Half-yearly Results - The Group

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Half-yearly Results - The Group

Half-yearly Results

Cairn Energy PLC

Tuesday, August 23, 2011


2

Half-yearly Results

Tuesday, August 23, 2011

Disclaimer

These materials contain forward-looking statements regarding Cairn, our corporate plans, future

financial condition, future results of operations, future business plans and strategies. All such forwardlooking

statements are based on our management's assumptions and beliefs in the light of information

available to them at this time.

These forward-looking statements are, by their nature, subject to significant risks and uncertainties

and actual results, performance and achievements may be materially different from those expressed

in such statements. Factors that may cause actual results, performance or achievements to differ from

expectations include, but are not limited to, regulatory changes, future levels of industry product

supply, demand and pricing, weather and weather related impacts, wars and acts of terrorism,

development and use of technology, acts of competitors and other changes to business conditions.

Cairn undertakes no obligation to revise any such forward-looking statements to reflect any changes in

Cairn's expectations with regard thereto or any change in circumstances or events after the date

hereof.


3 Half-yearly Results

Tuesday, August 23, 2011

Welcome

Introduction

Group Financial Overview

Future Resource

and Value Potential

Concluding Remarks

Simon Thomson

Chief Executive Officer

Jann Brown

Managing Director and Chief Financial Officer

Dr Mike Watts

Deputy Chief Executive

Simon Thomson

Chief Executive Officer


4

Half-yearly Results

Tuesday, August 23, 2011

Simon Thomson, Chief Executive Officer

Introduction


5

Half-yearly Results

Tuesday, August 23, 2011

Cairn Overview

A Consistent Strategy for Value Creation

– Growth Focus

– Balanced portfolio

– Transformational potential

– New opportunities

– Financial Focus

– Vedanta deal

– Strong balance sheet provides financial and operational flexibility

– Operational Focus

– Current and future Rajasthan production

– 2011 Greenland multi-basin exploration programme

– Experienced leadership team

– Extensive corporate, exploration, development, operational and project management skills


6

Half-yearly Results

Tuesday, August 23, 2011

Cairn Overview

Track Record of Value Creation

– Cairn strategy creation of material growth potential

– Realisation and return of value to shareholders

– Equity raised in UK markets between 1988 and 1993: ~£35 million*

– Equity raised in UK markets since entering South Asia 1993: ~£300 million*

– Cash returned to date £510 million

– Shareholder return following completion of Vedanta transaction

– Cairn in South Asia - a home grown and full cycle business

– Greenland material acreage provides exposure to a number of separate frontier basin

plays

* ~£1.1 billion raised in Cairn India


7

Half-yearly Results

Tuesday, August 23, 2011

Cairn Overview

Growth and New Opportunities

– Establish commercial reserves in strategic positions

to create and deliver shareholder value

– Concentrate on material equity positions

– Balanced portfolio through existing and new opportunities

– Retained 22% interest in CIL (Cairn India Limited)

– Transformational exploration

– Retain focus on materiality and discovering hidden value


8

Half-yearly Results

Tuesday, August 23, 2011

Jann Brown, Managing Director and Chief Financial Officer

Financial Overview


9

Half-yearly Results

Tuesday, August 23, 2011

Finance

Transaction with Vedanta

– Cairn sale of 40% of CIL to Vedanta at INR 355 per share realising

~$6 billion gross proceeds

– First 10% tranche completed 11 July 2011, post tax proceeds ~$1.4 billion

– Second 30% tranche subject to Government of India conditions including CIL

shareholder approval and ONGC consent; post tax proceeds expected ~$4 billion

– Post completion, intention to return substantial proportion of proceeds to

shareholders

– ~22% CIL retained stake


10

Half-yearly Results

Finance

Cairn India

Tuesday, August 23, 2011

Production and realised prices

Retained stake in CIL

boepd H1 2011 H1 2010

Gross field production 166,527 87,523

Entitlement production* 77,056 32,866

3,500

22% current

market value

~$2.5 billion

140

130

Prices realised H1 2011 H1 2010

3,000

~$3bn

31 Dec 10

120

Oil per bbl ($)* 99.59 69.62

Gas per mcf ($) 4.67 3.88

Per boe ($)* 97.78 63.48

FY 2011 forecast

entitlement basis

(boepd)

Ravva 4,000 - 4,400

CB/OS-2 2,200 - 2,600

22% Cairn

India

market

value

($'million)

2,500

~$2 bn

30 Jun 09

2,000

~$2.5 bn

31 Dec 09

~$2.7 bn

30 Jun 10

~$2.7 bn

30 Jun 11

110

100

90

80

Oil

price ($)

Rajasthan* 67,000 - 72,000

73,200 - 79,000

70

1,500

June 2009 December 2009 June 2010 December 2010 June 2011

60

*Rajasthan royalty treated as cost recoverable

22% CIL market value Oil price


$'m

$'m

11

Half-yearly Results

Finance

Cashflow, Funding and Capital Expenditure

Tuesday, August 23, 2011

Movement in Net Cash

Funding and Capital Expenditure

1,800

1,600

1,400

1,291

-242

3000

2500

~$3,144m

CIL

available

funding

846

1,200

1,000

800

600

400

200

404

-242

-218

10 1,003

2000

1500

1000

500

CIL

net

cash

1,048

PLC

funding*

~1,250

~$1,440 m

~80

~120

~520

~630

CIL

other

CIL

Sri Lanka

CIL

Rajasthan

PLC

Greenland

Drilling

0

2010 net cash and

bank deposits

Pre-tax operating

cash flow

Tax paid Exploration capex Development

capex

Financing and

other

2011 net cash and

bank desposits

0

Pro-forma

Funds

Available

~90

2011 Full Year

Capex

Guidance

PLC

other Greenland

Exploration

* ~$1.4 billion Vedanta proceeds received July 2011, $200 million loan facility repaid August 2011


12

Half-yearly Results

Tuesday, August 23, 2011

Finance

Conclusion

– Vedanta transaction reshapes business

– Continues Cairn strategy of creation, realisation and return of value to

shareholders

– Re-gears equity base to exploration success

– Continuing business well positioned for future growth

– Strong balance sheet

– Continued exposure to CIL growth

– Flexibility in portfolio management


13 Half-yearly Results

Tuesday, August 23, 2011

Dr Mike Watts, Deputy Chief Executive

Future Resource

and Value Potential


14

Half-yearly Results

Tuesday, August 23, 2011

Cairn Overview

A Consistent Strategy for Value Creation

– Entry in Bangladesh 1993 (Corporate acquisition HSSH 1995)

– Sangu gas discovery 1996

– Entry in India (Corporate acquisition Command Petroleum 1996)

– 10% entry into Rajasthan 1997 (Bangladesh transaction with Shell)

– Operatorship of Rajasthan 1999, 50% interest

– Secured 100% interest of Rajasthan May 2002

– 2003 – 2005 drilled >120 wells using maximum 7 rigs

– Mangala oil field discovered January 2004

– 24 additional discoveries including Bhagyam and Aishwariya

– Exploration and Appraisal programme establishes:

– Discovered resource of ~4 billion boe in place

– ~6.5billion boe in place of potential resource

– Listed CIL subsidiary in 2007 - $2 billion raised

Rajasthan

Mangala

Bhagyam

Aishwariya

Cambay

Lakshmi

Gauri

INDIA

BANGLADESH

Sangu

– $1 billion returned to shareholders, $0.9 billion reinvested

– First Mangala Oil Aug 2009, export by road tanker

Ravva

– First Mangala pipeline oil June 2010

– Current FDP Approved MBA production of 175,000 bopd

>20% India's domestic oil production

– Rajasthan vision potential >240,000 bopd

>30% India's domestic oil production

– Sale of 10% stake in CIL ~$1.4 billion July 2011

– Anticipated sale of 30% of CIL ~$4 billion

– Shareholder return and residual 22% holding in CIL


15

Half-yearly Results

Cairn in India

Approved Rajasthan Plan and Potential Prize to

operate ~ 30% of India’s Domestic Oil Production

Tuesday, August 23, 2011

Bhagyam

Shakti

Cairn India Operated Blocks – Gross Production

Development

Area 2

Development

Area 3

Kameshwari

West

Vijaya

Mangala

Aishwariya

Vandana

Development

Area 1

BOPD

300,000

250,000

240,000

200,000

Existing fields Ravva

and Cambay Basin

Rajasthan Vision based on resource base

and subject to investment and all

necessary Government of India approvals

Assumptions include:

Mangala 150,000 bopd,

Bhagyam ~60,000 bopd

Aishwariya 20,000 bopd,

development of the other fields

plus Barmer Hill

Current approved

FDP 175,000 bopd

Kameshwari

Saraswati

175,000

Mangala 125,000 bopd

150,000

Bhagyam 40,000 bopd

MBA Fields

Aishwariya 10,000 bopd

EOR Potential

to extend and

enhance plateau

100,000

Raageshwari

Guda

50,000

Water Flood

Mangala, Bhagyam and

Aishwariya

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030


16

Half-yearly Results

Greenland

Strategy

Tuesday, August 23, 2011

– Cairn is the largest acreage

holder and most active Operator

in Greenland

– Cairn has acquired 2D seismic

database ~85,000km, two 3D

surveys to be completed 2011

GREENLAND

– 3 exploration wells 2010,

4 wells planned 2011

– Heightened industry interest

offshore Greenland and the

Arctic in general

– Initial risk capital exploration

phase ends 2011 thereafter

Cairn will evaluate all the data

and seek farm-ins to assist in

the funding of future phases of

activity


17

Half-yearly Results

Tuesday, August 23, 2011

Greenland

2011 Programme

Exploration Wells

– LF7-1 Plugged and abandoned July 2011

– AT7-1 Temporarily suspended for re-entry and

drilling to TD at the end of the season

– Delta-1 operating

– Gamma-1 operating

– AT2 Potential 5 th well in sequence

3D Seismic

– Southern survey almost complete

– Northern survey expected to commence end

August / early September

Up to 4 / 5 Exploration wells

Melville

Sub Basin

Baffin

Bay

West

Disko

Blocks

Aasiaat

Two 3D Seismic Surveys

Geochemical

Sampling Survey

1 x 3D (1,500 km 2 )

Seismic Survey

Delta-1

Operating

Gamma-1

Operating

Ilulissat

Kangerlussuaq

AT7-1

Temporarily suspended for re-entry and

drilling to TD at the end of the season

Geochemical Survey

– Sea bed sampling in Pitu block results and

analysis October 2011

West

Greenland

LF7-1

Nuuk

Possible

AT2 well

1 x 3D (1,500 km 2 )

Seismic Survey

Almost complete

Southern

Greenland

Application

Area


Courtesy of TGS

18

Half-yearly Results

Tuesday, August 23, 2011

Greenland

LF7-1, AT7-1 Wells and Potential Fifth Well (AT2 prospect)

West Greenland South Ungava Basins

Baffin Bay Basin

and Sub Basins

100 km

Pitu

GREENLAND

AT7-1

Napariaq

Rajasthan

Basin to

same

scale

Atammik

Basin

.

.

.

AT2

Prospect

Sigguk

Eqqua

Ingoraq

Nuussuaq

Basin

ª

100 km

LF7-1

Qulleq-1

Atammik

Lady

Franklin

Lady Franklin

Basin

Basins

Volcanic

Centres

Highs

West and South Greenland

Basins and Sub Basins

Kingittoq

Application

Volcanic Area

Spreading centre

Saqqamiut

Salliit

Uummannarsuaq


Seismic line courtesy of TGS

19

Half-yearly Results

Tuesday, August 23, 2011

Northern Baffin Bay – Pitu Block

Evidence of a Working Hydrocarbon System (?)

Geochemical Seabed Sampling

Melville Basin

Pitu:

Cairn,

Nunaoil

Possible DHI

(Direct Hydrocarbon

Indicator)

Earliest possible exploration

well Pitu block based on the

3D seismic - 2013


After Driscoll & Hogg, 1995

20

Half-yearly Results

Tuesday, August 23, 2011

South Greenland

Prospect Potential and Newfoundland Analogue

South Greenland „A‟ Structure

– 2011 3D survey

3D Survey

Nuuk

Earliest possible

exploration well,

based on the 3D

seismic - 2013

Sections equivalent scale

Hibernia Field, Newfoundland (Discovered 1979)

– 1.2 billion bbls 1.8 TCF Gas Reserves

– Stacked Pay in Early Cretaceous sands

– Max Production 220,000 bopd

– Current Production ~130,000 bopd

Hibernia Structure


21

Half-yearly Results

Tuesday, August 23, 2011

Western Mediterranean

Frontier Exploration - Spain

– Two permits (~4,000 km 2) ,

including 5 blocks, awarded and

effective 23 Jan 2011

SPAIN

Alta Mar-1

Alta Mar-2

– Four exploration phases of 2,2,1

and 1 year respectively;

Phase 1 – studies,

Phase 2 – seismic acquisition,

Phases 3 and 4 – exploration wells

Valencia

SPAIN

MADRID

Albufera

Benifayo

Gandia

Alta Mar 1

Alta Mar 2

Acreage Water

Depth Range


22

Half-yearly Results

Tuesday, August 23, 2011

New Opportunities

Eastern Mediterranean – Frontier Exploration

– 2012 bid rounds in:

Lebanon and Cyprus

Syrian Licensing Round

Announced March 2011

On Hold

III

2,885 km 2

“5C”Consortium

II

2,977 km 2

Syria

– Cairn Energy PLC (Operator)

– CC ENERGY Development SAL

Lebanese private company

– CCED is a Lebanese independent upstream Exploration and Production

company that is associated with the CCC group

– CCED has made several discoveries in the Sultanate of Oman and is

currently producing and selling crude oil from Oman

– CCC is a leading international engineering and construction conglomerate

– 5 th largest contractor in the industrial/petroleum sector. In 2009 LNG

Trains built by CCC were supplying ~30% of the world total annual

production

Cyprus

NOBLE

Cyprus Bid

Round

2012

Cyprus:

Prospect „A‟

Drilling Planned

Q4 2011

Lebanon

Bid Round

2012

II

3,176 km 2

Beirut

Tripoli

Lebanon

– Cove Energy PLC

UK AIM listed company

– Specialist and creative frontier explorer

– Initial focus on East Africa (Mozambique, Tanzania and Kenya) deep water

– Four world-class discoveries

NOBLE

Tamar Field

8 Tcf

Sidon

Syria

NOBLE

Leviathan Discovery

16 Tcf (325km 2 )

Dalit Field

0.5 Tcf


23

Half-yearly Results

Tuesday, August 23, 2011

Simon Thomson, Chief Executive Officer

Concluding Remarks


24

Half-yearly Results

Tuesday, August 23, 2011

Cairn Overview

Concluding Remarks

– Growth Focus

– Balanced portfolio

– Transformational potential

– New opportunities

– Financial Focus

– Vedanta deal

– Strong balance sheet provides financial and operational flexibility

– Operational Focus

– 2011 Greenland multi-basin exploration programme

– Track record of discovery and development

– Experienced leadership team

– Extensive corporate, exploration, operational and project management skills


Appendix

Tuesday, August 23, 2011


oepd

26

Half-yearly Results

Tuesday, August 23, 2011

APPENDIX

Production

Production (entitlement basis)

boepd H1 2011 H1 2010

Gross field production 166,527 87,523

Entitlement production* 77,056 32,866

80,000

77,056 77,056

Gross

production:

166,527

boepd

60,000

Prices realised H1 2011 H1 2010

Oil per bbl ($)* 99.59 69.62

Gas per mcf ($) 4.67 3.88

Per boe ($)* 97.78 63.48

40,000

Oil

97.5%

Rajasthan

70,241

20,000

*Rajasthan royalty treated as cost recoverable

0

Gas

Liquids

2.5%

Group

CB/OS-2 2,621

Ravva 4,194

India


27

Half-yearly Results

APPENDIX

Revenue and Gross Profit Before Held-for-sale

Accounting Adjustments

Tuesday, August 23, 2011

– Production costs $13.79* (H1 2010: $14.72) per boe

(excluding stock movements)

– Decrease due to increase in Rajasthan production

– CB-OS/2 increase due to decline in production and one-off

costs incurred

– Ravva remained in line with prior period

– DD&A rate $16.91* (H1 2010: $12.30) per boe

– Increase due to Rajasthan production and inclusion of

pipeline depletion

– Unsuccessful exploration $98m (H1 2010: $41m)

– Principally Greenland drilling campaign of LF7-1 well

1600

1200

800

$1,336m

(revenue)

$199m

$6m

$98m

$236m

Production costs Unsuccessful exploration costs

Gross profit Depletion & decommissioning charge

Pre-award costs

*Rajasthan royalty treated as cost recoverable

400

0

$797m

$333m

(revenue)

H1 2011 H1 2010

$68m

$4m

$41m

$73m

$147m


28

Half-yearly Results

Tuesday, August 23, 2011

APPENDIX

Cash And Cash Equivalents

Cairn India

$m

PLC / Capricorn

$m

Group

$m

Cash 1,452 75 1,527

Debt (404) (120) (524)

Net cash / (debt) 1,048 (45) 1,003

– PLC/Capricorn

– ~$1.4 billion received from Vedanta Group in July 2011

– $200m loan facility repaid in August 2011. Loan facility cancelled

– Cairn India

– Total borrowing facilities of ~$1.25 billion


29

Half-yearly Results

APPENDIX

2011 Capital Budget

Tuesday, August 23, 2011

2011 Group capital budget

Exploration

61%

$1,441m

39%

Production and

development

2011 CIL capital budget

2011 Capricorn capital budget

Rajasthan

Development

$524m

$721m

$720m

Greenland

Drilling

$629m

Exploration

$160m

CB/OS-2

Production

$12m

Ravva

Production

$25m

Other

$7m

Other

Greenland

Exploration

$84m


30

Half-yearly Results

APPENDIX

Income Statement Before Exceptional Items

and Held-for-sale Accounting Adjustments

Tuesday, August 23, 2011

H1 2011 H1 2010

$’m

$’m

Revenue 1,336.3 332.6

Increase due to Rajasthan

Production costs

production

(199.1) (68.3)

Pre-award costs (6.3) (3.8)

Unsuccessful exploration costs

$95m relates to Greenland

(98.4) (40.8)

Depletion and decommissioning charge drilling campaign including

(235.8) (73.2)

Cost of sales LF7-1 well

(539.6) (186.1)

Gross profit

Increase due to

796.7 146.5

Other operating income Rajasthan production

6.0 7.0

Administrative expenses (53.0) (49.0)

Impairment of oil and gas assets - (10.5)

Operating profit 749.7 94.0

Foreign currency exchange loss (2.6) (2.7)

Other finance costs (13.9) (3.4)

Profit before taxation Increase in current tax

733.2 87.9

Taxation on profit charge due to Rajasthan

(149.4) (30.7)

Profit for the period

revenues

583.8 57.2

Period end exchange rate INR/$ 44.70 46.45

Period end exchange rate $ / £ 1.60 1.49


31

Half-yearly Results

APPENDIX

Balance Sheet

Tuesday, August 23, 2011

H1 2011 H1 2010

$’m

$’m

Oil and gas exploration / appraisal assets and development /producing assets 485.6 2,569.8

Other non-current assets 66.5 80.7

552.1 2,650.5

Cash and deposits 75.2 1,097.4

Net other current liabilities (276.2) (49.5)

Deferred tax liabilities - (77.1)

Loans and borrowings (non-current) - (830.7)

Cairn India

Exploration - $392m

Development - $2,621m

Deferred tax asset - $382m

Provisions and other liabilities (non-current) - (52.2)

Assets held-for-sale Cash and deposits - $1,452m

5,643.8 2.9

Liabilities held-for-sale (1,487.6) -

Cairn India

Loans and borrowings - $404m

Provisions - $549m

Net assets 4,507.3 2,741.3


32

Half-yearly Results

APPENDIX

Cashflow Statement

Tuesday, August 23, 2011

H1 2011 H1 2010

$’m

$’m

Net cash generated from operating activities 1,048.7 125.1

Exploration $242m

Development $218m

Oil and gas capital expenditure (460.7) (451.2)

Other capital expenditure (4.5) (5.2)

Net proceeds on disposal of oil & gas assets - 63.5

Interest received 25.1 31.3

Cash outflow from investing activities (excluding deposits) (440.1) (361.6)

Proceeds from increase in non-controlling interests 4.5 1.2

Arrangement and facility fees (15.2) (19.7)

Proceeds / (costs) from issue of shares less cost of shares purchased 1.6 (1.3)

(Repayments) / proceeds from borrowings and issue of debentures (less finance lease obligations) (148.8) 163.9

Cash (outflow) / inflow from financing activities (157.9) 144.1

Cash inflow/(outflow) after financing 450.7 (92.4)

Opening cash and cash equivalents at beginning of year (including deposits) 1,078.1 1,189.7

Exchange (losses)/gains (including deposits) (1.3) 0.1

Closing cash and cash equivalents (including deposits) 1,527.5 1,097.4

Borrowings (524.2) (830.7)

Closing cash & cash equivalents (including borrowings) 1,003.3 266.7


33

Half-yearly Results

Tuesday, August 23, 2011

Investor Relations contacts

David Nisbet

Group Corporate Affairs

Carly Blackbourn

– Investor Relations Coordinator

– E-mail:

david.nisbet@cairnenergy.com

Tel: +44 (0)7711 146 068

– E-mail:

carly.blackbourn@cairnenergy.com

Tel: +44 (0)131 475 3094

Half-yearly

Results

www.cairnenergy.com

33

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