OREANDA-NEWS. Simon Thomson, Chief Executive of Cairn Energy PLC will make the following statement at the Company’s Annual General Meeting for shareholders in Edinburgh at 12noon today:

“Cairn seeks to deliver sustainable growth in value for shareholders from a balanced Exploration and Production portfolio. That balance is provided from a combination of the attractive mature basin positions that we have built in the North Sea and an extensive frontier and emerging basin exploration portfolio. The future cash flow from the North Sea means we remain fully funded with financial flexibility to pursue all our strategic goals while remaining highly disciplined around deploying capital.

A key strategic goal is to maximise the value in Senegal following the significant discoveries made in the autumn of last year.  We believe we have opened up a new world class basin play with full block mean risked resource potential in excess of one billion barrels. As Cairn is fully-funded, we can be counter-cyclical and benefit from reduced contractor costs in a lower oil price environment whilst we undertake a very active programme. In Q4 of this year, we will commence a programme of up to six wells for which we have selected a 7th Generation dual activity drillship. We will rapidly appraise the SNE-1 discovery and we will also acquire extensive additional 3D seismic during the course of this year.

This commitment to extensive activity lays the foundations for a long term, multi-field, multi-phase exploitation plan to maximise value in Senegal.  We plan to progress from the existing discoveries, through appraisal and further exploration of the substantial prospectivity that we see across the acreage towards development of the discovered resource base. We are well-placed to take advantage of this exciting opportunity.

Senegal is an attractive place to have made these discoveries: It is a stable democracy with an important regional role and is one of West Africa’s most prosperous nations. It has excellent infrastructure including one of the biggest ports in West Africa and the Production Sharing Contract (PSC) has appropriate fiscal terms to reflect the frontier basin risk.

Our approach to Senegal is absolutely consistent with Cairn’s strategic delivery for more than 20 years. We are a highly experienced exploration, appraisal and development operator, with an absolute focus on Health, Safety and Environment and a demonstrable track record of benefiting the communities in which we operate. We have a history of strong partnerships with industry and government alike. We take a large acreage position with follow on potential in the event of success. And we remain focused on routes to monetisation and shareholder value. Over the last ten years, we have returned in excess of US\$4.5 billion to shareholders as a result of trading assets that have stemmed from oil and gas discoveries made by Cairn.

We currently remain unable to access the value of our ~10% shareholding in Cairn India and have received a draft tax assessment from the Indian authorities. We have received consistent legal advice that Cairn has been fully compliant with all applicable laws and regulations in respect of our operations in India. We have therefore filed a claim under the UK-India Investment Treaty and are pursuing a fast track arbitration process with the Indian authorities. Importantly, the issue is confined to our Indian assets. 

Whilst we are very disappointed to have received the draft notice notwithstanding our regular engagement with the new Government, we are focused on resolving this issue and in the meantime we have moved quickly to ensure continued financial flexibility in the business; by the end of 2014 we completed a redundancy process that saw a reduction of 40% in the workforce and we also effected the disposal of a part interest in our Catcher development asset thereby reducing our future capital expenditure by \$380m. These moves combined with an ongoing focus on capital discipline have ensured continued financial strength in the Group.

Cairn remains fully-funded to deliver all its strategic goals. We look forward to proving up significant additional value in Senegal through an exciting programme of drilling and data acquisition commencing in Q4 2015. The North Sea assets remain on track to generate significant cash flow from 2017 onwards. Our management team continue to focus on maintaining balance in the portfolio and a disciplined approach to the allocation of capital.”