TIDMCNE
RNS Number : 3375A
Cairn Energy PLC
11 September 2018
EMBARGOED FOR RELEASE AT 0700 11 September 2018
CAIRN ENERGY PLC ("Cairn" or "Company" or "Group")
Half-Year Report Announcement
Simon Thomson, Chief Executive, Cairn Energy PLC said:
"Cairn has made strong progress across its balanced portfolio.
Cash flow from the North Sea is now established and development
projects in Senegal and Norway are well advanced to support the
production base over the long term.
We are also delighted to have enhanced our exploration portfolio
with potentially high impact opportunities across frontier and
emerging basins. This additional acreage supplements our existing
active programmes in the UK, Norway and Mexico.
This continued strategic delivery, together with our strong
balance sheet, ensures Cairn remains well-positioned to access
material value growth potential."
HIGHLIGHTS
Production
Ø Catcher (Cairn 20% working interest (WI)) averaged 27,000
barrels of oil equivalent per day (boepd) (gross) in H1, reflecting
constrained production as commissioning was completing and ramp up
continued. Producing up to 60,000 barrels of oil per day (bopd)
(gross) in August.
Ø Kraken (Cairn 29.5% WI) averaged 30,700 bopd (gross) in H1,
primarily as a result of planned and unplanned production downtime.
Producing 35,000 - 40,000 bopd (gross) in August.
Ø Combined net production to Cairn from the fields in H1
averaged 14,400 boepd with production in June averaging 19,700
boepd (respectively 13,000 boepd and 18,200 boepd, net of
FlowStream entitlement).
Ø Combined net production in H2 is expected to average 20,500 -
22,000 boepd net to Cairn (18,500 - 20,000 boepd net of FlowStream
entitlement).
Developments
Senegal
Ø Delivered key milestones for the SNE field development plan
(Cairn Operator 40% WI):
Ø Evaluation Report submitted to the Government of Senegal
ØMulti-phase development plans for 500 million of barrels of oil
(mmbbls)
ØProduction 100,000 bopd (gross)
Ø Assessing tender responses for the Floating Production Storage
and Offloading (FPSO) facility and subsea infrastructure ahead of
the front end engineering and design (FEED) planned for Q4 2018
Ø Development and Exploitation Plan submission and approval
targeted for H2 2018 with the Final Investment Decision (FID) to
follow in 2019
Ø Formal Transfer of Operatorship (TOO) to Woodside expected in
Q4 2018; key work streams already delegated
Ø Detailed work underway on project financing
Norway
Ø Nova development (Cairn 20% WI) in Norwegian North Sea, Plan
for Development and Operation (PDO) submitted in H1. Expected to
deliver plateau production of 50,000 bopd (10,000 bopd net to
Cairn) from 2021
Exploration
International
Ø New country interests acquired across frontier and emerging
basins in Suriname, Côte d'Ivoire and Mauritania:
Ø Suriname - awarded an operated exploration agreement (Cairn
100% WI) by the State Oil Company of Suriname (Staatsolie) on
acreage in the offshore Demerara plateau with 2D seismic activity
planned from Q4 2018
Ø Côte d'Ivoire - farm-in agreement with Tullow Oil for a 30% WI
in seven onshore licences* with seismic activity planned in
2019
Ø Mauritania - option agreement to acquire 30% WI from Total to
enter a large offshore exploration block** upon a well decision
following ongoing seismic acquisition and evaluation programme
Ø Mexico - plans to progress the first two exploration wells on
Block 9 (Cairn Operator, 65% WI) and one exploration well on Block
7 (Cairn 35% WI, ENI Operator) in H2 2019. Plans to evaluate 3D
seismic over the newly acquired Block 15 in the Tampico Mislanta
basin
*subject to Government approvals
**subject to Government and partner approvals
UK & Norway
Ø Exploration campaign underway with plans to drill up to ten
wells (subject to partner approvals) in 2018-19 across a variety of
play types:
Ø Two wells are currently operating: P2184 licence (Cairn
Operator 45% WI) targeting the Ekland prospect in the UK North Sea
using the Ensco 101 drilling rig and P1763 licence targeting the
Plantain prospect and potentially the Agar discovery (Cairn 50% WI)
in the UK North Sea using the Transocean Leader. (Cairn farmed into
the licence (25% WI) with Azinor Catalyst in H1)
Ø Completed drilling in H1 on Tethys and Raudåsen prospects with
a small oil discovery regarded as non-commercial and a dry well,
respectively
Ø Upcoming Stjerneskudd well on PL885 (Cairn 30% WI) in the
Norwegian Sea expected to spud in Q4
Ø Awarded five licences (three operated and two non-operated) in
the UK 30(th) Licensing Round in H1 in existing core central North
Sea areas
Ø Plans for 2019 exploration programme maturing with material
prospects and equity interests; three to four wells expected,
subject to partner approvals
Finance
Ø Oil sales revenue of US$172 million (m) at an average realised
price of US$66.97/barrel (bbl) (US$67.81/bbl before hedging
costs)
Ø Group cash at 30 June 2018 US$75m
Ø Reserves Based Lending (RBL) facility US$65m drawn at 30 June
2018
Ø Extension of existing US$575m RBL maturity from 2021 - 2025
agreed in order to incorporate expected Nova cashflows into the
debt capacity calculation and create additional flexibility
Ø Norway exploration tax receivable of US$62m at 30 June 2018,
US$59m drawn under the Norway Exploration Finance Facility
Ø Cash outflow on Kraken, Catcher, Senegal and Nova developments
of US$86m in H1 and forecast at US$124m for H2 2018
Ø Exploration cash outflow across the portfolio of US$48m in H1
2018 and forecast at US$72m in H2 2018 (net of Norwegian
exploration tax rebate)
Ø SNE project finance launch expected Q4 2018
India Tax Dispute
Ø Final hearing of Cairn's claim under the UK-India Bilateral
Investment Treaty (the Treaty) took place in August in The Hague;
the Tribunal has stated that it will make appropriate arrangements
to progress with the drafting of the award as expeditiously as
possible
Ø During H1, the India Income Tax Department (IITD) instructed
the sale of 2% shareholding in Vedanta Limited (VL) held by Cairn,
seizing proceeds of US$231m. Subsequent to H1, a further 1% of
shares were sold. The IITD has also seized US$162m dividends due
from the VL shareholding plus a US$234m tax refund due.
Ø Following the disposal of the shareholding in VL and seizure
of proceeds by the IITD, Cairn has recorded a loss on
de-recognition of the shares sold of US$231m
Ø Cairn remains confident of its legal position; the Treaty
affords strong provisions to enforce a successful award
Enquiries to:
Analysts / Investors
David Nisbet, Corporate Affairs Tel: 0131 475 3000
Media
Linda Bain/Christian Goodbody, Corporate Tel: 0131 475 3000
Affairs
Cairn Energy PLC
Patrick Handley, Will Medvei Tel: 0207 404 5959
Brunswick Group LLP
Webcast
There will be a live audio webcast of the results presentation
available to view on the website (www.cairnenergy.com) at 9am BST.
This can be viewed on PC, Mac, iPad, iPhone and Android mobile
devices.
An 'on demand' version of the webcast will be available on the
website as soon as possible after the event. This can be viewed on
PC, Mac, iPad, iPhone and Android mobile devices.
Presentation
The results presentation slides will be available on the website
from 7am BST.
Conference all
You can listen to the results presentation by dialling in to a
listen only conference call at 9am BST using the below dial-in
details.
Dial-in Details:
United Kingdom (Local): 020 3059 5868
All other locations: +44 (0)20 3059 5868
Access code: Cairn Energy PLC Half-Yearly Results 2018
A recording of the conference call will be available from 11
September 2018 until 18 September 2018.
Recording Dial-in Details:
Replay number: +44 (0)121 260 4862
Conference code: 677557
Transcript
A transcript of the presentation will be available on the
website as soon as possible after the event.
Corporate & Finance Overview
Cairn's strategy is to create, add and deliver value for
shareholders from a balanced portfolio of exploration, development
and production assets. We seek to deliver consistent material
growth through our exploration portfolio, which is primarily in
frontier and emerging acreage with the greatest potential value
impact. Cashflow realised from our production assets enables us to
sustain our exploration and development activity.
In the first half of 2018, we made excellent progress in
building and diversifying the exploration portfolio as we seek to
participate in a range of exploration opportunities from material
high impact prospects in frontier and emerging basins to short
cycle time prospects in more mature basins. We have focused on
geologies where Cairn has the greatest knowledge and ability to
manage an active exploration programme over the next three years
with a meaningful number of operated and non-operated wells.
Cairn continues to maintain financial flexibility with a strong
balance sheet and cash flow from production to fund an attractive
portfolio of exploration and appraisal opportunities. Our
sustainable business model provides the ability to leverage
success, and we continue to optimise and where appropriate expand
the asset base.
Current sources of funding include cash of US$75m at the half
year end, the US$575m RBL bank facility which was drawn US$65m at
30 June and the Norway Exploration Finance Facility, which is
available to finance tax rebates on Norwegian exploration
expenditure. During H1 we were pleased to see production from
Catcher and Kraken steadily increase, generating oil sales of
US$172m and operating cashflow of US$112m (adjusted for oil sales
receivables). Near-term uses of capital to the end of the year
include US$124m anticipated expenditure on the Kraken, Catcher,
Senegal and Nova developments and forecast Exploration and
Appraisal (E&A) expenditure of US$72m across the portfolio.
Operational Review
Production
In the UK and Norway we have made good progress in our
non-operated producing assets during H1, with ongoing project
commissioning on both fields now essentially complete. In addition,
the non-operated Nova development in Norway reached FID in H1 2018
and is expected to deliver first oil in 2021 with peak net
production to Cairn of 10,000 bopd. The three projects can be
expected to provide production and cash flow to Cairn through to
the period when the Senegal development comes on stream. Further
tie-back and infill opportunities exist in the vicinity of all
three fields under development or in production.
Catcher
The Catcher Area averaged 27,000 boepd (gross) in H1, reflecting
constrained production before commissioning of the gas and the
water injection plants was completed. However, plateau production
rates of 60,000 bopd (gross) have been achieved since May with
reductions when there have been issues with the gas export,
following the start-up of gas export into the SEGAL gas pipeline,
or unplanned shutdowns.
Since first production, more than eight million barrels of oil
have been produced and 16 cargoes lifted.
Production data from the three Catcher Area fields (Catcher,
Varadero and Burgman) continues to demonstrate good pressure
support and connectivity between the reservoirs. Delivery potential
from the available wells remains significantly in excess of the
FPSO design capacity and the Joint Venture (JV) sees opportunities
for extension of the plateau production rates of 60,000 bopd.
Post H1, the DSV Falcon successfully tied into production four
development wells, further increasing deliverability from the
Catcher Area. The 17(th) well, a Burgman producer, was complete in
August and the 18(th) well, also a Burgman producer, is scheduled
to complete in October. This will mark completion of this project
phase of the Catcher Area development. Both wells will be available
for production from November.
Several near field discoveries have been identified as potential
subsea tie-backs to the Catcher Area FPSO to maintain and extend
plateau production. In particular, the development concepts for the
Laverda and Catcher North oil accumulations have been selected and
will comprise two development wells drilled from a common drill
centre tied back to the Varadero manifold. Project sanction is
targeted for Q1 2019.
In addition, potential infill well locations targeting resources
beyond the reach of the initial development wells have been
identified with plans to acquire 4D seismic to help define future
infill drilling locations. One of the new blocks awarded in the UK
30(th) Offshore Licensing Round lies to the South of the Catcher
field and contains the Bonneville discovery, a potential future
tie-back to the Catcher Area.
Kraken
Average gross production in the six months to June 2018, which
includes the impact of the planned maintenance shutdown in March,
was slightly below expectations at 30,700 bopd. The production
level in H1 was impacted by both planned and unplanned production
downtime, watercut development slightly higher than expectations
and not fully maintaining reservoir voidage due to restricted
availability of water injection in the period.
Following completion of the required filter maintenance, water
injection rates increased significantly and gross production has
improved, reaching levels of 35,000 - 40,000 bopd in August and
FPSO performance has stabilised.
Since first production, more than ten million barrels of oil
have been produced and 20 cargoes lifted, with 16 in 2018, of which
five were for Cairn. Demand for cargoes continues to be strong and
pricing relative to Brent is in line with expectations.
The DC4 manifold is in position and flowlines have been
installed in Q3. The drilling programme is now expected to commence
in late September, following a rig contract re-negotiation the
Transocean Leader drilling rig is scheduled to relocate from a
third-party exploration well.
First production from DC4 is expected in early 2019. Additional
potential in the Kraken area is being reviewed for further possible
drilling options in 2019 - 2020.
Developments
Senegal - SNE
The SNE field covers a large area of 350km(2) and has two
distinct horizons with a stacked series of S400 upper reservoirs
overlying S500 lower reservoirs. It is proposed that the SNE field
will be developed in a series of phases with the first phase
principally targeting the S500 resource with up to 26 subsea oil
production, water injection and gas injection wells tied back to an
FPSO. The FPSO, with proposed 100,000 bopd production capacity,
will be located towards the eastern edge of the SNE field in 800m
water depth.
The subsea facilities will be designed to expand to accommodate
future phases of SNE development, as well as providing a hub for
developing other oil discoveries on the block. First oil is
targeted in 2022, with an expectation of up to 40,000 bopd
production net to Cairn on plateau.
In H1 there has been ongoing progress in the delivery of key
milestones for the field development plan: the Evaluation Report
outlining the basis of commerciality of the project was submitted
to the Government in July; the tender responses for the FPSO
facility and supporting subsea infrastructure have been received
and are under evaluation and short-listing ahead of FEED planned
for Q4; in parallel with the detailed engineering work, an
Environmental and Social Impact assessment study has been submitted
and detailed work is underway on the project financing.
The JV is targeting submission and approval of the Development
and Exploitation Plan in H2, this will outline the full multi-phase
development plans and options, including a detailed definition of
the first phase. At the same time, TOO to Woodside is planned in Q4
this year with FID expected to follow in 2019.
Cairn (Operator) has a 40% WI in three blocks offshore Senegal
(Sangomar Deep, Sangomar Offshore and Rufisque Offshore) alongside
partners, Woodside 35% WI, FAR Ltd 15% WI and the Senegal National
Oil Company, Petrosen 10% WI (Petrosen has the right to increase
its equity to 18% on development).
Nova
In H1, the Operator (Wintershall) awarded contracts for the rig
as well as the subsea production systems, subsea umbilicals, risers
and flowlines and host topsides modification, which allowed the
project to progress towards the execution phase and submit the PDO
to the Norwegian Ministry of Petroleum and Energy. Nova will be
developed as a subsea tie-back connecting two templates to the
nearby Gjøa platform for processing and export. Gjøa will also
provide lift gas to the field and water injection for pressure
support. Power for the Nova field comes via the Gjøa platform from
shore. The Operator awarded a rig contract to Seadrill, which will
operate the West Mira drilling rig and drill six subsea wells on
the field commencing in H1 2020 to deliver first oil in 2021.
Total investment in the Nova development is estimated to be
US$1.2 billion (gross). Expanded debt funding from Cairn's existing
RBL facility is expected to be available to fund the development.
Nova is anticipated to deliver plateau production of 50,000 bopd
(10,000 bopd net to Cairn).
International Exploration
In Mexico, where Cairn now holds three licences, we opened an
office in Mexico City in H1 and established a local team as plans
progress for the first two exploration wells on Block 9 (Cairn
Operator, 65% WI) and an initial one exploration well on Block 7
(Cairn 35% WI, ENI Operator) in H2 2019. These licences provide an
exciting opportunity to build a portfolio over time in this highly
prolific, yet under-explored region.
A rig tendering process is underway along with the approval
process to commence operations, and Exploration Plans have been
submitted to the Government of Mexico. Following approvals, the
four year period of each licence will commence. Blocks 7 and 9
cover an area of 1,200km(2) and are located in shallow water Gulf
of Mexico, directly analogous to recent world class
discoveries.
Cairn was delighted to secure a third licence interest in the
Mexico offshore bid round in H1 2018. The Operated licence (50% WI)
with Citla as partner is on Block 15 in the shallow water
Tampico-Misantla Basin, located north-west of Cairn's existing
interests. At this early stage, there is a commitment to purchase
3D seismic information on the block. Environmental baseline survey
plans are in progress.
In Ireland, Cairn has an acreage position in the Porcupine Basin
with an interest in five licences over an area of more than
4,000km(2) . In H1, activity focused on processing the large 3D
seismic data set acquired in 2017 and developing a lead and
prospect inventory across LO 16/19 (Cairn 70% WI, Operatorship) and
the adjacent LO 16/18.
In Suriname, a frontier area with multiple wells currently
drilling in the region, Cairn was awarded an operated exploration
agreement (Cairn 100% WI) by Staatsolie on the largest offshore
block. The licence covers an area of 13,000 km(2) in the Demerara
plateau in the Guyana-Suriname basin which has a conjugate margin
to the SNE field in Senegal. Cairn has an initial 2D seismic
acquisition commitment with 4,150km planned for Q4 2018.
In Côte d'Ivoire, Cairn has entered into the continental rift
play with Tullow Oil. Cairn has agreed a farm-in for a 30% interest
in all seven of Tullow's onshore licences (CI -301, CI-302, CI-518,
CI-519, CI-520, CI-521 and CI-522), subject to obtaining the
necessary Government approvals. Tullow completed a full tensor
gravity gradiometry survey covering 8,600 km(2) in H1 and this data
is currently being interpreted and will be used to optimise the
location for a 2D seismic survey planned for 2019.
In Mauritania, Cairn has an option agreement with Total to enter
block C7, targeting a turbidite fan play in a large offshore
exploration block in a proven oil province. Cairn has a right to
acquire a 30% WI (Total Operator, 60% WI and Societé Mauritanienne
des Hydrocarbures, 10% WI), upon a well decision following
completion of the 7,000km(2) seismic programme for which
acquisition, processing and interpretation in ongoing. The
transaction is subject to Government and partner approvals.
UK & Norway Exploration
The UK & Norway is a core region for Cairn and the company
has built a strong position with a balanced portfolio of
exploration and production assets. Cairn has qualified as an
Operator in both the UK and Norway and has a material exploration
drilling campaign currently underway with up to ten wells planned
across a variety of plays in 2018-19, subject to partner
approval.
Two exploration wells were completed in H1: PL682 containing the
Tethys prospect close to the Gjøa field in the Norwegian North Sea
made a minor oil discovery but this was deemed as non-commercial;
and the wildcat well on PL790 close to the Knarr field also in the
Norwegian North Sea containing the Raudåsen prospect was classified
as dry with only traces of petroleum.
Cairn is currently operating a well on P2184, targeting the
Ekland prospect which is the Company's first operated well in the
UK North Sea. Ekland is within an established play and the primary
well objective is the Triassic Skagerrak sandstones and secondary
objective is the Upper Jurassic Fulmar sandstones. The well is
being drilled by the Ensco 101 and operations are expected to
complete shortly.
Cairn farmed into the P1763 licence in the UK North Sea with
Azinor Catalyst in H1. Cairn joins Azinor Catalyst for 50% of the
sole risk drilling activity on the Agar discovery and Plantain
prospect and 25% of the wider licence with existing partners. Agar
and Plantain have estimated combined mid-case resources of 60
million barrels of oil equivalent (mmboe), with an upside case of
98 mmboe. The exploration well is currently drilling with the
Transocean Leader semi-submersible. Cairn has the option to take
over Operatorship with respect to the Agar Plantain project.
In Q4, Cairn expects the Stjerneskudd well (Cairn 30% WI) to
spud on PL885 in the Norwegian Sea with Equinor as Operator.
Stjerneskudd represents a material prospect of more than 100 mmboe
gross with stand-alone potential and significant follow on
opportunity in the event of success.
Cairn participated in five applications in the UK 30(th) Licence
Round and in H1 was offered all five licences (three as operator
and two as non-operator), incorporating most of the prospectivity
we had identified prior to bidding.
In 2019, Cairn will continue an exploration campaign across the
UK & Norway region with a potential further three to four wells
targeting material prospects with significant equity interests.
India
The final arbitration hearings were held in August in The Hague
and involved testimony by expert and fact witnesses and addressed
Cairn's claims under the UK-India Bilateral Investment Treaty,
India's defences and issues of jurisdiction.
The IITD has continued to enforce its retrospective tax claim
against Cairn whilst the Treaty arbitration has been ongoing. To
date the IITD has seized dividends due to Cairn from its
shareholding in VL totalling approximately US$162m and it has
offset a tax rebate of US$234m due to Cairn as a result of
overpayment of capital gains tax on a separate matter. During the
period, the IITD seized proceeds from a 2% sale of Cairn's
shareholding in VL, realising US$231m. Subsequent to H1, a further
1% shares were sold. Following these sales, Cairn's retained
holding in VL is now 2%.
The reparation sought by Cairn in the arbitration is the
monetary value required to restore Cairn to the position it would
have enjoyed in 2014 but for the Government of India's actions in
breach of the Treaty. Accordingly, the status of Cairn's assets
seized in India does not affect the merits of Cairn's claims, the
amount of relief sought, or the enforceability of the arbitral
award.
The Arbitral Tribunal is expected to issue a binding and
internationally-enforceable award, the drafting and issuance of
such an award typically takes several months. In this case, taking
into account the delays already suffered by Cairn, the Tribunal has
stated that it will endeavour to issue its award as expeditiously
as possible. Cairn continues to have a high level of confidence in
the merits of its claims in the arbitration. Cairn is seeking full
restitution for losses totalling more than US$1.4bn resulting from
India's expropriation of its investments in India in 2014, and
India's unfair and inequitable treatment of those investments, due
to the imposition of retrospective tax measures.
Financial Review
Key Statistics
H1 2018
====================================================== ========
Production - net WI share (boepd)(1) 14,377
Production - net WI share, post FlowStream (boepd)
(2) 12,995
Sales volumes (boepd)(3) 14,205
Average price per boe (US$)(3) 66.97
Revenue from production (US$m) 172.1
Average production costs per boe (US$)(1) 24.30
Depletion and amortisation costs per boe (US$) 25.29
Cash generated from oil and gas production (US$m)(4) 94.1
Net cash inflow from oil and gas production 57.3
Net cash inflow from operating activities 30.7
====================================================== ========
(1) Production volumes and costs per boe based on Kraken WI
share of 29.5%, Catcher WI 20%
(2) Production volumes and costs per boe based on Kraken WI
share post FlowStream of 25%, Catcher WI 20%
(3) Sales and revenue per boe based on Kraken WI share of 25%,
Catcher WI 20%
(4) gross profit less deferred revenue, royalty income and
depletion and amortisation
Production
Production from Kraken commenced in June 2017 and Catcher came
on stream in late December 2017. During H1 2018, daily production
volumes on both assets have increased significantly. Kraken is
currently producing up to 40,000 boepd gross with Catcher operating
up to 60,000 boepd gross. Combined production for the remainder of
2018 is expected to average 20,500 - 22,000 beopd net to Cairn
(18,500 - 20,000 boepd net excluding FlowStream entitlement).
Revenue
Revenue from the sale of oil and gas was US$172.1m to June 2018,
after adjusting for hedging transactions. Release of deferred
revenue of US$9.6m and royalty income in Mongolia of US$0.7m,
increased total revenue to US$182.4m.
At 30 June, Cairn had hedged 2.8 mmbbls of forecast production
through to September 2019 using collar structures with a weighted
average floor of US$61.6 per bbl and an average ceiling of US$75.9
per bbl.
Cost of sales
Total production costs of US$63.2m include US$32.3m of operating
and variable lease payments on the Catcher and Kraken FPSOs
respectively. All Kraken FPSO lease payments were classified as
variable lease payments in the period. Movements in oil inventory
and overlift/underlift positions, measured at market value, of
US$14.8m were charged against cost of sales in the period. The
Group's accounting for revenue and the classification and
measurement of overlift/underlift is unaffected by the
implementation of IFRS 15.
Net cash inflow from operating activities and cash generated
from oil and gas production
Net cash inflow from operating activities for the period of
US$30.7m reflects net cash generated from oil and gas sales after
deducting administrative costs. Adding back these expenses leads to
a net cash inflow from oil and gas production of US$57.3m which,
after adjusting for timing differences in working capital through
trade receivables and inventory, overlift and underlift movements,
represents underlying cash generated from operations of US$94.1m in
the first half of 2018.
Net cash outflow for the Period
US$m
=================================================== ===================
Opening cash at 1 January 2018 86.5
Net cash inflow from operations 57.3
Pre-award costs (11.2)
Exploration expenditure (73.5)
Development expenditure (61.0)
Administration expenses, finance costs and equity
transactions (19.2)
Drawings under Exploration Finance Facility 29.4
Foreign exchange movements 1.5
Closing net cash and long-term borrowings at 30
June 2018 9.8
=================================================== ===================
Cairn had net cash of US$9.8m at 30 June 2018, representing a
net cash outflow of US$76.7m over the six month period. Borrowings
under the Group's RBL facility at 30 June 2018 were US$65.0m, all
drawn in the period, before adjusting for unamortised facility fees
and accrued interest. Closing net cash and long-term borrowings
presented above exclude US$58.6m drawn under the Norwegian
Exploration Finance Facility. This working capital advance is
secured against tax refunds due from the Norwegian government
within the next 18 months, and do not reflect the Group's current
long-term indebtedness.
Cairn agreed an extension of the Group's US$575.0m RBL facility
to June 2025, increasing the borrowing base to include the planned
production of the Nova asset in Norway. The terms of the extended
facility are consistent with that of the original. Under IFRS 9 the
extension will be accounted for as an extinguishment of the
original financial liability and the recognition of a new financial
liability due to the extended period over which the facility is
available. The accounts disclosure includes all amounts drawn under
the RBL facility as short-term debt.
Cash outflows on exploration expenditure in the period included
UK & Norway costs of US$31.8m relating to the Tethys and
Raudåsen wells in Norway and pre-development activities on the Nova
asset.
Development cash outflows in the period related to costs on
Kraken and Catcher.
Capital expenditure on Oil and Gas Assets
US$m
============================================== ===================
Opening oil and gas assets at 1 January 2018 1,825.9
Exploration and appraisal additions
Senegal 12.1
UK & Norway 44.8
International 7.7
Development additions
UK & Norway 9.3
Unsuccessful exploration costs - UK & Norway (45.9)
Depletion and amortisation - UK & Norway (65.7)
Other movements (6.8)
Foreign exchange movements 1.4
Closing oil and gas assets at 30 June 2018 1,782.8
============================================== ===================
Exploration and appraisal asset additions in Senegal reflect the
continuing work on the Development and Exploitation plan and TOO of
the licence to Woodside. In the UK & Norway costs incurred in
the year on the Tethys and Raudåsen wells were US$22.5m with a
further US$22.3m of additions across remaining licences in the
portfolio. This includes US$10.9m of the Nova field where formal
approval of the development plan by the Norwegian authorities is
awaited.
Development additions in the period totalling US$9.3m include
the release of accruals for rig costs relating to Kraken of
US$22.7m following renegotiation to the rig contract.
At the half year, Cairn has reviewed its exploration/appraisal
and development/producing assets for indicators of impairment and
performed impairment tests where indicators were identified. No
impairment arose from any of the tests performed. Impairment tests
will be re-run at the year end to reflect a further six months
production history and anticipated well testing on Kraken. The
Group's long-term oil price assumption remains unchanged at US$70
per barrel.
Results for the period - Other operating income and expense
Other operating income and costs, administrative expenses and
net finance costs
Period ended Period ended Year ended
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
================================ ============= ============= =============
Pre-award costs (12.0) (33.8) (43.8)
Unsuccessful exploration costs (46.8) (15.2) (60.7)
Administrative expenses and
other income/costs (14.4) (13.5) (30.3)
Related tax credits 30.6 25.0 30.4
================================ ============= ============= =============
Operational and administrative
expenses (42.6) (37.5) (104.4)
Net finance (costs)/income,
excl. dividends (18.2) 14.9 14.2
================================ ============= ============= =============
Pre-award costs reflect the increase in Cairn's portfolio of
assets, with further acreage added in the UK & Norway and new
country entries in Cote D'Ivoire and Suriname.
Unsuccessful exploration costs, primarily relating to the UK
& Norway region, include costs written off on Tethys and
Raudåsen of US$34.9m and US$11.9m on other licences relinquished or
where no further exploration activities are planned.
Administrative costs remain consistent year-on-year and include
US$3.2m of costs in preparation for the Indian Tax arbitration.
Finance costs in the period include exchange losses and facility
fees on the Group's RBL facility. Exchange gains in 2017 drive the
additional year-on-year change.
Related tax credits reflect Norwegian current tax refunds
receivable on qualifying exploration and administrative
expenses.
Gains and losses on Financial Asset - Investment in Vedanta
Limited
The sale of shares in the period results in a loss on
derecognition of US$230.8m following seizure of the proceeds by the
IITD. Cairn held a 3% shareholding in VL, with a value of US$522.0m
at 30 June 2018. Sales subsequent to the balance sheet date, as
disclosed in the post balance sheet event note 6.1, reduce this
holding to 2%.
Dividends declared by VL and due to Cairn in the period of
US$64.5m were also seized by the IITD are not recorded in the
results for the period. Total dividends now seized by the IITD are
US$161.9m.
Following the adoption of IFRS 9 "Financial Instruments" Cairn's
financial asset is now classified as a financial asset at fair
value through profit or loss and therefore all periodic fair value
gains and losses are reflected through the Income Statement rather
than other comprehensive income. In the current period, a fall in
the market value of Vedanta has resulted in a US$319.4m charge to
the Income Statement. Comparative results, including a 2017 full
year gain of US$449.1m, have been restated to reflect adoption of
the new standard.
Taxation
With a full six months of production on both the Group's UK
producing assets, Cairn made a UK ring fence profit in the period
which was fully offset by brought forward losses. At 30 June 2018,
Cairn had total UK ring fence losses of US$980.0m. US$818.8m of
losses are recognised as deferred tax assets (at the applicable UK
tax rate of 40%) to fully offset deferred tax liabilities of
US$327.5m. The remaining US$161.2m of losses together with the
deferred tax impact of the decommissioning liability represent an
unrecognised deferred tax asset of US$111.2m at 30 June 2018.
Probable future profits, based on low-case production sensitivities
do no support the recognition of a deferred tax asset at this
time.
A cash tax refund is receivable in Norway in respect of 78% of
qualifying exploration and overhead spend. US$24.4m of tax credits
are recorded for amounts receivable relating to the current period.
Norwegian deferred tax liabilities at 30 June 2018 of US$67.2m
reflect timing differences on the carrying value of exploration
assets where either a tax refund has been claimed or an uplift is
available on capital spend.
The sale of part of the Group's interest in VL, instructed by
the IITD, has not led to a taxable capital gain either in India or
the UK at the price range achieved. The reduction in the VL
shareholding, together with movements in the share price have led
to a US$69.1m reduction in the deferred tax liability in respect of
the shareholding at 30 June 2018. The remaining deferred tax
liability in India of US$20.3m predominantly relates to the Vedanta
preference shares held at the Balance Sheet date which are due for
redemption in October this year.
Contents
-----------------------------------------------------------------
Group Income Statement
Group Statement of Comprehensive Income
Group Balance Sheet
Group Statement of Cash Flows
Group Statement of Changes in Equity
Section 1 - Basis of Preparation
1.1 Accounting Policies
1.2 Going Concern
1.3 Restatement of Comparative Financial Statements
Section 2 - Oil and Gas Assets
2.1 Intangible Exploration/Appraisal Assets
2.2 Property, Plant & Equipment - Development/Producing
Assets
2.3 Capital Commitments
Section 3 - Other Assets and Liabilities: Financial Assets, Cash
and Borrowings, Lease liabilities and Working Capital
3.1 Financial Asset at Fair Value through Profit or Loss
3.2 Cash and Cash Equivalents
3.3 Loans and Borrowings
3.4 Finance Lease Liabilities
3.5 Trade and Other Receivables
3.6 Trade and Other Payables
3.7 Deferred Revenue
Section 4 - Results for the Period
4.1 Segmental Analysis
4.2 Revenue and Cost of Sales
4.3 Finance Costs
4.4 Earnings per Ordinary Share
Section 5 - Taxation
5.1 Tax Credit on Loss for the Period
5.2 Income Tax Asset
5.3 Deferred Tax Assets and Liabilities
5.4 Contingent Liability - Indian Tax Assessment
Section 6 - Other Disclosures
6.1 Post Balance Sheet Events
Cairn Energy PLC
Group Income Statement
For the six months ended 30 June 2018
Year ended
Six months
ended 30 June 31 December
2017 2017
Six months
ended 30 June
2018 (unaudited) (audited)
(unaudited) (restated) (restated)
Note US$m US$m US$m
-------------------------------------------- ----- --------------- --------------- --------------
Continuing operations
Revenue 4.2 182.4 10.8 33.3
Cost of sales 4.2 (78.0) (0.4) (5.9)
Depletion and amortisation 2.2 (65.7) (0.3) (20.8)
-------------------------------------------- ----- --------------- --------------- --------------
Gross profit 38.7 10.1 6.6
Pre-award costs (12.0) (33.8) (43.8)
Unsuccessful exploration costs 2.1 (46.8) (15.2) (60.7)
Loss on disposal of intangible
exploration/appraisal assets (4.5) - -
Other operating income 5.0 1.4 2.4
Administrative expenses (14.9) (14.9) (32.7)
Reversal of impairment of property,
plant & equipment - development/producing
assets 2.2 - - 23.0
Operating loss (34.5) (52.4) (105.2)
Loss on derecognition of financial
assets 3.1 (230.8) (33.0) (33.0)
(Loss)/gain on fair value of
financial assets 3.1 (319.4) 200.5 449.1
Finance income 5.9 70.9 77.0
Exceptional provision against
finance income receivable - (104.7) (104.7)
Finance costs 4.3 (24.1) (3.6) (10.4)
(Loss)/profit before taxation
from continuing operations (602.9) 77.7 272.8
Tax credit/(charge) 5.1 102.4 (6.8) (55.0)
-------------------------------------------- ----- --------------- --------------- --------------
(Loss)/profit for the period
attributable to equity holders
of the parent (500.5) 70.9 217.8
-------------------------------------------- ----- --------------- --------------- --------------
(Loss)/profit per ordinary
share - basic (cents) 4.4 (86.20) 12.31 37.72
(Loss)/profit per ordinary
share - diluted (cents) 4.4 (86.20) 12.11 36.84
-------------------------------------------- ----- --------------- --------------- --------------
Cairn Energy PLC
Group Statement of Comprehensive Income
For the six months ended 30 June 2018
Six months
ended
30 June Year ended
Six months 31 December
ended 2017 2017
30 June 2018 (unaudited) (audited)
(unaudited) (restated) (restated)
US$m US$m US$m
------------------ ---------------- --------------
(Loss)/profit for the period (500.5) 70.9 217.8
Other comprehensive income
- items that may be recycled
to the income statement
Fair value on hedge options (13.4) - (2.9)
Currency translation differences (0.8) 40.1 76.1
---------------- --------------
Other comprehensive income
for the period (14.2) 40.1 73.2
---------------------------------------- ------------------ ---------------- --------------
Total comprehensive income
for the period attributable
to equity holders of the
parent (514.7) 111.0 291.0
---------------------------------------- ------------------ ---------------- --------------
Cairn Energy PLC
Group Balance Sheet
As at 30 June 2018
30 June
30 June 2017 31 December 2017
2018 (unaudited) (audited)
(unaudited) (restated) (restated)
Note US$m US$m US$m
------------------------------------------------------------ ----- ------------- ------------- -----------------
Non-current assets
Intangible exploration/appraisal assets 2.1 632.7 560.8 619.4
Property, plant & equipment - development/producing assets 2.2 1,150.1 1,070.3 1,206.5
Intangible assets - goodwill 128.6 124.6 128.2
Other property, plant & equipment and intangible assets 9.3 2.8 10.8
Financial asset at fair value through profit or loss 3.1 - 823.6 1,072.2
1,920.7 2,582.1 3,037.1
------------------------------------------------------------ ----- ------------- ------------- -----------------
Current assets
Financial asset at fair value through profit or loss 3.1 522.0 - -
Cash and cash equivalents 3.2 74.8 253.7 86.5
Trade and other receivables 3.5 132.3 129.3 83.1
Inventory 9.1 0.3 10.4
Income tax asset 5.2 62.2 54.9 38.4
800.4 438.2 218.4
------------------------------------------------------------ ----- ------------- ------------- -----------------
Total assets 2,721.1 3,020.3 3,255.5
------------------------------------------------------------ ----- ------------- ------------- -----------------
Current liabilities
Loans and borrowings 3.3 92.9 21.7 29.8
Finance lease liabilities 3.4 5.1 17.1 1.5
Trade and other payables 3.6 168.3 212.8 199.2
Deferred revenue 3.7 21.5 28.7 24.3
Provisions - other 2.8 - 2.8
290.6 280.3 257.6
------------------------------------------------------------ ----- ------------- ------------- -----------------
Non-current liabilities
Loans and borrowings 3.3 28.3 - -
Finance lease liabilities 3.4 169.8 183.1 168.2
Deferred revenue 3.7 42.9 45.5 49.7
Deferred tax liabilities 5.3 87.5 102.6 164.4
Provisions - decommissioning 121.0 98.6 121.1
Provisions - other - 2.7 -
------------------------------------------------------------ ----- ------------- ------------- -----------------
449.5 432.5 503.4
------------------------------------------------------------ ----- ------------- ------------- -----------------
Total liabilities 740.1 712.8 761.0
------------------------------------------------------------ ----- ------------- ------------- -----------------
Net assets 1,981.0 2,307.5 2,494.5
------------------------------------------------------------ ----- ------------- ------------- -----------------
Equity attributable to equity holders of the parent
Called-up share capital 12.6 12.5 12.5
Share premium 489.5 488.0 488.0
Shares held by ESOP/SIP Trusts (15.7) (10.9) (10.2)
Foreign currency translation (175.7) (210.0) (174.9)
Capital reserves - non-distributable 40.8 40.8 40.8
Merger reserve 255.9 255.9 255.9
Hedge reserve (16.3) - (2.9)
Retained earnings 1,389.9 1,731.2 1,885.3
------------------------------------------------------------ ----- ------------- ------------- -----------------
Total equity 1,981.0 2,307.5 2,494.5
------------------------------------------------------------ ----- ------------- ------------- -----------------
Cairn Energy PLC
Group Statement of Cash Flows
For the six months ended 30 June 2018
Year ended
Six months ended 30 June 2017 31 December 2017
Six months ended 30 June 2018 (unaudited) (audited)
(unaudited) (restated) (restated)
US$m US$m US$m
--------------------------------- ------------------------------ ------------------------------ -------------------
Cash flows from operating
activities
(Loss)/profit before taxation
from continuing operations (602.9) 77.7 272.8
Unsuccessful exploration costs 46.8 15.2 60.7
Depreciation, depletion and
amortisation 67.5 0.8 23.4
Share-based payments charge 8.5 10.4 17.5
Reversal of impairment of
property, plant & equipment -
development/producing assets - - (23.0)
Loss on derecognition of
financial assets 230.8 33.0 33.0
Loss/(gain) on fair value of
financial assets 319.4 (200.5) (449.1)
Loss on disposal of intangible
exploration/appraisal assets 4.5 - -
Finance income (5.9) (70.9) (77.0)
Exceptional provision against
finance income receivable - 104.7 104.7
Finance costs 24.1 3.6 10.4
Interest paid (2.4) (0.2) (0.6)
Income tax received from
operating activities - - 2.8
Movement on inventory 1.3 - (10.4)
Trade and other receivables
movement (66.4) (17.2) (10.5)
Trade and other payables
movement 5.4 10.8 (0.5)
Deferred revenue received - 74.6 74.6
Net cash inflows from
operating activities 30.7 42.0 28.8
--------------------------------- ------------------------------ ------------------------------ -------------------
Cash flows from investing
activities
Expenditure on intangible
exploration/appraisal assets (73.5) (68.9) (186.6)
Expenditure on property, plant &
equipment -
development/producing assets (61.0) (71.0) (145.6)
Income tax received from
investing activities - - 27.6
Purchase of other property,
plant & equipment and
intangible assets (0.8) (4.7) (7.9)
Interest received and other
finance income 0.6 4.2 15.3
Net cash used in investing
activities (134.7) (140.4) (297.2)
--------------------------------- ------------------------------ ------------------------------ -------------------
Cash flows from financing
activities
Facility fees, arrangement fees
and bank charges (4.3) (2.8) (8.3)
Proceeds from borrowings 94.4 21.7 29.2
Cost of shares purchased (3.7) (3.8) (3.9)
Shares issued for cash 1.6 - -
Finance lease reimbursement 2.8 - 1.4
Net cash inflows from financing
activities 90.8 15.1 18.4
--------------------------------- ------------------------------ ------------------------------ -------------------
Net decrease in cash and cash
equivalents (13.2) (83.3) (250.0)
Opening cash and cash
equivalents at beginning of
period 86.5 334.9 334.9
Foreign exchange differences 1.5 2.1 1.6
--------------------------------- ------------------------------ ------------------------------ -------------------
Closing cash and cash
equivalents (note 3.2) 74.8 253.7 86.5
--------------------------------- ------------------------------ ------------------------------ -------------------
Cairn Energy PLC
Group Statement of Changes in Equity
For the six months ended 30 June 2018
Equity
share Shares
capital held Foreign Merger Hedge Retained
and share by ESOP/ currency and capital reserves earnings Total
premium SIP Trust translation reserves (restated) (restated) equity
US$m US$m US$m US$m US$m US$m US$m
------------------- ------------ ------------ -------------- -------------- ------------ ------------ ---------
At 1 January 2017 500.4 (10.2) (250.1) 296.7 - 1,653.1 2,189.9
Profit for the
year - - - - - 217.8 217.8
Fair value on
hedge
options - - - - (2.9) - (2.9)
Currency
translation
differences
recycled
on disposal of
subsidiary - - (0.9) - - 0.9 -
Currency
translation
differences - - 76.1 - - - 76.1
Total
comprehensive
income - - 75.2 - (2.9) 218.7 291.0
Share-based
payments - - - - - 17.5 17.5
Shares issued for
cash 0.1 (0.1) - - - - -
Cost of shares
purchased - (3.9) - - - - (3.9)
Cost of shares
vesting - 4.0 - - - (4.0) -
At 31 December
2017 500.5 (10.2) (174.9) 296.7 (2.9) 1,885.3 2,494.5
Loss for the
period - - - - - (500.5) (500.5)
Fair value on
hedge
options - - - - (13.4) - (13.4)
Currency
translation
differences - - (0.8) - - - (0.8)
Total
comprehensive
income - - (0.8) - (13.4) (500.5) (514.7)
Share-based
payments - - - - - 8.5 8.5
Shares issued for
cash 1.6 - - - - - 1.6
Cost of shares
purchased - (8.9) - - - - (8.9)
Cost of shares
vesting - 3.4 - - - (3.4) -
At 30 June 2018 502.1 (15.7) (175.7) 296.7 (16.3) 1,389.9 1,981.0
------------------- ------------ ------------ -------------- -------------- ------------ ------------ ---------
For the six months ended 30 June 2017
Equity
share Shares
capital held Foreign Merger Retained
and share by ESOP/ currency and capital earnings Total
premium SIP Trust translation reserves (restated) equity
US$m US$m US$m US$m US$m US$m
--------------------------------- ------------ ------------ -------------- -------------- ------------ ---------
At 1 January 2017 500.4 (10.2) (250.1) 296.7 1,653.1 2,189.9
Profit for the period - - - - 70.9 70.9
Currency translation differences - - 40.1 - - 40.1
Total comprehensive income - - 40.1 - 70.9 111.0
Share-based payments - - - - 10.4 10.4
Shares issued for cash 0.1 (0.1) - - - -
Cost of shares purchased - (3.8) - - - (3.8)
Cost of shares vesting - 3.2 - - (3.2) -
--------------------------------- ------------ ------------ -------------- -------------- ------------ ---------
At 30 June 2017 500.5 (10.9) (210.0) 296.7 1,731.2 2,307.5
--------------------------------- ------------ ------------ -------------- -------------- ------------ ---------
Section 1 - Basis of Preparation
1.1 Accounting Policies
Basis of preparation
The half-yearly condensed consolidated financial statements for
the six months ended 30 June 2018 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting', as
adopted by the European Union. They should be read in conjunction
with the annual financial statements for the year ended 31 December
2017, which have been prepared in accordance with International
Financial Reporting Standards ('IFRSs') as adopted by the European
Union.
This half-yearly report was approved by the Directors on 10
September 2018.
The disclosed figures, which have been reviewed but not audited,
are not statutory accounts in terms of Section 434 of the Companies
Act 2006. Statutory accounts for the year ended 31 December 2017,
on which the auditors gave an unqualified audit report, which did
not contain an emphasis of matter paragraph or any statement under
section 498 of the Companies Act 2006, have been filed with the
Registrar of Companies.
This half-yearly report has been prepared on a basis consistent
with the accounting policies expected to be applied for the year
ending 31 December 2018, and uses the same accounting and financial
risk management policies and methods of computation as those
applied for the year ended 31 December 2017, other than changes to
accounting policies resulting from the adoption of new or revised
accounting standards.
Adoption of IFRS 9 "Financial Instruments" on 1 January 2018 has
resulted in re-classification of the Group's available-for-sale
financial asset as a financial asset held at fair value through
profit or loss. Fair value gains and losses on the financial asset
are now reflected through the Income Statement rather than Other
Comprehensive Income. IFRS 9 also requires the change in fair value
relating to the time value of an option, designated for hedge
accounting, to be recorded in Other Comprehensive Income, whereas
previously Cairn had recorded such movements through the Income
Statement. Both these changes have resulted in the restatement of
comparative information, details of which can be found in note 1.3.
Audited comparative information for the year ended 31 December 2017
has been restated, though the restatement itself has yet to be
audited which will be done in conjunction with the audit of the
Group's 31 December 2018 financial statements.
Comparative information to June 2017 has also been restated to
reflect the expected timing of the release of the deferred revenue
provision between less than and greater than one year. Previously
this was classified wholly within one year. December 2017
comparative information is unaffected.
Other changes to IFRS effective 1 January 2018, including the
adoption of IFRS 15 "Revenue from Contracts with Customers", have
no significant impact on Cairn's accounting policies or financial
statements.
Changes to accounting policies and the impact on financial
statements resulting from new accounting standards and amendments
to existing standards that have been issued, but are not yet
effective, including IFRS 16 "Leases" are currently being assessed.
The most significant change under IFRS 16, shall be Cairn's
interests in the Catcher FPSO being recorded as a right-of-use
asset with a corresponding lease liability being the present value
of future minimum payments, estimated to be US$163.0m had IFRS 16
been implemented at the Balance Sheet date. Currently the Catcher
FPSO is accounted for as an operating lease, with all costs being
charged directly to the Income Statement.
Significant key estimates and assumptions are unchanged from
those applied in the year ended 31 December 2017 and the same have
accordingly been applied here, other than a change of functional
currency of the Group's subsidiary undertaking Nautical Petroleum
Limited, which holds the Group's interests in the UK Catcher and
Kraken producing assets. The functional currency of the subsidiary
has been changed with effect from 1 January 2018 from GBGBP to US$,
reflecting the significant revenue streams now being received by
the entity.
1.2 Going Concern
The directors have considered the factors relevant to support a
statement of going concern.
In assessing whether the going concern assumption is
appropriate, the Board considered the Group cash flow forecasts
under various scenarios, identifying risks and mitigating factors
and ensuring the Group has sufficient funding to meet its current
and contracted commitments as and when they fall due for a period
of at least 12 months from the date of signing these financial
statements.
The directors have a reasonable expectation that the Group will
continue in operational existence for this 12-month period and have
therefore used the going concern basis in preparing the financial
statements.
Section 1 - Basis of Preparation (continued)
1.3 Restatement of Comparative Financial Statements on adoption of IFRS 9
Issued IFRS 9 restatement IFRS 9 restatement Restated
Financial - Financial - hedge June
Six months ended 30 June 2017 Statements asset option 2017
US$m US$m US$m US$m
--------------------------------------
Income Statement
Net gain/(loss) on derecognition
of financial asset 402.6 (435.6) - (33.0)
Gain on fair value of financial
assets - 200.5 - 200.5
Profit before taxation from
continuing operations 312.8 (235.1) - 77.7
Tax credit/(charge) 1.2 (8.0) - (6.8)
Profit for the period attributable
to equity holders of the parent 314.0 (243.1) - 70.9
Profit per ordinary shares -
basic (cents) 54.49 (42.18) - 12.31
Profit per ordinary shares -
diluted (cents) 53.62 (41.51) - 12.11
Group Statement of Comprehensive
Income
Profit for the period 314.0 (243.1) - 70.9
Surplus on valuation of financial
assets 200.5 (200.5) - -
Deferred tax charge on valuation
of financial assets (42.8) 42.8 - -
Surplus on valuation recycled
to the Income Statement (435.6) 435.6 - -
Deferred tax charge on surplus
on valuation recycled to the
Income Statement 34.8 (34.8) - -
Other comprehensive (expense)/income
for the period (203.0) 243.1 - 40.1
Total comprehensive income for
the period 111.0 - - 111.0
Balance Sheet
Available-for-sale reserve 29.0 (29.0) - -
Retained earnings 1,702.2 29.0 - 1,731.2
Total equity 2,307.5 - - 2,307.5
Issued Financial IFRS 9 restatement IFRS 9 restatement Restated
Statements - Financial - hedge December
Year ended 31 December 2017 asset option 2017
US$m US$m US$m US$m
--------------------------------------
Income Statement
Net gain/(loss) on derecognition
of financial asset 402.6 (435.6) - (33.0)
Gain on fair value of financial
assets - 449.1 - 449.1
Finance costs (13.3) - 2.9 (10.4)
Profit before taxation from
continuing operations 256.4 13.5 2.9 272.8
Tax credit/(charge) 6.7 (61.7) - (55.0)
Profit for the year attributable
to equity holders of the parent 263.1 (48.2) 2.9 217.8
Profit per ordinary shares -
basic (cents) 45.58 (8.37) 0.51 37.72
Profit per ordinary shares -
diluted (cents) 44.52 (8.17) 0.49 36.84
Group Statement of Comprehensive
Income
Profit for the year 263.1 (48.2) 2.9 217.8
Surplus on valuation of financial
assets 449.1 (449.1) - -
Deferred tax charge on valuation
of financial assets (96.5) 96.5 - -
Surplus on valuation recycled
to the Income Statement (435.6) 435.6 - -
Deferred tax charge on surplus
on valuation recycled to the
Income Statement 34.8 (34.8) - -
Fair value on hedge options - - (2.9) (2.9)
Other comprehensive (expense)/income
for the year 27.9 48.2 (2.9) 73.2
Total comprehensive income for
the year 291.0 - - 291.0
Balance Sheet
Hedge reserve - - (2.9) (2.9)
Available-for-sale reserve 223.9 (223.9) - -
Retained earnings 1,658.5 223.9 2.9 1,885.3
Total equity 2,494.5 - - 2,494.5
Section 2 - Oil and Gas Assets
2.1 Intangible Exploration/Appraisal Assets
Senegal UK & Norway International Total
US$m US$m US$m US$m
Cost
At 1 January 2017 330.3 172.6 32.7 535.6
Foreign exchange - 7.7 0.5 8.2
Additions 77.3 10.5 11.5 99.3
Unsuccessful exploration
costs - (3.5) (11.7) (15.2)
-------------------------- -------- ------------- -------------- -------
At 30 June 2017 407.6 187.3 33.0 627.9
Foreign exchange - 4.3 0.2 4.5
Additions 26.9 23.2 51.6 101.7
Unsuccessful exploration
costs - (4.6) (47.4) (52.0)
--------------------------
At 31 December 2017 434.5 210.2 37.4 682.1
Foreign exchange - 1.4 - 1.4
Additions 12.1 44.8 7.7 64.6
Disposals - (5.9) - (5.9)
Unsuccessful exploration
costs - (45.9) (0.9) (46.8)
-------------------------- -------- ------------- -------------- -------
At 30 June 2018 446.6 204.6 44.2 695.4
-------------------------- -------- ------------- -------------- -------
Impairment
At 1 January 2017 - 43.9 20.4 64.3
Foreign exchange - 2.3 0.5 2.8
-------------------------- -------- ------------- -------------- -------
At 30 June 2017 - 46.2 20.9 67.1
Foreign exchange - 1.9 0.2 2.1
Unsuccessful exploration
costs - - (6.5) (6.5)
-------------------------- -------- ------------- -------------- -------
At 31 December 2017 - 48.1 14.6 62.7
At 30 June 2018 - 48.1 14.6 62.7
-------------------------- -------- ------------- -------------- -------
Net book value
-------------------------- -------- ------------- -------------- -------
At 30 June 2017 407.6 141.1 12.1 560.8
-------------------------- -------- ------------- -------------- -------
At 31 December 2017 434.5 162.1 22.8 619.4
-------------------------- -------- ------------- -------------- -------
At 30 June 2018 446.6 156.5 29.6 632.7
-------------------------- -------- ------------- -------------- -------
Additions in the current period in the UK & Norway region of
US$44.8m, include US$22.5m of costs relating to the two exploration
wells completed in the period on the Tethys and Raudåsen prospects
and US$10.9m incurred on Nova pre-development activities. Remaining
additions of US$11.4m are spread across the remaining portfolio of
assets in the region.
Unsuccessful exploration costs charged in the period include
costs of the two wells above, neither of which were commercially
successful, and further costs were written off licences which have
either been relinquished or where no further exploration is
planned.
Impairment review
At 30 June 2018, Cairn reviewed its intangible
exploration/appraisal assets for indicators of impairment and where
indicators were identified, performed impairment tests. No
impairment was recorded.
Section 2 - Oil and Gas Assets (continued)
2.2 Property, Plant & Equipment - Development/Producing Assets
UK & Norway
UK & Norway leased asset Total
US$m US$m US$m
Cost
At 1 January 2017 756.1 - 756.1
Foreign exchange 44.8 3.3 48.1
Additions 87.5 200.8 288.3
--------------------------------- ------------ -------------- --------
At 30 June 2017 888.4 204.1 1,092.5
Foreign exchange 36.8 5.6 42.4
Additions 125.0 4.1 129.1
Re-measurement of leased assets - (36.4) (36.4)
--------------------------------- ------------ -------------- --------
At 31 December 2017 1,050.2 177.4 1,227.6
Additions 9.3 - 9.3
At 30 June 2018 1,059.5 177.4 1,236.9
--------------------------------- ------------ -------------- --------
Depletion, amortisation and
impairment
At 1 January 2017 21.0 - 21.0
Foreign exchange 0.9 - 0.9
Depletion and amortisation 0.3 - 0.3
--------------------------------- ------------ -------------- --------
At 30 June 2017 22.2 - 22.2
Foreign exchange 1.3 0.1 1.4
Depletion and amortisation 17.1 3.4 20.5
Reversal of impairment (23.0) - (23.0)
---------------------------------
At 31 December 2017 17.6 3.5 21.1
Depletion and amortisation 57.8 7.9 65.7
At 30 June 2018 75.4 11.4 86.8
--------------------------------- ------------ -------------- --------
Net book value
--------------------------------- ------------ -------------- --------
At 30 June 2017 866.2 204.1 1,070.3
--------------------------------- ------------ -------------- --------
At 31 December 2017 1,032.6 173.9 1,206.5
--------------------------------- ------------ -------------- --------
At 30 June 2018 984.1 166.0 1,150.1
--------------------------------- ------------ -------------- --------
Additions during the period of US$9.3m include the release of
accruals of US$22.7m due to the renegotiation of rig contracts.
Non-cash additions relating to increases in the decommissioning
estimate were US$1.5m.
Impairment review
Impairment reviews on the Group's development/producing assets
are conducted at the each reporting date. The Group's
development/producing assets were reviewed for indicators of
impairment at 30 June and impairment tests performed. No impairment
was recorded. There have been no significant changes in market
conditions or management's estimates and assumptions used in
impairment testing at the December 2017 year end.
Section 2 - Oil and Gas Assets (continued)
2.3 Capital Commitments
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Oil and gas expenditure:
Intangible exploration/appraisal assets 178.7 101.2 63.2
Property, plant & equipment - development/producing assets 51.0 346.1 120.8
Contracted for 229.7 447.3 184.0
------------------------------------------------------------ -------- -------- ------------
Capital commitments represent Cairn's share of obligations in
relation to its interests in joint operations. These commitments
include Cairn's share of the capital commitments of the joint
operations themselves.
The capital commitments for intangible exploration/appraisal
assets as at 30 June 2018 include US$98.7m relating to operations
in the UK & Norway. Capital commitments for operations in
Mexico account for US$62.9m and other international operations
total to US$12.1m. The balance represents remaining commitments in
Senegal.
The capital commitments for property, plant & equipment -
development/producing assets, which relate entirely to the Group's
UK North Sea producing assets, exclude costs of the Kraken FPSO
finance lease obligations, which are disclosed in note 3.4.
At 30 June 2018, Cairn had the following operating lease
commitments relating to oil and gas exploration, appraisal and
development activities. These amounts are also included in total
capital commitments above and exclude operating lease commitments
relating to producing activities:
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Intangible exploration/appraisal assets
Not later than one year 3.6 1.4 3.1
Property, plant & equipment - development/producing assets
Not later than one year 5.1 42.1 34.5
After one year but no more than five years - 24.0 10.3
5.1 66.1 44.8
------------------------------------------------------------ -------- -------- ------------
Section 3 - Assets and Liabilities: Financial Assets, Cash and
Borrowings, Lease liabilities and Working Capital
3.1 Financial Asset at Fair Value through Profit or Loss
7.5% Redeemable
preference
Listed equity shares of
shares INR10 Total
US$m US$m US$m
Fair Value
As at 1 January 2017 656.1 - 656.1
Surplus on valuation of Cairn
India Limited shares prior to
merger 163.6 - 163.6
Disposal of shares in Cairn
India Limited on merger (819.7) - (819.7)
Addition of shares in Vedanta
Limited on merger 671.8 114.9 786.7
Surplus on valuation of Vedanta
Limited shares after merger 37.8 (0.9) 36.9
------------------------------------ -------------- ---------------- --------
As at 30 June 2017 709.6 114.0 823.6
Surplus on valuation of Vedanta
Limited shares 241.9 6.7 248.6
As at 31 December 2017 951.5 120.7 1,072.2
Deficit on valuation of Vedanta
Limited shares (307.9) (11.5) (319.4)
Derecognition of shares in Vedanta
Limited (230.8) - (230.8)
As at 30 June 2018 412.8 109.2 522.0
------------------------------------ -------------- ---------------- --------
Following adoption of IFRS 9 on 1 January 2018, fair value
movements during the period are recognised in the income statement
and comparative information has been restated accordingly, see note
1.3. There is no change to the valuation of the asset following the
adoption of IFRS 9.
At 1 January 2018, Cairn held 4.9% of the listed equity shares
in VL. During late May and early June 2018 the IITD instructed the
sale of 1.7% of Cairn's shareholding seizing the resultant
proceeds. See note 5.4. This has resulted in a loss on
derecognition of US$230.8m during the six month period to 30 June
2018. Further sales of 1.1% were instructed in August and September
2018, reducing Cairn's shareholding in the listed equity shares to
2.1%. See note 6.1. Cairn continues to be restricted from selling
its remaining shares in VL pending conclusion of the ongoing
arbitration proceedings. As timing of the arbitration award is
expected to be within one year from the balance sheet date, the
financial asset has been classified as current at 30 June 2018.
The listed equity shares held at 30 June 2018 in the ordinary
share capital of VL, listed in India, have by their nature no fixed
maturity or coupon rate. These listed equity securities present the
Group with an opportunity for return through dividend income and
trading gains and are Level 1 assets measured at fair value. The
redeemable preference shares have a coupon of 7.5%, a term of 18
months and will be cash settled in October 2018. These too are
Level 1 assets measured at fair value.
The Group is exposed to equity price risks arising from the
listed equity investments it holds in VL.
3.2 Cash and Cash Equivalents
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Cash at bank 16.4 13.5 24.7
Short-term bank deposits - 14.4 24.0
Money market funds 58.4 180.6 19.5
Tri-party repurchase transactions - 45.2 18.3
----------------------------------- -------- -------- ------------
Cash and cash equivalents 74.8 253.7 86.5
----------------------------------- -------- -------- ------------
Section 3 - Other Assets and Liabilities: Financial Assets, Cash
and Borrowings, Lease liabilities and Working Capital
(continued)
3.3 Loans and Borrowings
Reconciliation of opening and
closing liability to cash flow 30 June 30 June 31 December
movements: 2018 2017 2017
US$m US$m US$m
Opening liability 29.8 - -
Loans advanced recognised in
cash flow statement 94.4 21.7 29.2
Borrowing costs and interest -
payable (2.4) -
Foreign exchange differences (0.6) - 0.6
----------------------------------- -------- -------- ------------
Closing liabilities 121.2 21.7 29.8
----------------------------------- -------- -------- ------------
Amounts due less than one year:
Reserve-based lending facility 62.6 - -
Exploration financing facility 30.3 21.7 29.8
----------------------------------- -------- -------- ------------
92.9 21.7 29.8
Amounts due greater than one
year:
Exploration financing facility 28.3 - -
121.2 21.7 29.8
----------------------------------- -------- -------- ------------
Reserve-based lending facility
The Group's reserve-based lending facility had cash drawings of
US$65.0m at 30 June 2018.
Cairn have signed an extension to its existing RBL facility with
a syndicate of international banks. The extension is expected to be
effective by 31 October and brings the Nova asset into the
borrowing base, subject to approval of the development plan which
is expected by the end of 2018. Interest on outstanding debt is
charged at the appropriate LIBOR for the currency drawn plus an
applicable margin. The facility remains subject to bi-annual
redeterminations, has a market standard suite of covenants and is
cross-guaranteed by all Group companies' party to the facility.
Debt is repayable in line with the amortisation of bank commitments
over the period from 1 July 2022 to the extended final maturity
date of 30 June 2025.
Under IFRS 9, the extension of the facility to June 2025
constitutes substantially different terms from the original and as
such the financial liability relating to the original facility
shall be extinguished on the date of the extension and replaced
with a new liability based on the revised terms.
Total commitments remain unchanged at US$575.0m under the
revised facility, but an accordion feature permits additional
future commitments of up to US$425.0m. The maximum available
drawdown is currently forecast to be US$525.0m during the life of
the facility. The facility can also be used for general corporate
purposes and may also be used to issue letters of credit and
performance guarantees for the Group of up to US$175.0m.
Exploration Financing Facility
As at 30 June 2018, US$58.6m (NOK 477.4m) was drawn under the
Norwegian Exploration Financing Facility. The maximum available
amount is currently forecast to be US$59.0m (NOK 481m).
Interest on outstanding debt is charged at the appropriate NIBOR
plus an applicable margin. Debt is repayable by the final maturity
date, which is the earlier of 31 December 2019 or the date of
receipt of the tax refund relating to exploration spend for
2018.
Section 3 - Other Assets and Liabilities: Financial Assets, Cash
and Borrowings, Lease liabilities and Working Capital
(continued)
3.4 Finance Lease Liabilities
Minimum lease payments Present value of minimum lease payments
----------------------------------------------- --------------------------------------------
30 June 30 June
30 June 2018 30 June 2017 31 December 2017 2018 2017 31 December 2017
US$m US$m US$m US$m US$m US$m
Not later than one
year 12.9 17.5 1.6 5.1 17.1 1.5
After one year but no
more than five years 90.5 94.2 88.5 65.5 82.9 77.2
After five years 118.6 139.8 130.5 104.3 100.2 91.0
Total future minimum
rentals payable 222.0 251.5 220.6 174.9 200.2 169.7
----------------------- ------------- ------------- ----------------- ---------- ---------- --------------------
Less future finance
charges (47.1) (51.3) (50.9)
Present value of
minimum lease
payments 174.9 200.2 169.7
----------------------- ------------- ------------- -----------------
Finance lease liabilities relate to the Kraken FPSO.
3.5 Trade and Other Receivables
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Trade receivables 55.5 - 0.2
Other receivables 12.6 28.1 12.7
Accrued income - underlift adjustments - - 5.6
Prepayments 5.2 26.7 18.8
Financial assets 1.8 - -
Joint operation receivables 57.2 74.5 45.8
132.3 129.3 83.1
---------------------------------------- -------- -------- ------------
Following the draw-down on the RBL facility, facility fees of
US$15.1m, held in prepayments at 31 December 2017, are now netted
against the loan balance. The fees are amortised over the estimated
useful life of the loan.
Joint operation receivables include Cairn's working interest
share of the receivables relating to joint operations and amounts
recoverable from partners in joint operations.
Section 3 - Other Assets and Liabilities: Financial Assets, Cash
and Borrowings, Lease liabilities and Working Capital
(continued)
3.6 Trade and Other Payables
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Trade payables 18.3 9.2 6.9
Deferred income - overlift adjustments 7.9 - -
Other taxation and social security 2.5 1.9 2.5
Accruals and other payables 29.6 32.7 22.6
Financial liabilities 14.6 - 1.4
Joint operation payables 95.4 169.0 165.8
168.3 212.8 199.2
---------------------------------------- -------- -------- ------------
Joint operation payables include Cairn's share of the trade and
other payables of joint operations in which the Group participates.
Where Cairn is operator of the joint operation, joint operation
payables also include amounts that Cairn will settle to third
parties on behalf of joint operation partners. The amount to be
recovered from partners for their share of such liabilities are
included within joint operation receivables.
The increase in trade payables is mainly due to costs incurred
on Kraken and Catcher development/producing assets. The increase in
accruals and other payables largely relates to overlift on
production, amounts due to FlowStream and the purchase of shares
for the ESOP Trust. The mark-to-market loss on oil price options
has created the financial liability as at 30 June 2018.
3.7 Deferred Revenue
30 June
30 June 2017 31 December
2018 (restated) 2017
US$m US$m US$m
Opening deferred revenue 74.0 - -
Fair value of proceeds received - 74.6 74.6
Released during the year (note 4.2) (9.6) - (3.0)
Foreign exchange differences - (0.4) 2.4
------------------------------------------------- --------- ------------ ------------
Closing deferred revenue 64.4 74.2 74.0
------------------------------------------------- --------- ------------ ------------
Amounts expected to be released within one year 21.5 28.7 24.3
Amounts expected to be released after one year 42.9 45.5 49.7
------------------------------------------------- --------- ------------ ------------
64.4 74.2 74.0
------------------------------------------------- --------- ------------ ------------
Deferred revenue relates to the stream agreement with FlowStream
entered into in 2017.
Section 4 - Results for the Period
4.1 Segmental Analysis
Operating segments
The Group's portfolio of exploration and development/producing
assets are managed through regional business units. Each business
unit is headed by a regional director (a regional director may be
responsible for more than one business unit) and the Board monitors
the results of each segment separately for the purposes of making
decisions about resource allocation and performance assessment.
The Senegal business unit's focus is to have a
government-approved exploitation plan by the end of 2018, with
first oil expected between 2021 and 2023. The UK & Norway
business unit includes exploration activities in the North Sea,
Norwegian Sea and Barents Sea and management of the Group's
producing assets in the UK North Sea. The International business
unit consists of all other regions where Cairn currently holds (or
held during the year) exploration licences, including Mexico,
Ireland, Western Sahara and the Mediterranean. The Other Cairn
Energy Group segment exists to accumulate the activities and
results of the holding company, other unallocated expenditure and
net assets/liabilities, including amounts of a corporate nature,
not specifically attributable to any of the business units.
Non-current assets as analysed on a segmental basis consist of
intangible exploration/appraisal assets; property, plant &
equipment - development/producing assets; intangible assets -
goodwill; and other property, plant & equipment and intangible
assets.
The segment results for the six months ended 30 June 2018 are as
follows:
Other
Cairn
Energy
Senegal UK & Norway International Group Total
US$m US$m US$m US$m US$m
Revenue - 181.7 - 0.7 182.4
Cost of sales - (78.0) - - (78.0)
Depletion and amortisation - (65.7) - - (65.7)
--------------------------------- -------- ------------ -------------- -------- --------
Gross profit - 38.0 - 0.7 38.7
Pre-award costs - (2.1) (0.7) (9.2) (12.0)
Unsuccessful exploration
costs - (45.9) (0.9) - (46.8)
Depreciation - (0.4) - (0.3) (0.7)
Amortisation - - - (1.1) (1.1)
Loss on disposal of intangible
exploration/appraisal assets - (4.5) - - (4.5)
Other operating income - - 5.0 - 5.0
Other administrative expenses (0.1) (0.5) (0.4) (12.1) (13.1)
Operating (loss)/profit (0.1) (15.4) 3.0 (22.0) (34.5)
Loss on derecognition of
financial assets - - - (230.8) (230.8)
Loss on fair value of financial
assets - - - (319.4) (319.4)
Interest income - - - 0.6 0.6
Other finance income and
costs - (19.2) - 0.4 (18.8)
(Loss)/profit before taxation (0.1) (34.6) 3.0 (571.2) (602.9)
Tax credit - 33.3 - 69.1 102.4
--------------------------------- -------- ------------ -------------- -------- --------
(Loss)/profit for the period (0.1) (1.3) 3.0 (502.1) (500.5)
Capital expenditure 12.1 54.2 7.8 0.2 74.3
--------------------------------- -------- ------------ -------------- -------- --------
Total assets 459.0 1,692.4 53.5 516.2 2,721.1
--------------------------------- -------- ------------ -------------- -------- --------
Total liabilities 13.7 660.7 26.5 39.2 740.1
--------------------------------- -------- ------------ -------------- -------- --------
Non-current assets 446.7 1,437.4 29.7 6.9 1,920.7
--------------------------------- -------- ------------ -------------- -------- --------
Section 4 - Results for the Period (continued)
4.1 Segmental Analysis (continued)
All transactions between the segments are carried out on an
arm's length basis, other than where inter-group loans are made
interest-free or at interest rates below market value.
The segment results for the six months ended 30 June 2017 after
restatement (see note 1.3) were as follows:
Other
Cairn
Energy
Group Total
Senegal UK & Norway International (restated) (restated)
US$m US$m US$m US$m US$m
Revenue - - 10.8 - 10.8
Cost of sales - (0.4) - - (0.4)
Depletion and amortisation - (0.3) - - (0.3)
--------------------------------- -------- ------------ -------------- ------------ ------------
Gross (loss)/profit - (0.7) 10.8 - 10.1
Pre-award costs - (27.0) (2.5) (4.3) (33.8)
Unsuccessful exploration
costs - (3.5) (11.7) - (15.2)
Depreciation - (0.2) - (0.1) (0.3)
Amortisation - - - (0.2) (0.2)
Other income and administrative
expenses - (1.8) 0.4 (11.6) (13.0)
Operating loss - (33.2) (3.0) (16.2) (52.4)
Loss on derecognition of
financial assets - - - (33.0) (33.0)
Gain on fair value of financial
asset - - - 200.5 200.5
Interest income - 0.1 - 9.4 9.5
Other finance income and
costs (0.3) (7.9) - 66.0 57.8
Exceptional provision against
finance income receivable - - - (104.7) (104.7)
--------------------------------- -------- ------------ -------------- ------------ ------------
(Loss)/profit before taxation (0.3) (41.0) (3.0) 122.0 77.7
Tax credit/(charge) - 28.9 - (35.7) (6.8)
--------------------------------- -------- ------------ -------------- ------------ ------------
(Loss)/profit for the period (0.3) (12.1) (3.0) 86.3 70.9
Capital expenditure 77.5 299.4 11.5 0.6 389.0
--------------------------------- -------- ------------ -------------- ------------ ------------
Total assets 460.0 1,539.4 27.4 993.5 3,020.3
--------------------------------- -------- ------------ -------------- ------------ ------------
Total liabilities 83.6 561.2 16.6 51.4 712.8
--------------------------------- -------- ------------ -------------- ------------ ------------
Non-current assets 407.7 1,336.9 12.1 1.8 1,758.5
--------------------------------- -------- ------------ -------------- ------------ ------------
Section 4 - Results for the Period (continued)
4.1 Segmental Analysis (continued)
The segment results for the year ended 31 December 2017 after
restatement (see note 1.3) were as follows:
Other
Cairn
Energy
Group Total
Senegal UK & Norway International (restated) (restated)
US$m US$m US$m US$m US$m
Revenue - 22.9 10.4 - 33.3
Cost of sales - (5.9) - - (5.9)
Depletion and amortisation - (20.8) - - (20.8)
--------------------------------- -------- ------------ -------------- ------------ ------------
Gross (loss)/profit - (3.8) 10.4 - 6.6
Pre-award costs - (30.2) (8.5) (5.1) (43.8)
Unsuccessful exploration
costs - (8.1) (52.6) - (60.7)
Depreciation - (0.6) - (0.5) (1.1)
Amortisation - - - (1.5) (1.5)
Other income and administrative
expenses - (2.2) 0.3 (25.8) (27.7)
Reversal of impairment of
property, plant & equipment
- development/producing assets - 23.0 - - 23.0
Operating loss - (21.9) (50.4) (32.9) (105.2)
Loss on derecognition of
financial assets - - - (33.0) (33.0)
Gain on fair value of financial
asset - - - 449.1 449.1
Interest income 0.1 0.6 - 3.2 3.9
Other finance income and
costs (0.7) 0.7 - 62.7 62.7
Exceptional provision against
finance income receivable - - - (104.7) (104.7)
--------------------------------- -------- ------------ -------------- ------------ ------------
(Loss)/profit before taxation (0.6) (20.6) (50.4) 344.4 272.8
Tax credit - 34.4 - (89.4) (55.0)
--------------------------------- -------- ------------ -------------- ------------ ------------
(Loss)/profit for the year (0.6) 13.8 (50.4) 255.0 217.8
Capital expenditure 104.2 416.8 63.1 8.6 592.7
--------------------------------- -------- ------------ -------------- ------------ ------------
Total assets 463.3 1,674.2 40.3 1,077.7 3,255.5
--------------------------------- -------- ------------ -------------- ------------ ------------
Total liabilities 34.6 592.4 26.5 107.5 761.0
--------------------------------- -------- ------------ -------------- ------------ ------------
Non-current assets 434.5 1,499.4 22.8 8.2 1,964.9
--------------------------------- -------- ------------ -------------- ------------ ------------
Section 4 - Results for the Period (continued)
4.2 Revenue and Cost of Sales
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Oil and gas sales 174.3 - 19.9
Loss on hedge options (2.2) - -
Release of deferred revenue
(note 3.7) 9.6 - 3.0
-------------------------------------- ----------- ----------- -------------
Revenue from oil sales 181.7 - 22.9
Royalty income 0.7 10.8 10.4
-------------------------------------- ----------- ----------- -------------
Revenue 182.4 10.8 33.3
-------------------------------------- ----------- ----------- -------------
Production and other costs (30.9) (0.1) (15.3)
Oil inventory and overlift/underlift
movements (14.8) (0.3) 16.4
Variable and operating lease
charges (32.3) - (7.0)
Cost of sales (78.0) (0.4) (5.9)
Depletion and amortisation
(note 2.2) (65.7) (0.3) (20.8)
-------------------------------------- ----------- ----------- -------------
Gross profit 38.7 10.1 6.6
-------------------------------------- ----------- ----------- -------------
During the period, Cairn achieved oil and gas sales of 10.4mmboe
from the Kraken and Catcher fields, realising US$172.1m after
hedging settlements. Deferred revenue is released on a
unit-of-production basis on based estimated future quantities to
which FlowStream are entitled.
Operating lease commitments
At the year end, Cairn had the following operating lease
commitment relating to the Catcher FPSO:
30 June 30 June 31 December
2018 2017 2017
US$m US$m US$m
Production costs - operating lease charges
Not later than one year 33.9 13.9 33.9
After one year but no more than five years 119.7 127.5 124.0
After five years 35.1 61.0 47.4
-------------------------------------------- -------- -------- ------------
188.7 202.4 205.3
-------------------------------------------- -------- -------- ------------
Section 4 - Results for the Period (continued)
4.3 Finance Costs
Year ended
Six months Six months
ended ended 31 December
30 June 30 June 2017
2018 2017 (restated)
Loan interest and facility
fee amortisation 15.3 0.2 0.6
Other finance charges 3.9 2.5 4.8
Loss on mark-to-market financial
instruments - - 0.3
Unwinding of discount - provisions 1.1 0.9 2.2
Finance lease interest 3.8 - 2.5
24.1 3.6 10.4
------------------------------------ ------------- ------------ -------------
Loan interest and facility fee amortisation includes US$12.9m of
facility fees relating to the RBL facility, which are amortised
over the expected useful life of the facility.
4.4 Earnings per Ordinary Share
Basic and diluted earnings per share are calculated using the
following measures of (loss)/profit:
Six months
ended Year ended
Six months 30 June
ended 31 December
30 June 2017 2017
2018 (restated) (restated)
US$m US$m US$m
(Loss)/profit and diluted (loss)/profit
attributable to equity holders
of the parent (500.5) 70.9 217.8
------------------------------------------ ------------- ------------ -------------
Refer to note 1.3 concerning the restatement of profit
comparatives on adoption of IFRS 9.
The following reflects the share data used in the basic and
diluted earnings per share computations:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
'000 '000 '000
Weighted average number of
shares 586,547 581,015 582,134
Less weighted average shares
held by ESOP and SIP Trusts (5,838) (4,817) (4,933)
---------------------------------- ------------- ------------ --------------
Basic weighted average number
of shares 580,709 576,198 577,201
Potential dilutive effect of
shares issuable under employee
share plans:
LTIP awards - 7,628 11,027
Approved and unapproved plans - 508 346
Employee share awards - 1,244 2,442
---------------------------------- ------------- ------------ --------------
Diluted weighted average number
of shares 580,709 585,578 591,016
---------------------------------- ------------- ------------ --------------
Potentially issuable shares,
anti-dilutive not included
above:
LTIP awards 28,019 19,328 16,665
Approved and unapproved plans 3,393 169 169
Employee share awards 4,141 1,804 842
Number of potentially issuable
shares 35,553 21,301 17,676
---------------------------------- ------------- ------------ --------------
2018 potentially issuable shares were all anti-dilutive due to
the loss for the period.
Section 5 - Taxation
5.1 Tax Credit on Loss for the Period
Analysis of tax credit on loss for the period
Six months
ended Year ended
Six months
ended 30 June 31 December
30 June 2017 2017
2018 (restated) (restated)
US$m US$m US$m
Current tax credit:
Norwegian tax refunds receivable (24.4) (27.4) (39.9)
(24.4) (27.4) (39.9)
Deferred tax (credit)/charge:
Norwegian deferred tax (credit)/charge (8.9) 2.0 9.0
Release of provision on carried
interests due to change in
tax rate - (3.5) (0.7)
UK deferred tax credits realised - - (2.8)
Deferred tax on derecognition
of financial assets - (7.1) (7.1)
Deferred tax on valuation of
financial assets (69.1) 42.8 96.5
Total deferred tax (credit)/charge (78.0) 34.2 94.9
---------------------------------------- ------------ ------------ -------------
Total tax (credit)/charge on
(loss)/profit (102.4) 6.8 55.0
---------------------------------------- ------------ ------------ -------------
The tax charge for prior periods has been restated following the
adoption of IFRS 9 (note 1.3) which has resulted in tax previously
included in other comprehensive income now included in the tax
charge in the income statement.
5.2 Income Tax Asset
The income tax asset of US$62.2m (30 June 2017: US$54.9m; 31
December 2017: US$38.4m) relates to cash tax refunds due from the
Norwegian authorities on the tax value of exploration and other
qualifying expenses incurred in Norway.
Section 5 - Taxation (continued)
5.3 Deferred Tax Assets and Liabilities
Reconciliation of movement in deferred tax
assets/(liabilities):
Temporary difference in
respect of non-current assets Losses Other temporary differences Total
US$m US$m US$m US$m
Deferred tax assets
At 1 January 2017 (205.6) 205.6 - -
Exchange differences arising (12.3) 12.3 - -
Deferred tax charge through
income statement (24.9) 28.4 - 3.5
Other deferred tax movements (3.5) - - (3.5)
------------------------------- ------------------------------ ------------- ---------------------------- --------
At 30 June 2017 (246.3) 246.3 - -
Exchange differences arising (15.2) 15.2 - -
Deferred tax charge through
income statement (87.5) 87.5 - -
At 1 January 2018 (349.0) 349.0 - -
Deferred tax credit through
income statement 21.5 (21.5) - -
At 30 June 2018 (327.5) 327.5 - -
------------------------------- ------------------------------ ------------- ---------------------------- --------
Deferred tax liabilities
At 1 January 2017 (74.3) 11.6 - (62.7)
Exchange differences arising (2.6) 0.4 - (2.2)
Deferred tax charge through
income statement (restated) (38.9) 1.5 (0.3) (37.7)
------------------------------- ------------------------------ ------------- ---------------------------- --------
At 30 June 2017 (115.8) 13.5 (0.3) (102.6)
Exchange differences arising (1.3) 0.2 - (1.1)
Deferred tax charge through
income statement (restated) (62.8) 1.6 0.5 (60.7)
At 1 January 2018 (179.9) 15.3 0.2 (164.4)
Exchange differences arising (1.1) - - (1.1)
Deferred tax credit through
income statement 75.9 1.8 0.3 78.0
At 30 June 2018 (105.1) 17.1 0.5 (87.5)
------------------------------- ------------------------------ ------------- ---------------------------- --------
30 June 30 June 31 December
Deferred tax liabilities analysed 2018 2017 2017
by country: US$m US$m US$m
India (20.3) (35.7) (89.4)
Norway (67.2) (66.9) (75.0)
Total deferred tax liability (87.5) (102.6) (164.4)
----------------------------------- -------- -------- ------------
Section 5 - Taxation (continued)
5.4 Contingent Liability - Indian Tax Assessment
The final hearing of Cairn's claim under the UK-India Bilateral
Investment Treaty took place in August in The Hague; the tribunal
has stated that it will make appropriate arrangements to progress
with the drafting of the award as expeditiously as possible.
Based on detailed legal advice, Cairn is confident that it will
be successful in this arbitration and accordingly no provision has
been made for any of the tax or penalties assessed by the IITD.
The Group also has legal advice confirming that the maximum
amount that could ultimately be recovered from Cairn by the IITD is
limited to the value of the assets of Cairn UK Holdings Limited
("CUHL"), a direct subsidiary of Cairn Energy PLC and the assessee
in respect of tax demanded. CUHL's assets are principally the
remaining ordinary and preference shares in VL disclosed in note
3.1. The IITD would also retain seized dividends and sales
proceeds, including those seized during the current period, and a
tax refund from 2011, which are currently not reflected on the
Group Balance Sheet.
Section 6 - Other Disclosures
6.1 Post Balance Sheet Events - Sale of shares in VL
In August and September 2018, the IITD instructed the further
sales of 1.1% of Cairn's remaining 3.3% holding in the listed
equity shares of VL, seizing the proceeds realised. These shares
had a value of US$148.3m recorded in the Balance Sheet as at 30
June 2018.
Following this sale, Cairn now holds 2.1% in the listed equity
shares of VL.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKKDBCBKDOCD
(END) Dow Jones Newswires
September 11, 2018 02:01 ET (06:01 GMT)
Capricorn Energy (LSE:CNE)
Historical Stock Chart
From Apr 2024 to May 2024
Capricorn Energy (LSE:CNE)
Historical Stock Chart
From May 2023 to May 2024