Cairn Energy upbeat ahead of ''eventful' year

17th Jan 2017 07:50

(ShareCast News) - Cairn Energy posted a pre-close trading update on Tuesday, informing the market on its recent operations and current guidance ahead of its preliminary results for the year to 31 December, which will be announced on 8 March.The FTSE 250 company reported $335m group net cash at 31 December, with its reserves-based lending bank facility remaining undrawn and debt availability to fund UK development assets increasing with project progress.It said that availability was expected to reach $350m at peak, with an additional $175m available in the form of letters of credit.Total cash expenditure for H2 2016 was $114m, mainly comprising $43m of development expenditure and $66m of exploration and appraisal expenditure - the majority of which related to Senegal, including cash outflow for activity in H1.A $35m tax rebate in respect of its previous Norwegian E&A activity was received in H2.It said forecast development expenditure for 2017, taking the UK development projects through to cash flow generation, was $170m, with remaining committed drilling E&A expenditure for 2017 estimated at $125m, predominantly in Senegal.Outstanding Norwegian tax rebate receivables stood at $31m.At 31 December, remaining cash outflows in respect of activities undertaken in 2016 was expected to be $45m.At its Senegal exploration operation, the third phase of drilling was to commence in late January with further evaluation of the SNE discovery.It said the joint venture, in which Cairn holds a 40% working interest, was finalising the selection of further optional exploration and appraisal wells to follow the two firm wells and ensure efficient evaluation of the full licence area.Stena DrillMAX, its sixth generation drillship, was contracted for two firm wells in the exploration and appraisal campaign with multiple follow-on options, with the board confirming the rig contract and support services were secured in the current lower cost environment, providing significant flexibility.Data gathered will enable calibration of the reservoir model for the upper reservoirs, which Cairn said was critical for optimising recovery factors by ensuring potential development wells are designed appropriately in number, placement and orientation.At its Catcher and Kraken developments in the UK North Sea, Cairn said it was on track for first oil in 2017, with a peak net targeted production to Cairn of around 25,000 boepd.Development at Kraken, in which Cairn holds a 29.5% working interest, progressed well in 2016 finishing the year ahead of budget and on schedule for first oil in Q2 2017.At Catcher, in which the company holds a 20% working interest, it was targeting start-up and first oil in H2 2017.Cairn added that its Skarfjell joint venture, in which it holds a 20% working interest, was progressing towards concept selection for field development with a decision expected Q1 2017."The next 12 months will be an eventful period for Cairn," quipped chief executive Simon Thomson."We will shortly embark on further exploration and appraisal drilling in Senegal and we continue to work towards first oil and cash flow from our North Sea assets."Thomson said that with six successful wells drilled to date in Senegal, Cairn has established a significant and growing resource base."The 2017 drilling programme aims to further define the SNE field for development and target additional exploration upside on the acreage."Cairn is fully-funded in respect of all of our capital commitments and we continue to actively assess and pursue new ventures within the context of a balanced portfolio."