Cairn Energy today assured investors it has enough money to continue its exploration and development programmes in the North Sea and elsewhere despite an ongoing dispute with the Government of India over tax.
Cairn, which has a 30% stake in the Premier Oil -operated Catcher field, said it had £660million cash on its balance sheet as well as a £346million agreed banking facility. But the firm has been banned from selling its stake in Cairn India, worth around another £660million, until it is able to settle the Indian government’s claims.
Cairn said it has not yet not received a tax assessment or demand from the Indian Income Tax Department.
The company also plans to slim down its workforce in an effort to reduce costs. Cairn made a loss of £72million in the six months to the end of June compared to a £224million loss in the same half last year.
In its half year report yesterday, Cairn said it has earmarked £180million to be spent in the second half of this year and another £66million for its 2015 drilling campaign.
“We are fully funded to deliver core developments of Catcher and Kraken, said Simon Thomson, Cairn Energy chief executive.
“That will give us approximately 25,000 barrels of oil equivalent per day on peak production. That will allow reinvestment and sustaining ongoing cash flow, feeding a series of explorations as well.”
He added that Cairn plans to drill seven exploration wells over the next 12 months, although this could increase targets in the North Sea depending on investment decisions of its partners this year.
Cairn, through its £281million acquisition of Agora in 2012, also has a 25% stake in Statoil’s Ensis project in the Barents Sea which has commenced drilling.
The company said it was now focused on mature and emerging basins, with plans to farm down exploration in frontier areas.
Thomson said the firm has been “actively engaging” with members of India’s new government after the conservative, pro-business Bharatiya Janata party won a landslide victory in elections in May.
He said the government announced plans to form a committee to look at retrospective tax issues
“In the meantime we are leaving no stone unturned in terms of our efforts to seek a resolution,” he added.
The Catcher Field Development Plan (FDP) received approval from the Department of Energy and Climate Change (DECC) in June with first oil targeted mid 2017.
The Kraken development is progressing on schedule with first oil expected 2016/2017 (Cairn 25% WI) and 2P net reserves of 29.5 mmboe.
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