Cairn Energy PLC (LON:CNE) said its full year net production for 2018 is estimated to be 17,000 to 20,000 barrels of oil per day (bopd), with plateau production from the Catcher and Kraken UK North Sea fields to be achieved by mid-year.
Both the Kraken and Catcher developments delivered first oil production in 2017 - Cairn has a 20% working interest in Catcher and a 29.5% working interest in Kraken.
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In an operational update, the FTSE 250-listed explorer said its capital expenditure for the second half of 2017 was around US$205mln, principally comprising circa US$75mln development expenditure and about US$130mln exploration, appraisal and new venture expenditure.
It added that Kraken and Catcher development expenditure for 2018 is forecast to be around US$125mln, and currently committed E&A expenditure for 2018 is estimated at about US$75mlm.
Cairn’s chief executive, Simon Thomson, said: "Over the last twelve months, Cairn has achieved several strategic milestones and is well positioned to deliver on its strategy in 2018.”
He added: “This year, we will begin a sustained drilling campaign in the UK and Norway where Cairn has built an extensive portfolio. We also expect development sanction for the Skarfjell discovery in the first half of the year.”
“Strong balance sheet and growing production cash flows”
Thomson said: “Cairn is funded in respect of all capital commitments with a strong balance sheet and growing production cash flows. We continue actively to assess and pursue new ventures within the context of a balanced exploration and production portfolio.
“We are excited by the potential of the recently awarded blocks offshore Mexico where we anticipate the start of exploration drilling in 2019."
The group also said international arbitration proceedings over its Cairn India stake are well advanced with the final hearing of Cairn's claim under the UK-India Bilateral Investment Treaty scheduled for August 2018.
Cairn said it intends to announce its preliminary results for the year to 31 December 2017 on Tuesday 13 March 2018.
In a note to clients, analysts at UBS pointed out that Cairn’s full year 2018 net production forecast was lower than their estimate of 22,000 bopd and the below consensus of 21,000 bopd.
But they still reiterated a ‘buy’ rating and 260p price target on the stock.
The analysts said: “Cairn shares are up 5% in the last month, but have underperformed the wider European E&Ps by ~10%, in our view suggesting some of this disappointing FY18 production is priced in.”
In late afternoon trading, Cairn shares were 2.2% lower at 211.2p.
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