1996 Annual report PDF 36.77MB - Cairn Energy PLC

Chief Executive's Report"Today, Cairn'smarket capitalisationis overToday, Cairn's market capitalisation is over £950 million; less than fveyears ago it was only £6 million. In the same period, the share price hasincreased more than twenty fold. This increase has been achieved bycareful adherence to a clearly defined strategy for development and gmwth£950 million; lessCairn plans to continue its pursuit of growth through a combination ofthan five yearsago it was only£6 million." relative to the Group's size. This strategy offers the potential for furthercapital growth.acquisitions, active asset management and exploration. Central to thisstrategy is the measured assessment of the balance of exploration risk toreward and the focus on opportunities capable of providing material gainGrowth StrategyCairn seeks a competitive edge in every aspect of its business, whileassessing and protecting the downside through risk management.Cairn is committed to:adding and realising value for the benefit of its shareholdersmaximising its commercial and technical expertisebeing innovativefinding "ugly" opportunities which can be turned around andmade "beautiful"maintaining flexibilityactive asset managementprotecting the downsideseeking strategic alliancesapplying a 'go or grow" strategyIncreases in shareholder value can be achieved by increasing oil or gasprices, imaginative acquisition and exploration success. Cairn has littleor no inRuence on oil and gas prices and consequently directs its effortstowards organic gmwth from exploration and strategic acquisitions.Strategy in ActionOrganic GrowthThe outstanding resuit of the Sangu gas discovery, offshore Bangladesh,has demonstrated the impact of pursuing organic growth throughexploration success and Cairn continues to seek new opportunitiescapable of providing material gain to the Group.Cairn plans to build on its strategic position in Bangladesh through anapplication for new blocks, and is currently conducting a very active seismicand drilling programme in Bangladesh. In addition, Cairn is actively seekingnew blocks in lndia.AcquisitionsOn 22 November 1996, Cairn acquired a controlling interest in Command;by 30 January 1997, Cairn owned 1M)% of Command. The strategicrationale for the acquisition was Command's operating position over theRawa field, offshore lndia in the Bay of Bengal.In India, there is rapidly increasing demand for oil and natural gas and Cairnwishes to participate in the emerging opportunities within the Indian oil andgas sector. At the heart of this strategy is Cairn's belief that it will discoversubstantial quantities of gas in Bangladesh and that gas may be exportedto lndia, once current and future potential demand in Bangladesh has beensatisfied by adequate indigenous supplies.DisposalsCairn is currently conducting a strategic review of its portfolio of assets.Those which no longer have either strategic or material value to the Gmupwill be sold.New VenturesIn 1996, Cairn signed two further Petrdeum Contracts with the Chinese