Edinburgh's Cairn Energy hails strong result from North Sea fields

Edinburgh-based Cairn Energy has seen oil and gas revenues top $500 million (£384m) after production from its North Sea fields came in at the upper end of guidance.

Cairn Energy has interests in areas including the North Sea, Mexico and Senegal. Picture: Contributed

In a trading update ahead of March’s full-year results, the energy explorer and producer said its share of combined oil production from the Catcher and Kraken fields in 2019 averaged 23,000 barrels of oil per day (bopd), at the top end of previous guidance of 21,000 to 23,000 bopd.

The group holds a 20 per cent stake in Catcher and a 29.5 per cent holding in Kraken. Full-year oil production, net to Cairn, for the current year is estimated to be 19,000 to 23,000 bopd.

The FTSE 250-listed firm said revenue for the 2019 year amounted to $504m, with oil priced at an average of $64.52 per barrel.

The company described the performance of the Catcher Area fields as “excellent”, underpinned by the operating efficiency of the floating production storage and offloading vessel. Kraken is said to have “significantly improved” during the second half of last year.

Chief executive Simon Thomson said: “Cairn’s strong cash flow generation, active portfolio management and year-end net cash provide financial flexibility for continued strategic delivery across our balanced portfolio.

“We are delighted to have achieved [final investment decision] in Senegal and we look forward to the results of our exploration drilling programme in Mexico.

“The sale of our Norwegian business through two attractively-priced transactions demonstrates the company’s continued focus on capital discipline and monetisation.”

Analysts at RBC Capital Markets noted: “2019-20 production is in line with our expectations and the drilling of two keenly watched wells offshore Mexico continues.

“Management reported a [2019 financial year] cash beat – ending the year with cash of $154m; however, this is driven largely by timing differences – 2019 capex [capital expenditure] is down while 2020 is up on our expectations.

“In the UK, development of the two Catcher satellite fields, Catcher North and Laverda, is progressing to plan with wells scheduled to be drilled mid-2020.”

In a note, Numis Securities’ analysts said: “We view the trading update as neutral. There is no update regarding the Mexico exploration program, with two wells ongoing and a further well to follow.

“The India tax arbitration hearing is still expected to be resolved in summer 2020,” they added.