There was no knee-jerk from Cairn Energy PLC (LON:CNE) as it released results a day after biggest day’s fall in crude prices for decades, with the oil firm this morning emphasising “strong” cash flow and fiscal discipline.
Cairn reported US$504mln of oil and gas revenues for 2019 as its net production averaged 23,000 barrels oil per day, which was marked at the upper end of management’s prior guidance. It had a realised oil sales price of US$65.70 per barrel and production costs averaged US$17.4 per barrel.
The company generated US$390mln of net cash for the twelve month period and committed some US$242mln of capex.
READ: Crude market rout hammers London's oil stocks
At the end of December the firm had US$147mln of cash, debt facilities remain undrawn and management continues to expect an award in its arbitration against India this summer (potentially releasing over US$1bn to the company).
Cairn reported an operating profit of US$155mln, improving from a loss of US$129mln in the preceding year and it reversed net impairments by US$68mln - with a US$147mln reversal of prior markdowns on the Kraken field in the North Sea being offset by a US$79mln goodwill write off as long term oil price assumptions were changed.
It reported a pre-tax profit of US$93.6mln.
Successes in the field
Operationally, Cairn’s focus has been on production at Kraken, exploration in Mexico and the delivery of the firm’s Sangomar field development in Senegal to a final investment decision.
The 20%-owned Catcher field saw gross production at 63,600 bopd and 29.5%-owned Kraken averaged 35,600 bopd, with both fields described as performing at peak rates.
At the same time the company trimmed its portfolio by divesting assets in Norway whilst exiting ventures in Ireland and Nicaragua.
Looking ahead, Cairn forecasts net production of 19,000-23,000 bopd and aims for an average production cost below US$20 per barrel.
Capital expenditure is guided at around US$615mln as the Sangomar field begins its progress towards ‘first oil’ in 2023. The project, 40% owned by Cairn, will be developed in phases with the first accessing up to 231mln barrels of reserves and yielding some 100,000 bopd of production.
Continued focus on capital allocation
Chief executive Simon Thomson said: “Cairn's strong operational performance in 2019 was delivered through production and cash flow generation at the top end of guidance and the group ended the year with an increased net cash position and undrawn debt facilities.
“A significant milestone was achieved in Senegal with a final investment decision taken for the Sangomar development. Reserve additions were made in both Senegal and the North Sea and the Company encountered exploration success alongside Eni in Mexico.
“The sale of Cairn's Norwegian business, combined with exits from exploration positions in Ireland and Nicaragua, demonstrate continued focus on capital allocation as the company seeks to generate further value for shareholders on a sustainable basis."
In Tuesday’s early deals, Cairn Energy shares gained 3.1% to trade at 88p to regain a little of Monday’s lost ground (the share began the week priced at around 120p).