Cairn Energy PLC Offer for Nautical Petroleum plc Conference Call
Jun 13, 2012 AM EDT
Thomson Reuters StreetEvents Event Transcript
E D I T E D V E R S I O N
CNE.L - Cairn Energy PLC
Cairn Energy PLC Offer for Nautical Petroleum plc Conference Call
Jun 13, 2012 / 07:30AM GMT
==============================
Corporate Participants
==============================
* Simon Thomson
Cairn Energy plc - Chief Executive
* Richard Heaton
Cairn Energy plc - Exploration Director
* Mike Watts
Cairn Energy plc - Deputy Chief Executive
* Jann Brown
Cairn Energy plc - Managing Director, CFO
* Paul Mayland
Cairn Energy plc - Business Development Director
==============================
Conference Call Participants
==============================
* Nathan Piper
RBC - Analyst
* Tao Ly
Nomura - Analyst
* Laura Loppacher
Jefferies - Analyst
* Alex Holbourn
Merrill Lynch - Analyst
* Stephane Foucaud
FirstEnergy - Analyst
* Ritesh Gaggar
Credit Suisse - Analyst
* Michael Alsford
Citigroup - Analyst
* Stuart Joyner
Investec - Analyst
* Mark Wilson
Macquarie - Analyst
* Ashley Kelty
Cenkos Securities - Analyst
* Jamie Maddock
Morgan Stanley - Analyst
* Anish Kapadia
Tudor Pickering Holt - Analyst
* Peter Hitchens
HSBC - Analyst
* Andrew Whittock
Liberum Capital - Analyst
* Caren Crowley
Davy Research - Analyst
* Jessica Saadat
JP Morgan - Analyst
==============================
Presentation
------------------------------
Operator [1]
------------------------------
Thanks for standing by. Welcome to the Cairn Energy announcement conference call. At this time all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. (Operator Instructions).
I must advise you this conference is being recorded today, Wednesday June 13, 2012. Now I'll turn the conference over to your speaker today, Simon Thomson. Please go ahead.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [2]
------------------------------
Thank you, and good morning everybody. I am Simon Thomson, Chief Executive. With me on the call are Jann Brown, Managing Director and Finance Director, Mike Watts; Deputy Chief Executive, Richard Heaton, Exploration Director and also Paul Mayland, Business Development Director.
We have a presentation which I will be running through. And I will do some introductory slides, then I'll had over to Richard Heaton who will talk in detail, some detail about the assets, then Mike Watts, and then I will finish with a conclusion. And of course, we would be delighted to take questions at the end.
I think if we turn to slide three, and I'll be, for those who don't have slides in front, we'll be talking through a description. So before coming onto the details of the transaction I think it's worth reiterating Cairn's strategy.
What we are seeking to do is to offer transformational potential within a well balanced exploration and production portfolio. So, to do that, we need to expose the Company to transformational operated exploration potential through our various interests whether in Greenland, Spain, Cyprus if we win a bid and so on, but also to utilize our full cycle capabilities to deliver value from a balanced portfolio. And very importantly we retain balance sheet strength to allocate capital growth to opportunities.
So turning to the next slide and the acquisition, we've been working extremely hard over the last few months to effect delivery of our strategy. So following completion of the Vedanta transaction and the returning of cash to shareholders, we [farmed into] Greenland and also importantly we made the first step in balancing the portfolio by acquiring Agora in February.
Now at the time of that transaction we stated that the Agora asset base was, from our perspective, an ideal platform for growth. And that in addition to the organic growth potential that it offered we would, if we saw a suitable strategic fit, contemplate a further corporate acquisition.
So, I am delighted to say today that the proposed acquisition of Nautical Petroleum offers that strategic fit, providing, as they do, an ability to expand our North Sea platform and consolidate a material asset base in North West Europe.
What we believe we can do is build on the achievements of Nautical in the North Sea, not only by applying our expertise, but also I think very importantly our access to capital to create further value.
You know, in particular, our balance sheet strength means that we have absolute flexibility and capacity to fund the near term developments that are coming.
And obviously we would hope that that removes any potential uncertainty that might have otherwise applied to how those developments were going to be funded. So we bring our strength, and our strength can unlock value.
Obviously as I said the acquisition from our perspective is absolutely strategically the right thing to do. It grows that balanced portfolio. It adds near term exploration appraisal and development, and also leads us to sustainable production and cash flow in the near term.
The offer price, as you will have seen, is 450p per share. And that equates to approximately $640m. But that number includes just over $100m of cash at the year end.
It is a cash transaction, and we expect it to become effective in August. It's been recommended by the Board of Nautical. We have a combination of letters of intent and irrevocable's equating to 27%.
And for the avoidance of doubt this is not a class one transaction for Cairn. And you will have seen that the premiums, in terms of premiums, it's just over 50% to the previous day's premium -- sorry, previous day's price.
So turning to the specifics of Nautical on the next slide, in terms of overview Nautical brings 2C contingent resources of 86m barrels, spread between three core interests, 15% in the Greater Catcher area, which brings our interests to 30%.
And we've made no secret at the time of our acquisition of Agora as to how much we like the Greater Catcher area, and the fact that we see further upside there.
Also a 25% carried interest in Kraken, the Kraken heavy oil development operated by EnQuest who have just taken over as operator, and also actually a significant interest in Ketos, which is an adjacent exploration prospect. And also a 6% interest in the Mariner oil field which is also planned for development.
And I think Richard will come onto it, but one of the important things here is that we believe that within a relatively short time scale, perhaps 12 months depending on timing of field development plan submissions, there is the capacity to turn the contingent resources into 2P reserves. From our perspective that's extremely positive.
Also the acquisition, proposed acquisition brings additional UK North Sea exploration and appraisal. Obviously we've had the recent Carnaby discovery which we are extremely pleased with. There is the Ketos exploration coming, and also near term wells which again Richard can touch on in Bonneville, Spaniards and Merrow.
So -- and indeed there are other exploration interests which we are currently working through, and which we will no doubt come back to the market with a view on in due course.
Turning to the next slide, slide six, in terms of the core assets themselves, they do provide us with critical mass in the North Sea. It's a significant technical resource, oil focused. There is further upside in terms of either appraisal or nearby exploration. And they can provide us with that sustainable cash flow to fund future exploration and appraisal activities.
I think there's two key points in relation to that, before I hand over to Richard. The first is that in combination with the Agora transaction, there's a reference on that map to Skarfjell, we believe that we do now have critical mass in the balance of our portfolio. And we think that is important in terms of delivery of strategy.
But also in relation to the [factors] of the public offer, I am afraid there is probably not as much detail as you would have liked that we can tell you in relation to our view of the particular assets, production profiles, timing and CapEx and so on.
We should and we must defer to the operators and to the timing of field development plan approvals in relation to those aspects. We'll answer what we can. But what we can will be relatively limited to public domain information.
But with that health warning I will hand over to Richard to talk through briefly each of the developments, Richard.
------------------------------
Richard Heaton, Cairn Energy plc - Exploration Director [3]
------------------------------
Thanks Simon.
So turning first of all to Catcher Area, as you know we acquired a 15% interest in this area. It was one of the core attractions, important in the Agora transaction originally.
With the acquisition of Nautical's interest this brings our equity here to 30%, which really does make it a very material asset for us, and very interesting both from the fact that it brings us a relatively near term development.
The joint venture is very, very busy at the moment going through the concept selection process. That is on track. That hopes to be completed during this year. And I think the news as we go through that continues to develop.
There is a new 3D survey over the area that's being looked at, at the moment. And there are three main discoveries there that had been made, which -- the basis of our evaluation is made on that is the Catcher field, Varadero and Burgman.
That is the basis of the numbers. There is quite a wide range there of contingent resource numbers. We are -- we believe that potentially the gross resource there is around about 130m barrels 2C. There is a wide range there. The operator holds a slightly lower number of 80m. But it's -- they are all within the range.
It is an excellent reservoir, very, very high quality sands. They are quite complex reservoirs; they are injectites and hence the wide range. But it's -- we clearly see a lot of upside there.
And I think some of that has been demonstrated by the Carnaby well, which recently was announced. We haven't got any figures for that. They're not included within these 2C resources yet, but obviously that will be coming news that will come through the operator.
So it -- we are working very, very quickly with the operator here as joint venture. We are now in a more material position. It's an important and intriguing asset for us. And obviously there are quite a few other exploration and appraisal opportunities within this license yet to come.
I think moving now onto the next page which is the Kraken development. Again, this is a very large undeveloped field that has been moving rapidly towards development, recently a transaction to transfer the operatorship to EnQuest. They are now pressing forward with plans on the development here.
The Nautical interest is 25% carried interest. Essentially that brings us, based on the operator's figures, a 40m barrels net 2C resource here. It's a very, very interesting field. The center of the field has been relatively well appraised but the -- there are -- it's a very large area.
And as the map shows the northern and southern areas still are not fully appraised yet. But there remains again here a wide range of volumes available if things go well. But there is a very core area here which can bring large resources.
So I think again good quality reservoirs. The recent well test in 5z well showed that the reservoir is capable of very high deliverability despite the relatively heavy oil here. So we are very interested to see what comes out of the further appraisal programs as well coming up in coming years.
What you'll also see on the map there is the Ketos prospect, so this is a series of sands at about the same level. They are not really drilled properly at the moment and something for appraisal or activity in the coming years. But also very important and obviously we'd have a 50% interest if this transaction completes through that, so again very interesting.
The demand for heavy oil in the market is strong. And so we believe that there will be relatively minor, if you like compared to Brent, the discounts would be quite modest. So it looks very interesting.
Again, if we turn the page to Mariner this is perhaps the largest undeveloped field, well, largest undeveloped fields in the UK North Sea strategically important. It's a 6% interest that is held here by Nautical.
Again, heavy oil but again high deliverability's from the wells, and obviously the operator Statoil working very, very keenly towards project sanction in 2012/2013. I think they'll be making some announcements this week about that, so very important for the UK North Sea, the development of Mariner.
So that covers very briefly the developments. Obviously what we have with Kraken and in Mariner and in the additional Catcher equity that we have -- bring through this acquisition of Nautical, it's a very long term, sustainable cash flow.
We are moving towards the developments very soon here. This will bring significant production to us in the relatively near term. This is very important in part of -- in terms of building our balanced portfolio.
We will be able through this long term production, sustainable production, to fund the other aspects of our strategy which is to make sure that we are also capable of undertaking a sustained program of transformational exploration. But it needs an engine room to drive that. And the production here when that gets on stream will certainly provide that.
It's also worth noting that as well as the Kraken, Mariner, Catcher, Greater Catcher area volumes of course not covered in the volumes in terms of net resource yet. But the important Skarfjell discovery that was made in the Norwegian sector in the relative recent past, very important again for Cairn. We have a 20% interest there.
And obviously in past weeks the announcement of the Carnaby find in the Greater Catcher area, also points towards the exploration potential and appraisal potential there.
So the next page talks about the, basically the 2012/2013 drilling program, the exploration and appraisal potential that lies there. We are focusing here really on the Greater Catcher area and on Kraken, and Ketos adjacent to Kraken.
There are other wells being drilled. It brings another well at Spaniards which will be -- that's spudding later this year. And so through 2012 and 2013 the Nautical acquisition brings us a much greater level of activity.
And obviously whilst we focus here on the North Sea, which is the principal area that we are building the portfolio in here, the acquisition of Nautical also brings us further exploration potential in the Southern UK, Irish Sea, Ireland and indeed France. And we will be taking a look at those very closely in the near future.
I think with that I'll just move on to pass over to Mike who will focus on the next part.
------------------------------
Mike Watts, Cairn Energy plc - Deputy Chief Executive [4]
------------------------------
Thank you Richard, and good morning everyone. Just for clarity I think I just would like to emphasize that the two acquisitions Agora and Nautical would come in at about $7 a barrel when the dust settles on acquisition costs.
To pick up on Simon's points, when we did our results presentation earlier this year we were at pains to point out the decent order of doing things. And cash back to shareholders yes, and then outlining the forward strategy.
And I think we tried to tell you that we were in a period of transition. We were rebuilding, repositioning the Company and that would take a period to do. And I think we are delivering on that strategy.
The sketch that we had at the time showed you these two Cairn's in a set of weighing scales. And I think I like the Cairn's because it gives a sense of building that is the whole image and ethos of Cairn.
But the balance is to really portray during this transition period there are two key arms to the business. Once the transition period is over I'm sure we've no need to use this slide, and we will just have a large Cairn.
But on the left hand side of the scales is where we are seeing both the acquisition of Nautical and the acquisition of Agora. And I would say that the operators concerned, both EnQuest and Premier are well known to us, Premier for Catcher, EnQuest for Kraken.
And we consider these companies within our peer group, and I think these companies would consider Cairn as a very credible, competent partner and a well funded partner. And I think that bodes well for going forwards.
So we are very happy to believe that we will have influence even though we will not be the operator. We will have influence around the table at the TCMs and OCMs. And the optimum decisions and development programs for all of these projects will be undertaken.
Just to give you the balance on the other side, the transformational stuff that Simon mentioned, this is where we really want to focus our own operational efforts. I think as a company this is what we want to offer shareholders at any one given time. And there will be a fanatical focus on operating.
There were two points about -- in this year, in January we announced the Statoil farm into the Pitu Block in Greenland. And what you have there was Statoil endorsing Cairn as an operator through the exploration drilling phase.
And last month we bid in the Cyprus bid round with Marathon, 40% Cairn and 40% Marathon. And Marathon endorsed Cairn as a deepwater operator in those bid applications.
So I think there are two transactions this year which have endorsed our operating capability, and brought our equity levels down now to appropriate size of Company that we are.
The problem with competitive bid rounds you can't guarantee success. And therefore we continue to look at other areas in the background to make sure that in the pipeline we are able to offer that transformational potential. So I would say non-operated on the left is fine if you can have influence, operated on the right.
And just very quickly, the same story is picked up on the business strategy slide. There is a triangle there showing you the appraisal development, near term exploration is there, the Nautical transaction as well as Agora.
The area of focus we've delineated as between Greenland and the Mediterranean including the North Atlantic, the North Sea, the Norwegian Continental Shelf. Those -- we've made no secret of our ambitions if we can to get into the more exciting areas, opening up frontier areas of Norway. And we have the position, as Simon has said, in Spain.
I think this transaction with Nautical is building on the platform that we've already created. We are still in transition. And by the end of the year, as I've said, we'll be a different company, and by the end of next year we'll be a different company still.
So thank you. Back to you, Simon.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [5]
------------------------------
Okay, thanks Mike.
So I think just in conclusion the proposed acquisition of Nautical is a very logical step for us, entirely in line with our strategy that consolidates a material position in North West Europe with exposure to additional exploration appraisal, and importantly development projects, and allows our balance sheet strength to access near term sustainable cash flow to help fund future activities.
It's worth just saying that following this cash transaction and following all of our CapEx and activity this year we will still have over $200m in cash at the end of this year. And obviously access, that's without any debt, access to further sources of capital whether through debt funding and of course our holding in Cairn India. So we remain financially extremely strong and look forward to expanding our portfolio.
With that, I'd like to hand over to questions, if the operator is there. Sorry, if there are people listening on the line and waiting -- and have questions we are just trying to get hold of the operator to ensure that we can field those properly.
==============================
Questions and Answers
------------------------------
Operator [1]
------------------------------
Okay. Apologies for that sir, there was a technical problem. Your first question comes from Nathan Piper of RBC. Please ask your question.
------------------------------
Nathan Piper, RBC - Analyst [2]
------------------------------
Good morning. A quick question really.
It seems a sensible deal that fills out your portfolio. My question though is given that you have relatively significant CapEx in the relative short term in the North Sea wouldn't -- doesn't that lead us to adding production to your portfolio for maximum tax efficiency?
And then secondly, can you let us know what kind of oil price assumptions you are doing these acquisitions on?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [3]
------------------------------
The first -- on the first point obviously there is a benefit in having tax efficient production. However, we are under no pressure whatsoever to add production to our portfolio. As I said we are financially extremely strong in balance sheet terms.
We believe it's the right thing to do from a pricing perspective to access 2C resources which we can then turn into near term 2P. And obviously production according to operator forecasts is 2015 to near term forward. So I think from that perspective we feel very comfortable.
And on the second point, no we don't publicly come forward with any assumptions in relation to any acquisition Nathan.
------------------------------
Nathan Piper, RBC - Analyst [4]
------------------------------
Okay. So just to be clear then you're not looking to add production in the short term? You feel you are balanced? I think you said earlier in the call that you are now balanced. Is this the end of the acquisition trail or is there -- are you still examining other opportunities?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [5]
------------------------------
Well you never say never. We are always examining opportunities. And I think one of the other important things to emphasize is, as I said at the beginning this is a very clear strategic fit for us in terms of for our scale a relatively large corporate transaction.
But you know there is a constant, and obviously with the earlier acquisition of Agora, constant activity in relation to smaller level of activity whether it's through license applications, potential farm-in deals and so on. So that goes on. But, yes, I mean we are really pleased because from our perspective this builds a critical mass position in North West Europe.
------------------------------
Nathan Piper, RBC - Analyst [6]
------------------------------
Understood, thanks.
------------------------------
Operator [7]
------------------------------
Your next question comes from Tao Ly of Nomura. Please ask your question.
------------------------------
Tao Ly, Nomura - Analyst [8]
------------------------------
Good morning.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [9]
------------------------------
Morning.
------------------------------
Tao Ly, Nomura - Analyst [10]
------------------------------
Prior to achieving the sustainable cash flow from these assets that you talk about you're going to have a considerable CapEx outlay at both Catcher and Kraken, Catcher itself potentially in the range of $2b to $3b, and you have 30% of that. Can you just expand on how you intend to finance this? I assume its debt.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [11]
------------------------------
Yes sure, why don't I hand over to Jann, Jann?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [12]
------------------------------
Morning Tao.
------------------------------
Tao Ly, Nomura - Analyst [13]
------------------------------
Morning Jann.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [14]
------------------------------
As Simon has said we've got lots of options in terms of funding. For a start we've still got a significant amount of cash on the balance sheet even after the end of all of this year's activity. There is absolutely no debt in place at the moment. And clearly at the right point in the cycle of all of the developments we'll seek to introduce debt.
Plus we've got our holding in Cairn India which is our traded stock. And at the right time it would make sense to move cash out of that and into value creating opportunities in our own portfolio here. So we are -- I've got lots of options, and at this stage that's as far as we'll go.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [15]
------------------------------
And also just to add to Jann's comments there, obviously Kraken comes with a carry from EnQuest for part of the expenditure.
------------------------------
Tao Ly, Nomura - Analyst [16]
------------------------------
And that's based on how big a reserves base group.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [17]
------------------------------
Yes. There is a firm and a contingent element that's correct.
------------------------------
Tao Ly, Nomura - Analyst [18]
------------------------------
Yes. And overall, I mean it strikes me over the next 24 months the story does evolve to the extent that you've got -- you have Catcher and Kraken coming on stream, potential sell-down of the Cairn India stake.
But with that cash pile, you know the surplus of $1b cash pile now considerably smaller following this deal, would you consider accelerating the sale of the Cairn India stake if the right deal was on the radar?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [19]
------------------------------
You know, we are happy always with Cairn India, I want to emphasize that. And I think Jann's point is absolutely correct. We have a number of different financing possibilities that we can use.
But we are all about value. And this transaction is all about value for us as was the Agora transaction. And it's about our long term build and our long term outlook.
So we'll always look at that value creating opportunity, and we are in the fortunate position I guess where we have the financial flexibility to do that. But I don't want to -- we don't to give any steers on any timing of any particular future debt instrument or share sell or anything else.
------------------------------
Tao Ly, Nomura - Analyst [20]
------------------------------
Yes. No, understood. Okay, thanks very much.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [21]
------------------------------
Thanks.
------------------------------
Operator [22]
------------------------------
Your next question comes from Laura Loppacher of Jefferies. Please ask your question.
------------------------------
Laura Loppacher, Jefferies - Analyst [23]
------------------------------
Hi, thanks for the call this morning. Just a -- I appreciate there is a (inaudible) process and you can't give us specific numbers, but can you give us any sort of ballpark numbers about what you think the total development spend in the North Sea will be sort of here through to 2015?
And then just a couple of specific questions on the assets. You mentioned high deliverability in Mariner. Sorry I'm not very familiar with the asset. Can you just tell us what the test results have been there? And then on Kraken what the steps from here are in terms of the appraisal and development planning?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [24]
------------------------------
Sure. I mean I think I'll answer the first part and then hand over to Richard and Paul for the specific Mariner and Kraken questions.
On the first one I am afraid we can't be more specific. The only guidance that's in the public domain at the minute is a previous Premier CapEx estimate range of between $1.6b and $2.8b gross for field development for Catcher. But you know that's depending upon the final development solution.
And with each of Kraken and Mariner we await the field development plans, agreement between joint venture and then submission. So, I think it would be incorrect of us to try and preempt what the final operator statement should be.
So I know it would be helpful for you for us to give you an overall number. I'm sorry we can't, because the right thing to do is to wait for the operator to come out with those numbers.
But let me hand over to Paul for -- in relation to your questions on Mariner and Kraken, Paul.
------------------------------
Paul Mayland, Cairn Energy plc - Business Development Director [25]
------------------------------
Yes. Hi, it's Paul here. All three of those fields have got good deliverability, reflecting the reservoir quality. I think you are familiar with Catcher with the Cromarty and Tay sands which we've talked about as part of the Agora acquisition.
In terms of Kraken itself it's shallow (inaudible), high porosity, high permeability sands which of course were tested in the 5z well with approximately 4,500 barrels a day from the horizontal well that was drilled by Nautical.
And then Mariner of course we had quite an extensive appraisal and actually extended well test program conducted in the past relating to the two reservoirs, which is the Maureen and Heimdal. So in terms of reservoir quality and deliverability they are very good.
------------------------------
Laura Loppacher, Jefferies - Analyst [26]
------------------------------
And what was that, what were the results from that extended well test?
------------------------------
Paul Mayland, Cairn Energy plc - Business Development Director [27]
------------------------------
Well it was over a period of time and there was actually I think two done. So I don't have exact details here, but it was pretty good flow rates. The issue on Mariner has really been getting the scale of the project and obviously it's a large field.
And I think the other aspect which I think was touched on by Richard was the differential to Brent for heavier crudes, which we see as a positive from our experience in Griffin for the best part of a decade.
------------------------------
Laura Loppacher, Jefferies - Analyst [28]
------------------------------
Okay, thank you.
------------------------------
Operator [29]
------------------------------
Your next question comes from Alex Holbourn of Merrill Lynch. Please ask your question.
------------------------------
Alex Holbourn, Merrill Lynch - Analyst [30]
------------------------------
Good morning all. Just a few questions.
First one, what levels of production do you believe these assets might be able to deliver over the next three to five years?
Second question is on your view and your plans for Buffalo and license D1463.
And then third question just on assets within Nautical's portfolio that you perhaps view as non-core, and specifically what your intentions are for onshore France and offshore Ireland if you are able to comment on that.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [31]
------------------------------
Okay. I mean, I think unfortunately I am not able to comment on a lot of those questions Alex. In relation to production it's the same answer as for the CapEx. We cannot come forward with a production estimate that's not already in the public domain.
I think Premier thus far are the only ones who have given a production estimate, and they are saying somewhere between 50,000 and 70,000 barrels a day gross from 2015 was their last public statement.
But there are no public statements in relation to Kraken and Mariner. Again it would be -- whilst we do carry our own internal estimates, and we are very comfortable with that, we can't -- it's not something that we can state publicly.
I'll defer to Richard in relation to Buffalo, but in relation to the other assets I think it's too soon for us to give specific comments in relation to the exploration portfolio.
There are things in there that we like very much. But I think we will come back to you in due course with measured views in relation to the portfolio. But, Richard, I don't know if there's any specific comments on Buffalo.
------------------------------
Richard Heaton, Cairn Energy plc - Exploration Director [32]
------------------------------
Well only that we actually do quite rate the Buffalo prospect aspect as the key thing, so we rate that one. We certainly have our wider team which of course includes the Agora guys who have been looking at that actually for a while I think, have actually been looking to get into that one way or another for some little time.
So we remain keen on that. Obviously we'll be working with the joint venture towards hopefully bringing that to drill status as soon as we can, hopefully in 2013.
------------------------------
Alex Holbourn, Merrill Lynch - Analyst [33]
------------------------------
That's great, many thanks.
------------------------------
Operator [34]
------------------------------
Your next question comes from Stephane Foucaud of FirstEnergy Capital. Please ask your question.
------------------------------
Stephane Foucaud, FirstEnergy - Analyst [35]
------------------------------
Good morning gents. The press release talked about Nautical, the management board of Nautical being supportive of the offer. That being said I have not seen any announcements by Nautical. I was wondering whether you could comment on that.
The second question was around Ketos. I think that Nautical in the past had talked about EnQuest potentially farming in into Ketos, and I think on the back of an analysis of this 3D and things like that.
And I was wondering whether there was an update that you could provide us, or your sentiments of whether that would have changed or not with this acquisition.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [36]
------------------------------
I think on you first question you'll see from the 2.7 announcement that it's recommended, and obviously there's quotes from each of myself and Steve Jenkins, the CEO of Nautical. So I think there is -- they'll have repeated that announcement, and it's probably on their website I imagine.
In relation to your -- your next question was sorry, in relation to Ketos was it, so Paul can I hand over to you on that?
------------------------------
Paul Mayland, Cairn Energy plc - Business Development Director [37]
------------------------------
Yes. That -- just to confirm that still remains an option for EnQuest. They can exercise that option and would by drilling a well would earn up to 50% interest in Block 91A which contains the Ketos prospect.
------------------------------
Stephane Foucaud, FirstEnergy - Analyst [38]
------------------------------
Without waiting for some sort of visibility on this, imminently is this still correct?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [39]
------------------------------
I think you'd have to wait for the -- EnQuest themselves to comment on that.
------------------------------
Stephane Foucaud, FirstEnergy - Analyst [40]
------------------------------
Thank you.
------------------------------
Operator [41]
------------------------------
Your next question comes from Ritesh Gaggar of Credit Suisse. Please ask your question.
------------------------------
Ritesh Gaggar, Credit Suisse - Analyst [42]
------------------------------
Hi, good morning. Just a couple of questions.
First of all how are you positioning Cairn in a lower oil price scenario? I mean it's more of a generic question because if Cairn India valuation looking at it right now it's comfortable, but if oil prices correct then those valuations will fall as well and you will lose your edge of being in a strong cash flow position with these deals being down at $100, $110 per barrel. That's my first question.
And second, my second is also regarding the two corporate deals give you an exposure in the Greater Catcher area. Are you looking to divest some of the non-core developments or non-core assets that you have acquired along with these, maybe smaller equity stakes or higher cost projects such as Kraken possibly?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [43]
------------------------------
In relation to your first question I mean I think your impression, maybe your assumption of oil price. We, as I said, we don't -- we are not publicly stating what oil price assumption we are using, but obviously we are conservative in relation to any acquisition we make.
In relation to Cairn India we are a happy holder of Cairn India. The oil price is currently around about $100 a barrel. We see an enormous amount of value in Cairn India and value growth potential.
So we take a long term view of our asset portfolio, and we take a long term view of oil price. And in those -- on that basis we are extremely comfortable with our holding and we see growth potential in it.
In relation to Catcher and other assets, no, again we very much like the portfolio that we are acquiring. And I think it would be premature to comment on any disposals or otherwise that we might make. We are very comfortable with it.
------------------------------
Ritesh Gaggar, Credit Suisse - Analyst [44]
------------------------------
Alright. That's really helpful. Thank you so much.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [45]
------------------------------
Thanks.
------------------------------
Operator [46]
------------------------------
Your next question comes from Michael Alsford of Citi. Please ask your question.
------------------------------
Michael Alsford, Citigroup - Analyst [47]
------------------------------
Morning all. Just a couple of questions.
Just firstly, just on the role of the Nautical team going forwards, I was just wondering if you could give any comments just to see how much involvement that team will have going -- within the business. Are they going to be committed to sort of helping to I guess transition but also help develop these assets going forwards.
And then just secondly, obviously the deals that you've done you've obviously added I guess non-operated development assets. I was just thinking when you think about maybe as the, I guess the portfolio evolves over the next sort of 12 to 18 months would you say now that your sort of thinking more that you want to be weighted towards more operated assets going forwards? Or is it again just about what role you play within the joint venture is more important that necessarily having operator status. Thank you.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [48]
------------------------------
Thank you. In relation to the first question we can't -- I wouldn't like to comment in relation to the status of employees of Nautical. What I can say is this. When we did the Agora transaction it was a small team, 15 people, and that team stayed with us. And that team is technically highly focused and highly experienced.
The Nautical team as you may know is a small team of 10 people, again technically highly focused. We have extremely good relations with them. We very much respect and admire what they've achieved. But beyond that I can't make I'm afraid any particular comments on -- because you're not allowed to from a regulatory perspective.
In relation to the -- to your second question for us it's all about balance. I think it's about getting the right combination of assets where we continue to offer shareholders that transformational operated exploration potential, which we will always seek to do.
But also that we have an asset base that gives us longevity and sustainability through cash flow delivery, and whether that side of the equation is operated or non-operated, provided as Mike says you have influence, is less important.
------------------------------
Michael Alsford, Citigroup - Analyst [49]
------------------------------
Great, thanks Simon.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [50]
------------------------------
Thank you.
------------------------------
Operator [51]
------------------------------
Your next question comes from Stuart Joyner of Investec. Please ask your question.
------------------------------
Stuart Joyner, Investec - Analyst [52]
------------------------------
Morning guys. Just a couple of questions.
First one is a clarification just on the tax point. Can we assume basically from what you said earlier Simon that the tax and corporate consolidation adjustment on this is zero or it's zero for now, it may change?
And then secondly, just in terms of Kraken and the assumptions you made on the valuation there, I think pre-marketing has suggested that Kraken could get a premium to Brent basically given its suitability for lube oil production. Could you comment on where you see the pricing outlook for the Kraken crude? Thanks.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [53]
------------------------------
Okay, it's Jann. Jann, let me pass to you on the tax.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [54]
------------------------------
Yes. On the tax point for accounting purposes your assumption is absolutely right for now a zero impact.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [55]
------------------------------
And in relation to Kraken, I mean I don't think we want to go into details of where we think the pricing might end up. I think it is safe to say that we do see a strong market in North West Europe and that heavy crude, as we referenced in our presentation, is declining and therefore there is an opportunity to fill that gap.
------------------------------
Stuart Joyner, Investec - Analyst [56]
------------------------------
Okay. But just, I'm not meaning to be specific but obviously when EnQuest, the EnQuest deal was done I think there was -- they were talking about using a discount. Is that where you see it or are you (multiple speakers)?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [57]
------------------------------
Well I think again we'd defer to an operator's public statements on that. We have our view, but we'd like it to come from the operator.
------------------------------
Stuart Joyner, Investec - Analyst [58]
------------------------------
Okay, thanks.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [59]
------------------------------
Thanks.
------------------------------
Operator [60]
------------------------------
Your next question comes from Mark Wilson of Macquarie. Please ask your question.
------------------------------
Mark Wilson, Macquarie - Analyst [61]
------------------------------
Hi. Good morning guys. Most of my questions have been answered already.
But one point, you mentioned how it's not a class one transaction. Could you just clarify what that means for the deal?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [62]
------------------------------
That means we don't require shareholder consent.
------------------------------
Mark Wilson, Macquarie - Analyst [63]
------------------------------
But you still have to have 75% is that not right?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [64]
------------------------------
We don't require to go to our shareholders for their approval for the deal.
------------------------------
Mark Wilson, Macquarie - Analyst [65]
------------------------------
Right.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [66]
------------------------------
But of course we have spoken to some of them and they are very supportive.
------------------------------
Mark Wilson, Macquarie - Analyst [67]
------------------------------
Okay. And so just to reiterate the timeline then for the -- of the agreement from the Nautical shareholders then.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [68]
------------------------------
Sorry, the timeline of?
------------------------------
Mark Wilson, Macquarie - Analyst [69]
------------------------------
For agreement from the Nautical shareholders, do you have -- you have to get 75% of that support is that right?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [70]
------------------------------
Yes. We are -- we expect the whole process to be gone through by late July or possibly just into August.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [71]
------------------------------
Because, by virtue of the [court scheme], that's the 75% yes.
------------------------------
Mark Wilson, Macquarie - Analyst [72]
------------------------------
Okay, alright. That's fine. And then in terms of -- in the second half of the year can you -- you may have mentioned this already, but previously clearly we knew there was corporate opportunities being looked at and this Nautical obviously is here now. So as we look into the second half of 2012 and with your remaining cash how would you summarize your view on further transactions or farm-in?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [73]
------------------------------
Okay. Well, I mean I think we want to get this one done and then move on. I think as I said earlier there is a lot of activity ongoing anyway in relation to, if you like, a smaller scale of smaller asset deals, license, new license applications and so on. So there will be a lot of work ongoing.
And anything else opportunistically is driven by value. You know, whether that's on the higher risk side of the portfolio or the lower risk side of the portfolio it's driven by value. We never rule anything out. With us it's about getting the right thing in the right order, and we need to get this deal done first.
------------------------------
Mark Wilson, Macquarie - Analyst [74]
------------------------------
That's very clear, thank you.
------------------------------
Operator [75]
------------------------------
Your next question comes from Ashley Kelty of Cenkos. Please ask your question.
------------------------------
Ashley Kelty, Cenkos Securities - Analyst [76]
------------------------------
Good morning all. So [nice], I'm impressed with this transaction, I've got a couple of queries.
First one is does this mean that Greenland is now slipping down the list of priorities as you've sort of refocused yourselves on the North Seas?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [77]
------------------------------
No it doesn't, I mean let me answer that straightaway. We -- and again it turns to that balanced point. We remain very committed and very excited about the potential of Greenland.
We are very pleased with the Statoil deal. We are working together on that Pitu Block and 3D seismic will be in at the autumn time. And we are looking to see how quickly we can move forward to drill. And obviously we have our other areas in Greenland that we are working up as well.
So, no, we remain absolutely committed to Greenland. It very much represents the DNA of transformational exploration for us. I think the important thing is that it's all discretionary. We've satisfied all of our commitments, so that gives us a lot of flexibility going forward, so just to answer that point straight off.
------------------------------
Ashley Kelty, Cenkos Securities - Analyst [78]
------------------------------
Okay. Well, following on from that obviously there's going to be heavy CapEx commitments in the North Sea in sort of Catcher, Kraken and Mariner. What's the current debt position in terms of being able to fund that near term development, and also the exploration in Greenland or is that going to have to slip?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [79]
------------------------------
No, not at all. Jann?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [80]
------------------------------
We said earlier we've got no debt on the balance sheet. And at this point in time it's a very strong position to be in. But as we move into development phase in the North Sea and clearly that gives us significant debt capacity. And we will be exploring the debt markets in due course.
The exploration spend that we anticipate on Greenland all of that has been taken into account in our cash flows going forward. So, no asset is going to suffer as a result of this deal.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [81]
------------------------------
And remember from the point of view of our strategy we have farmed down the, what we believe, will be the first well in Greenland. There was a carried element to that, and we -- so whilst we retained massive materiality we've reduced our CapEx exposure to that well going forward.
------------------------------
Ashley Kelty, Cenkos Securities - Analyst [82]
------------------------------
Okay. So I'm right in assuming that you've got no undrawn debt capacity at this time?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [83]
------------------------------
That is correct.
------------------------------
Ashley Kelty, Cenkos Securities - Analyst [84]
------------------------------
Right. And you estimate you'll have $200m of cash at the end of 2012?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [85]
------------------------------
That's correct.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [86]
------------------------------
Yes.
------------------------------
Ashley Kelty, Cenkos Securities - Analyst [87]
------------------------------
Right okay, no that's fine thank you.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [88]
------------------------------
Thank you.
------------------------------
Operator [89]
------------------------------
Your next question comes from Jamie Maddock of Morgan Stanley. Please ask your question.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [90]
------------------------------
Good morning.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [91]
------------------------------
Morning.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [92]
------------------------------
My first question, and I'm not sure to what extent you'll be able to answer, pertains to Cairn India. Latest discussions or what you -- I guess just trying to bring up to speed with where we stand on things like commencement of a dividend payment and your understanding of that with --?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [93]
------------------------------
Yes, I mean we can't comment. We are a shareholder, we have no inside information whatsoever. Jann, if there is anything you want to add.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [94]
------------------------------
In their last year end announcement, they made a commitment to a dividend policy of 20% of net profits. But as Simon said we have no inside information. We rely purely on publicly stated information
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [95]
------------------------------
Yes. Am I right they are in the process of reorganizing? Is that --?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [96]
------------------------------
That's correct.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [97]
------------------------------
Because it's structural reorganization to allow them to do that.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [98]
------------------------------
That's correct, yes.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [99]
------------------------------
Okay. And then with regards to again, sorry this is perhaps just revising and revisiting something that you might have said, with regards to production and relative other approvals that we might expect to receive or that might be forthcoming, are there any that we should be thinking about?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [100]
------------------------------
Sorry, production in relation to?
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [101]
------------------------------
Yes, sort of [MBA] field elsewhere.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [102]
------------------------------
Not that we are aware of.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [103]
------------------------------
Okay, 175 I think is the --.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [104]
------------------------------
Sorry, 175 is what is current yes.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [105]
------------------------------
Yes, it was just whether we'd expect -- I know that you've spoken about the opportunity to go above that.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [106]
------------------------------
Yes, I think what Cairn India is saying, is guiding to 200,000 at year end and 240,000 in 2013. So I think that guidance [will rise].
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [107]
------------------------------
Okay, super. And then with -- sorry, and then back on to sort of more the [question] of today, I'm just trying to understand as well and I understand that it's an injectite. But with regards to Catcher and the variations and the estimates for recoverable oil which is between 80 and 130, is there anything you could say around what I guess how we should think about what that -- what is controlling that wide variation in estimates of reserves.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [108]
------------------------------
Yes. No, we don't want to give a lot of detail, but Richard let me hand over to you on that.
------------------------------
Richard Heaton, Cairn Energy plc - Exploration Director [109]
------------------------------
Yes. I mean we -- what we've know is we have a number of experts if you like within our team who've worked on quite a few similar fields across the North Sea and elsewhere.
And essentially the sand, the injectite sand it really depends upon exactly the -- how the sands and the oil and the gas contacts lie in the geometries of those fields as to what recovery factors that you can get out.
If the geometries are right then you can get absolutely fabulous recovery factors out of them. Equally there where it's not so advantageously disposed then it reduces the recovery factors. And the fact is that there is a wide range.
Equally across Catcher area it is complex, so different parts of different fields will have different geometries. So that's why it's taken some time to get the right, if you like the right volumes and that's just having an impact on just making sure we get the right concept for development there. It's fascinating geology. The team is working very busily on it, but it will take a little time to close out.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [110]
------------------------------
Okay. And there is -- it is a recovery factor as opposed to an oil in place discussion is that right?
------------------------------
Richard Heaton, Cairn Energy plc - Exploration Director [111]
------------------------------
It is [in general] largely that, and well placements and all that. So the new seismic, the static models and the -- then moving up from that -- the reservoir model, full reservoir models those are key to actually getting the right development done. And it's, as I say, if it works well it -- those recoveries can be superb from these quality sands.
------------------------------
Jamie Maddock, Morgan Stanley - Analyst [112]
------------------------------
Okay. That's everything, thank you.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [113]
------------------------------
Thank you.
------------------------------
Operator [114]
------------------------------
Your next question comes from Caren Crowley of Davy. Please ask your question. Miss Crowley your line is open. Miss Crowley your line is open. Your next question comes from the line of Anish Kapadia of TPH. Please ask your question.
------------------------------
Anish Kapadia, Tudor Pickering Holt - Analyst [115]
------------------------------
Good morning. I had three questions please. I believe Nautical was looking to potentially sell its remaining 6% stake in Mariner. Just wondering if that sale process is still ongoing or not.
On Kraken I was wondering if you could clarify the resource classification, because from what I read the Kraken resource was reclassified as reserves from contingent resource.
And I think based on that, that number that Nautical put out they'd be able to get the full carry from EnQuest. I was just wondering if you can clarify that.
And then the final thing with these two acquisitions can you give some guidance on 2013 admin charges.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [116]
------------------------------
Okay. On your first question I don't think it's appropriate for us to comment on any transaction that Nautical may or may not do during a bid offer period. I mean I think it's worth reiterating Paul's comment though that Mariner is a large developed oil field and it's got significant growth potential. So we like what we see.
In relation to Kraken, Paul I don't know if you can answer that point in relation to the 2C.
------------------------------
Paul Mayland, Cairn Energy plc - Business Development Director [117]
------------------------------
Yes, I think it's just one of a process a little bit. It's obviously when Nautical defined the resources as reserves (inaudible) back in March they were still the operator.
It's now transition, so the development plan is now in the hands of a new operator. So we basically see it as 2C. But very quickly thereafter we'd hope that we'd move that 2C up to 2P when we see the EnQuest prepared field development plan for Kraken.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [118]
------------------------------
Okay thanks, and Jann on the admin.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [119]
------------------------------
And on the admin we are assuming no significant change for 2013 in our numbers.
------------------------------
Anish Kapadia, Tudor Pickering Holt - Analyst [120]
------------------------------
Thank you.
------------------------------
Operator [121]
------------------------------
Your next question comes from Peter Hitchens of HSBC. Please ask your question.
------------------------------
Peter Hitchens, HSBC - Analyst [122]
------------------------------
Good morning, gentlemen and Jann. Just a couple of questions for you.
One, I just wanted to know if you can tell me what current cash levels are for Nautical? You're talking 108 start of the year just wondering what it is now just to get an indication of the level of burn.
And the rest of the portfolio things like France, Ireland, onshore UK, I presume that's going to be relinquished.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [123]
------------------------------
On the first point I don't think we can from a regulatory perspective answer that question, which is why we've had to refer to the cash at the year-end public domain number. So apologies we can't answer that.
On the second one, no, don't make that assumption. I think we've got to continue working through the entirety of the asset base. We've obviously focused on the core assets. There are some things where we see that we [don't] much like the look of, but we'll need to come back to you in due course on that Peter.
------------------------------
Peter Hitchens, HSBC - Analyst [124]
------------------------------
Okay, thank you.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [125]
------------------------------
Thanks.
------------------------------
Operator [126]
------------------------------
Your next question comes from Andrew Whittock of Liberum. Please ask your question.
------------------------------
Andrew Whittock, Liberum Capital - Analyst [127]
------------------------------
Good morning. One suggestion, one question.
Simon you might like to take a look at your scales, slide 12. It's starting to appear like you're just piling up black rubbish bags and I'm sure that's not the intent.
My question is I guess Jann, can you just remind me what else is in Capricorn Energy Ltd at the moment?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [128]
------------------------------
They're blue. It's blue and orange (multiple speakers) the Cairn logo colors Andrew, so anyway, but, sorry, Jann.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [129]
------------------------------
Sorry, your question was?
------------------------------
Andrew Whittock, Liberum Capital - Analyst [130]
------------------------------
Take your time Jann.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [131]
------------------------------
Your question was what else is in Capricorn Oil Ltd.
------------------------------
Andrew Whittock, Liberum Capital - Analyst [132]
------------------------------
No, no actually Capricorn Energy Ltd, the vehicle that's making the bid.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [133]
------------------------------
The company is a holding company.
------------------------------
Andrew Whittock, Liberum Capital - Analyst [134]
------------------------------
Okay. It's a subsidiary of Capricorn Oil isn't it?
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [135]
------------------------------
It's a subsidiary of Capricorn Oil which is a wholly owned subsidiary of Cairn Energy. But in itself it is an intermediate holding company.
------------------------------
Andrew Whittock, Liberum Capital - Analyst [136]
------------------------------
Right okay.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [137]
------------------------------
Does that answer your question Andrew?
------------------------------
Andrew Whittock, Liberum Capital - Analyst [138]
------------------------------
I think it does. If it doesn't I'll come back to you later on Jann.
------------------------------
Jann Brown, Cairn Energy plc - Managing Director, CFO [139]
------------------------------
Fine, okay.
------------------------------
Andrew Whittock, Liberum Capital - Analyst [140]
------------------------------
Thanks.
------------------------------
Operator [141]
------------------------------
Your next question comes from Caren Crowley of Davy. Please ask your question.
------------------------------
Caren Crowley, Davy Research - Analyst [142]
------------------------------
Morning gentlemen, morning Jann. Apologies earlier on I had some technical issues.
Just regarding the portfolio that you acquired some of the earlier questions were saying whether some of the assets will be considered non-core and perhaps relinquished or divested. And you talked about an internal review. I'm just enquiring as to what you think the timing of that internal review will be.
The second question as well is on Mariner and the Kraken development projects. They are heavy oil which is relatively unconventional. And I'm just wondering does Cairn think they have a special edge when it comes to heavy oil developments, or whether that, the acquisition of those development projects is possibly a function of the maturity of the North Sea. Thanks.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [143]
------------------------------
So I think -- thanks. I think on the first point again I would just reiterate it's too soon to say. We need to get to the end of this process, complete the acquisition and then we will come back to the market in due course. But I would reiterate that we do find a number of areas of interest in relation to the exploration portfolio.
On the second point I'll hand over to Paul. But I don't think we regard this as unconventional play, but let me hand it over to Paul.
------------------------------
Paul Mayland, Cairn Energy plc - Business Development Director [144]
------------------------------
No, not at all. I guess the heavy or medium crudes offer opportunities or challenges depending on your perspective. And there really is two aspects to that. There is the marketing of the crude, which we've already talked about our experience from high [can] heavier crude which was Griffin in the North Sea. So we would view that quite positively without giving any specifics.
And secondly, in terms of development it's about a water flooding performance or more viscous crudes, and of course whilst this is heavier than what we have in Rajasthan, they are viscous crudes. And the water flood performance to date has been very strong.
------------------------------
Caren Crowley, Davy Research - Analyst [145]
------------------------------
Any sense of recovery? Then what sort of recovery rate you would expect from each of those two fields?
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [146]
------------------------------
Again I think we have to defer to the operators' public domain comments.
------------------------------
Caren Crowley, Davy Research - Analyst [147]
------------------------------
Okay I understand, thanks.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [148]
------------------------------
Thanks.
------------------------------
Operator [149]
------------------------------
Your next question comes from Jessica Saadat of JP Morgan. Please ask your question.
------------------------------
Jessica Saadat, JP Morgan - Analyst [150]
------------------------------
Hi, morning all. Just I missed the beginning of the call so maybe it was already addressed. But I was just trying to understand kind of if there had been much interest from other companies for Nautical, or if you were worried about a competing offer coming along.
And then the second question is for 2013 and 2014 do you have a rough idea of the prospective resources that you'll be targeting with the exploration program, because I mean presumably you'll have Greenland at some point in 2014 but no production really until 2015. So I was just trying to get a bit more of an idea of what you see as the key catalysts in 2013 and 2014.
And then the third question was just wondering how the kind of recent Carnaby well impacted your view on the Catcher area because it was positive, but it was obviously at the lower end of expectations of (inaudible) through to (inaudible).
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [151]
------------------------------
Okay, so in relation to competing interests we believe that we've made a reasonable offer and so that's for other people to comment on I guess.
Let me hand over to perhaps Mike and Richard in relation to 2013 and '14 catalyst. And I think we've got the -- what we've shown you here today in references to Greenland. But, Mike, do you want to --?
------------------------------
Mike Watts, Cairn Energy plc - Deputy Chief Executive [152]
------------------------------
Well, it's really [increased]. We are in a transition; we are repositioning; we are rebuilding this Company, and that will take some time. And I don't think you should look at a static view of the Company today and say that's what we'll be tomorrow.
You already know we are active in bid rounds in Cyprus that we may or may not be successful. We are looking at other opportunities and we will continue to look at other opportunities.
That's the nature of the business. We are evolving from a predominantly South Asia company to one which is going to have a very strong position in North West Europe and the Mediterranean.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [153]
------------------------------
But I think -- and I think we will come out, on specifics we will come out in due course in relation to -- as the plans unfold. And Carnaby I think -- just to say we were very positive on Carnaby but --.
------------------------------
Richard Heaton, Cairn Energy plc - Exploration Director [154]
------------------------------
Yes. Carnaby you are absolutely right Jessica to say the [discovery] volumes, but that is not the point. The point is this is a play which is underexplored in the North Sea.
There are some very attractive aspects to that discovery, the [Venton] migration patch in the [Catcher] area, the shallow depth, the black and biodegraded crude which opens up fairways which have not been explored. So, you know -- but just -- you have to look at things in context.
------------------------------
Jessica Saadat, JP Morgan - Analyst [155]
------------------------------
Okay, great. Thanks.
------------------------------
Operator [156]
------------------------------
(Operator Instructions). There are no further questions at this time sir, please continue.
------------------------------
Simon Thomson, Cairn Energy plc - Chief Executive [157]
------------------------------
Thank you. Well, thanks for listening in everybody. Just, in summary, we believe that this proposed acquisition is a very logical strategic step for us.
It consolidates the material position in North West Europe, adds additional exposure to exploration appraisal development and also accesses near term sustainable cash flow, which we believe that we are ideally positioned to access through our balance sheet strength. And importantly should be seen in the context of our balanced portfolio.
So, thanks very much everybody for listening in. Goodbye.
------------------------------
Operator [158]
------------------------------
That does conclude our conference for today. Thanks for participating. You may all disconnect.
------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the
Transcript has been published in near real-time by an experienced
professional transcriber. While the Preliminary Transcript is highly
accurate, it has not been edited to ensure the entire transcription
represents a verbatim report of the call.
EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional
editors have listened to the event a second time to confirm that the
content of the call has been transcribed accurately and in full.
------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other
information on this web site without obligation to notify any person of
such changes.
In the conference calls upon which Event Transcripts are based, companies
may make projections or other forward-looking statements regarding a variety
of items. Such forward-looking statements are based upon current
expectations and involve risks and uncertainties. Actual results may differ
materially from those stated in any forward-looking statement based on a
number of important factors and risks, which are more specifically
identified in the companies' most recent SEC filings. Although the companies
may indicate and believe that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate or
incorrect and, therefore, there can be no assurance that the results
contemplated in the forward-looking statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2017 Thomson Reuters. All Rights Reserved.
------------------------------