Scottish oil explorer Cairn Energy yesterday hailed better-than-expected flows from one of its key North Sea interests as it prepares for a “very busy” drilling campaign in the months ahead.
In an update ahead of its annual general meeting (AGM), the Edinburgh-headquartered firm said it was ”particularly pleased” with the performance of its Catcher field east of Aberdeen, which it said is operating ahead of its expectations.
However, it has reduced its reserve estimates for its other North Sea field, Kraken, where Cairn’s chief executive Simon Thomson said it knows “what needs to be done to improve the performance of the field”.
“We are working with the operator on several initiatives designed to increase the productivity of the assets on a sustainable basis,” he said.
Between them, Catcher and Kraken generated around 17,500 barrels of oil per day of production for Cairn last year and around $395 million (£310m) in sales revenue.
Overall group production for 2019 remains within earlier guidance of 19,000-22,000 barrels a day for the first four months of the financial year and Cairn said it will update on production performance later in the year.
The company also highlighted its planned drilling programme for the second half of this year, which will target more than 800 million barrels of oil.
The six-well campaign will see three drilled in the UK and Norway and three in Mexico.
The first well in the Mexico programme is expected to be drilled in the third quarter of the year followed by two more. Cairn said the blocks are close to existing discoveries “in what remains a highly prospective yet underexplored region”.
In Norway, Cairn expects to drill the Lynghaug prospect later in the second half in what will be the first well to be operated by the firm in the region.
A second Norwegian well, Godalen, will follow before the focus shifts to Cairn’s Chimera interest in the UK North Sea, its second operated well in the UK.
Cairn said it was fully funded for the drilling activity.
“We have cash on the balance sheet, cashflow from our production and access to material undrawn debt capacity under our bank facilities,” stressed Thomson.
He said the company “continues to have a high level of confidence in the merits of our case” in its long-running dispute with Indian tax authorities where it is awaiting the final determination from an arbitration panel.
“Cairn’s portfolio today offers production, an active development pipeline and a multi-year exploration drilling programme, all underpinned by a strong balance sheet and a continued focus on capital discipline,” said Thomson.
“We look forward to continued delivery of our strategy to create, add and realise value for shareholders.”
All resolutions at the company’s AGM in Edinburgh were passed.