Scottish explorer Cairn Energy says its UK North Sea Catcher and Kraken developments are on track for first oil from 2017.
The Edinburgh-based company is targeted peak net production to Cairn of 22,500 barrels of oil equivalent per day.
Cairn today posted pre-tax losses of £370.5million from continuing operations last year, against losses of £728.3million in 2013.
The company has built a strong position in the UK and Norway by acquiring exploration, appraisal and development assets and participating in licence rounds.
North Sea interests provide balance to its broader exploration portfolio and are expected to deliver free cash flow to sustain future exploration.
Kraken and Catcher, two of the largest ongoing developments in the UK North Sea, are the group’s core development projects.
A third, the Skarfjell discovery in Norway, is in the early stages of development planning.
More recently, Cairn entered the emerging Barents Sea and is in the process of applying for operatorship in Norway.
The Catcher field, with Premier Oil as operator with a 50% stake, Cairn 20%, MOL 20% and Dyas 10%, was discovered in 2010 in block 28/9a of the central North Sea.
Follow up wells in the block then discovered the Varadero, Burgman, Carnaby and Bonneville fields.
These discoveries together with four adjacent licences make up what is known as the Greater Catcher area.
A field development plan (FDP) for the development of the Catcher, Varadero and Burgman fields was approved by the UK Government last year.
A floating production storage and Offloading facility for Catcher is currently under construction in Singapore and will be capable of processing 60,000 barrels of oil per day.
The Kraken field – EnQuest is operator with 60%, Cairn has 25% and First Oil 15% – was discovered in 1985 in block 9/2b of the UK North Sea, followed by the Kraken North field in 2013.
Combined, these two fields make up the Kraken development. A joint venture is continuing to evaluate additional opportunities in the block.
The FDP for Kraken was approved by the Department of Energy and Climate Change in 2013 and the development’s FPSO vessel, which will be capable of processing 80,000 barrels of oil per day, is also under construction in Singapore.
Development drilling on Kraken will start in 2015, with 25 wells expected to be drilled over more than four years.
Chief executive Simon Thomson said: “Cairn enters 2015 in a strong position, with further drilling planned in Senegal to evaluate the scale of this world class asset.
“We are preparing, along with our joint venture partners, for a multi-well exploration and appraisal programme that has the ability to add substantial value for the company and all stakeholders.
“In the last 12 months, we have actively managed the portfolio and streamlined the business to provide the group with continued financial flexibility to deliver our active exploration, appraisal and development programmes.”
Meanwhile, Cairn said it had instructed lawyers to file a notice of dispute under the UK-India Investment Treaty to protect its legal position and shareholder interests after a draft assessment order from India’s taxman.
Addressed to Cairn’s subsidiary, Cairn UK Holdings, the draft order is in respect of fiscal year 2006/7 to the amount of £1billion plus any applicable interest and penalties.
The transactions subject to the assessment are those undertaken to effect the group reorganisation that was required to allow the flotation of former subsidiary Cairn India in 2007.
Cairn “strongly contests” the basis of the draft assessment and says its notice of dispute is supported by detailed legal advice on the strength of the legal protections available to it under international law.
The company continues to be restricted by the Indian tax authorities from selling its remaining 10% shareholding in Cairn India, with the stake currently valued at about £464million.
Mr Thomson said: “Cairn has consistently confirmed that it has been fully compliant with all relevant legislation and paid all applicable taxes in India.”
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