Cairn Energy narrows pre-tax loss to 194.2m dollars; analysts give thumbs up

FTSE 250-listed oil and gas exploration group Cairn Energy narrowed its pre-tax loss from continuing operations to 194.2m dollars in the year ended December 31st from 1.2bn dollars one year earlier, a preliminary results announcement has shown.

FTSE 250-listed oil and gas exploration group Cairn Energy narrowed its pre-tax loss from continuing operations to 194.2m dollars in the year ended December 31st from 1.2bn dollars one year earlier, a preliminary results announcement has shown.

The group reported an operating loss of $247.3m compared to $1.1bn in the previous year and a profit of $72.6m after taxation from continuing operations compared to a loss of $1.2bn in 2011.

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Basic earnings per ordinary share were 11.13 cents compared to 330.93 cents a year earlier and the basic profit per ordinary share from continuing operations was 11.13 cents compared to a loss of 95.98 cents a year earlier.

The group had net cash of $1.6bn, a 10% residual shareholding in Cairn India Limited (CIL) valued at $1.1bn at December 31st.

The group said that its profit was reduced by the Agora Group loss of $53.7m and reduced by the Nautical Group loss of $4.4m for the period between the respective dates of acquisition and the balance sheet date.

The group further reported that the profit after tax for the year of $73m reflected foreign exchange gains and other finance income and the net profit after tax on disposal of financial assets. It said that this was offset by the costs of unsuccessful exploration activities and administration costs.

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The group said that unsuccessful exploration costs of $159m predominantly related to North Sea drilling activity. Wells drilled include Kakelborg and Geite in the Norwegian North Sea and Tybalt and Spaniards in the UK North Sea. The costs written off included the fair value allocated to these wells at the time of the Agora and Nautical acquisitions.

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The sale of an aggregate 11.5% of the group's holding in (CIL) in two separate transactions during the year resulted in an accounting loss of $82m, reflecting the movement in the price realised from that recognised at the date of completion of the transaction with Vedanta Resources. As both sales took place on-market, no tax liability arose and therefore a release of $145m has been made from the related deferred taxation provision.

Operational highlights: Multi-well frontier planned for Atlantioc MarginThe group outlined a planned a multi-well frontier exploration drilling programme for the Atlantic Margin, which it said was subject to necessary approvals over the forthcoming 18 months targeting more than 3.5bn barrels of oil equivalent of mean un-risked gross prospective resource.

In the UK and Norway, the group reported mature basin exploration and appraisal with four non-operated scheduled exploration and appraisal wells and new interests in 10 licences acquired in bid rounds.

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CEO view: The group delivered on its strategic objectivesSimon Thomson, Chief Executive Officer of Cairn Energy, said: "Cairn delivered on its 2012 strategic objectives. Cash was returned to shareholders re-gearing the company to the drill bit, acquisitions created a balanced portfolio with growth potential; and the group's frontier exploration position was expanded.

"With a strong cash position and a disciplined approach to capital expenditure, we look forward to the start of our multi-well, multi-year operated exploration programme commencing in the fourth quarter of 2013 targeting more than 3.5bn barrels of oil equivalent of resource."

Analyst view: Cairn has greater upside than is reflected in present share priceMatthew Lambourne, an Equity Analyst at Jefferies, gave Cairn Energy a "buy" rating with a price target of 385p and a price of 289.20p.

He said: "With a strong portfolio of development assets, growing suite of exploration acreage and strong balance sheet, we continue to see Cairn as having greater upside than is reflected in the current share price."

Cairn Energy's share price was up 0.17% to 289.70p at 08:32 following an early morning high of 291.80p per share.




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