Annual Report 2007 in PDF - Cairn Energy PLC

key financial performance indicators
Gross profit
the group generated a gross profit of
$61.5m (2006: $63.9m).
cost of sales for the year was $226.2m
(2006: $222.4m). this includes a write-off
of unsuccessful exploration costs and
general exploration expenditure of
$40.7m (2006: $62.0m) in accordance
with the group’s successful efforts
based accounting policies.
production costs for the year were
$66.5m (2006: $56.9m). these include
pre-exploration costs expensed and
stock movements. production costs
have increased to $9.20 per boe
(2006: $6.36 per boe) due in part to
higher pre-award/new venture costs
and the impact of workover costs for
ravva, but also to the fall in entitlement
production, with fixed costs spread
over a smaller production base.
the average group rate for
depletion and decommissioning has
increased by 15.0% to $13.29 per boe
(2006: $11.56 per boe), mainly as a result
of the downgrade of the sangu reserves
as outlined in the operating and
exploration review.
profit for the year
administrative expenses for the
year were $88.4m (2006: $60.3m).
these include a charge of $32.2m
(2006: $18.5m) for share-based
payments plus associated taxes.
cairn india’s underlying administrative
expenses have also increased following
its establishment as an autonomous
business with its own listing.
2007 2006 % Increase/(decrease)
production (boepd) 19,809* 24,523* (19.2)
average price per boe ($) 39.70 31.84 24.7
turnover ($m) 287.7 286.3 0.5
average production costs per boe ($) 9.20 6.36 44.7
operating (loss) ($m) (76.3) (64.6) 18.1
profit/(loss) before tax ($m) 1,553.2 (91.8)** 1,791.9
exceptional items ($m) 1,577.3 – –
profit/(loss) after tax ($m) 1,527.8 (97.1)** 1,673.4
cash flow from operating activities ($m) 155.3 189.4 (18.0)
net assets ($m) 1,749.8 678.8** 157.8
net cash ($m) 827.3 701.3*** 18.0
* on an entitlement interest basis ** restated *** includes $751.8m raised in pre-ipo placing
an impairment charge of $51.8m has
been made in respect of bangladesh
exploration blocks 5, 7 and 10 and the
magnama-1 well and hatia-1 well in
block 16. the costs of these two wells
have been impaired until the future plans
to assess their potential have been
completed. the carrying value of the
group’s exploration assets in nepal of
$7.1m has also been impaired given the
continued uncertainty over the lifting of
contractual force majeure.
net finance income for the year was
$34.8m (2006 restated: net finance cost
$27.3m). finance income increased from
$4.6m to $65.2m reflecting interest
generated on cash balances held
following the ipo of cairn india at the
beginning of the year. finance costs
include a realised foreign exchange loss
of $23.1m (2006: $14.2m) and a $3.3m
(2006: $9.7m) fair value charge in
respect of foreign exchange options
entered into to manage currency
exposure. realised foreign exchange
losses arose primarily due to the
treatment under ifrs of exchange
movements on intra-group funding
arising from the weakening of the
us dollar against sterling in the year.
in accordance with ifrs 3 ‘business
combinations’, negative goodwill arising
on the acquisition of medoil plc has
been recognised immediately in the
income statement.
Cambay Basin
India
the group made an exceptional gain
of $1,537.0m on the disposal of 31%
of cairn india through the ipo and an
exceptional gain of $40.3m on the
disposal of 10% of capricorn to dyas bv.
these gains are not chargeable to tax.
the tax charge for the year was $25.4m
(2006 restated: $5.3m).
the group’s profit for the year is
$1,527.8m (2006 restated: loss $97.1m).
balanCe sheet
Capital expenditure
balance sheet additions during the year
were $591.5m (2006: $284.0m), broken
down as follows:
2007 2006
$m $m
acquisition of subsidiaries 139.5 –
exploration/appraisal assets 180.5 161.0
development/
producing assets 245.6 110.5
other assets 25.9 12.5
total 591.5 284.0
acquisition of subsidiaries relates to the
acquisitions of plectrum petroleum plc
and medoil plc.
exploration/appraisal expenditure
by cairn india during the year relates
principally to the continued drilling
programme in rajasthan. capricorn’s
exploration/appraisal programme
comprised three wells in bangladesh in
south sangu-3, magnama-1 and hatia-1
(hatia was completed in 2008).
the majority of the development
expenditure was on rajasthan, plus
some activity on ravva and sangu as
described in the operating and
exploration review.
CAIRN ENERGY PLC ANNUAL REPORT 2007 29