commenced an exploration programme in Greenland and believes that there is potentially up to 50bn barrels of oil.

Sir Bill said: "The key to Capricorn is that it is now taking on the role of an arctic explorer and there is seismic opportunity in our work in Greenland, which is taking place with a view to drilling at locations in three years time.

"We are trying to create a bandwagon rather than follow one and Greenland offers huge potential."

Cairn recorded its first real strong profits in the first half of this year after recording profits of 203.6 million after tax. Although it recorded 823.6m of profits in the first half of 2007, the figure had been strongly influenced by the 835m IPO of Cairn India.

But Jann Brown, Cairn's finance director, insisted that the true sign of the group's strength is in its balance sheet. She said: "Right now, because we are in the development phase, the true health of the company is not in the profit position. What is important is the balance sheet, and it is in very good shape."

Cairn is currently forecasting that the Rajasthan fields will deliver 175,000 barrels of oil equivalent a day, but that the figure could rise even further.

Sir Bill said that, while the price of oil will impact revenues, the company's relatively low research and production costs mean it will be profitable "at any cost".

If oil stands at $100 a barrel, the firm could get an operating cash flow of $3bn (1.6m) a year.

"The group has the ability to deliver material growth in the two arms of its business," said Sir Bill.