The future's burning brightly for Cairn Energy: the company's operations blaze a trail off the Indian state of Gujarat
Cairn upbeat despite profit whammy
India focused UK player Cairn Energy remains buoyant about its major exploration projects despite a 76% fall in pre-tax profits.
The UK-listed outfit turned over a $407 million pre-tax profit for the first half of 2008 compared with $1.5 billion over the same period a year ago, when it was boosted by a its flotation on the Mumbai stock exchange and national Indian stock exchange, coupled with sky-high oil prices.
Operating profit hit $44.2 million compared with $18.2 million a year ago, despite taking 38% less oil out of the ground, as Cairn more than doubled the price achieved to $71.19 a barrel on average.
Sliding production was primarily due to a fall in overall field production at Ravva and Sangu in India, but particularly in Sangu which is a mature field now in decline.
Gas production accounted for 47% of total production compared to 68% for the same period last year.
The group’s gross operated production across South Asia during the first half was 80,873 barrels of oil equivalent, while working interest production and entitlement interest production stood at 22,124 boe per day and 13,886 boe per day respectively.
The group’s chief executive, Bill Gammell, confirmed that its Mangala field in Rajastan, India, is on track to start pumping oil during the second half next year followed by Bhagyam and Aishwariya in 2010.
Cairn revised estimates on the amount of hydrocarbons it can extract from the three proven Rajasthan fields, Mangala, Bhagyam and Aishwariya, of 175,000 barrels of oil per day (bopd) an increase from the previously forecast figure of 150,000 barrels of oil per day.
“This project will equate to about 20% of Indian domestic production, which is very important to the local Rajasthan economy and the central government,” Cairn’s exploration director, Mike Watts, said in a statement yesterday.
During the first half, Cairn was awarded one new exploration block in Sri Lanka, while its exploration programme in India will include around six wells and several seismic shoots aimed at sealing future expansion.
The company is also looking to expand its exploration activities in new territories such as Greenland as it seeks to repeat the success of its fields in India.
Capricorn, Cairn’s exploration arm, has begun a 10,000 kilometre 2D seismic shoot in Greenland which is expected to be finished by October, with interpreted results available during the second half next year.
The Arctic part of Greenland is increasingly being recognised as a potentially world class prospective area.
“The extensive Arctic continental shelf may constitute the geographically largest unexplored prospective area for petroleum remaining on earth,” the US Geological Survey said in a report last month.
It also found that potential reserves across north, east and west Greenland and eastern Canada were more than 50 billion barrels of oil equivalent.
Cairn has more than $1.1 billion of cash reserves, up from $861 million after selling a 4% share placement in Cairn India, of which Cairn maintains a 65% stake.