Preliminary 2012 Cairn Energy PLC Earnings Conference Call (Listen Only)

Mar 19, 2013 AM EDT
CNE.L - Cairn Energy PLC
Preliminary 2012 Cairn Energy PLC Earnings Conference Call (Listen Only)
Mar 19, 2013 / 09:00AM GMT 

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Corporate Participants
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   *  Simon Thomson
      Cairn Energy plc - Chief Executive
   *  Jann Brown
      Cairn Energy plc - Managing Director and CFO
   *  Mike Watts
      Cairn Energy plc - Deputy Chief Executive

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Conference Call Participants
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   *  Nathan Piper
      RBC - Analyst
   *  Jamie Maddock
      Morgan Stanley - Analyst
   *  Laura Loppacher
      Jefferies - Analyst
   *  Phil Corbett
      Deutsche Bank - Analyst
   *  Alejandro Demichelis
      Exane BNP Paribas - Analyst
   *  Michael Alsford
      Citigroup - Analyst
   *  Sanjeev Bahl
      Numis - Analyst
   *  Thomas Martin
      Canaccord Genuity - Analyst
   *  Alex Topouzoglou
      Exane BNP Paribas - Analyst
   *  Melanie Savage
      GMP Securities - Analyst
   *  Colin McEnery
      Edison Investment Research - Analyst
   *  Tom Robinson
      Numis - Analyst
   *  Rob West
      Sanford Bernstein - Analyst
   *  Andrew Whittock
      Liberum Capital - Analyst

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Presentation
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 Simon Thomson,  Cairn Energy plc - Chief Executive   [1]
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 Morning everybody. Welcome to Cairn's preliminary results presentation for 2012. I think there's a problem with the DLR so there may be some people coming in late on. I'm Simon Thomson, Chief Executive. With me are Jann Brown, Finance Director, and Dr. Mike Watts, Deputy CEO. As in previous years we have a presentation to run through with you with time for questions at the end and as in previous years it's being webcast.

 We have a full Cairn team, senior management team with us today who'd be happy to chat with you at the end of the presentation. So in addition to the familiarly handsome features of David Nisbet at the back, we've got Douglas Taylor, Deputy Finance Director; Richard Heaton, Exploration Director; Paul Mayland, who's been recently appointed as COO; and then we've got Rob Jones and Ian Watt, who are respectively Regional Directors for the Med and North Africa and North Atlantic; and last but by no means least, Chris Elliott, who heads up the exploration in the North Sea. So please afterwards feel free to ask questions and follow up with them.

 So with the introductions over, turning to the presentation. Cairn in 2013 offers shareholders value creation through a balance, well-funded, exploration-led business. Now that's nothing new for the Company. It's the same model we've been following for the last 25 years to create, add and realize value. But I think the important thing here is that at the beginning of 2012 we obviously did realize substantial value. And as a team we've been working extremely hard over the last year to position ourselves to have the right kind of portfolio to be able to create and add value in the future, and we believe that's where we've got to today.

 If we cast our minds back to this time a year ago when I was standing in front of you, we had literally just returned $3.5b and we'd announced a farm-down in Greenland of the Pitu block to Statoil, demonstrating the financial discipline that we were adopting for a smaller vehicle going forward and bringing the right kind of partners in.

 I talked at that time about the next requirement being to build a balanced portfolio, a portfolio that will provide cash flow to fund our exploration going forward and a portfolio that would provide transformational exploration. Jann talked about our balance sheet strength and about our ability to sell down further tranches of Cairn India as and when we saw fit. And Mike talked about building out the frontier exploration portfolio in the Atlantic margin and in the Mediterranean.

 So I'm delighted to be standing in front of you today having done exactly what we said we would do. Through the acquisitions in the North Sea we have created balance in the portfolio. Through Morocco and the recently announced Senegal this morning, we have built out and expanded our frontier exploration portfolio. And through the additional sales of Cairn India stock through the year we've demonstrated not only the liquidity of that position but also we shored up the balance sheet for the future.

 From our perspective the rebuild is largely now completed. We believe we have the right kind of balanced portfolio for the future. And I think whilst you'll see us actively managing what we now have as we go forward, as any company would, the focus in respect of any additional activities or things brought into the portfolio will be very much on the exploration part.

 To move on to the next slide, where does that leave us in terms of 2013? Well we're about to, in autumn, commence a multi-well, multi-year operated exploration campaign, and that will start in Morocco. I think the interesting thing about Morocco, like Greenland and like Senegal announced today, is that we've established a large acreage position that has follow-on potential, in areas that we believe are technically attractive and that have attractive fiscal terms, representing the frontier nature of the exploration positions. So there's running room for us in the event of success and there's a similar theme which Mike will come on and talk about.

 We are targeting around about $300m per annum of spend. May be lumpier. There may be additional spend in some years, depending on level of activity year on year. And obviously that's the combination of both the operator transformational potential wells and also the non-operated North Sea mature basin wells. In particular four wells, 2013/2014, and there may well be more, and I'll come on to that. But those wells alone are targeting in excess of 3.5b barrels of un-risked gross potential. All of that will be funded through our balance sheet strength in the near term and then ultimately through the cash flow from the development platform in the North Sea.

 So again, it's a delivery of that twin track, with the North Sea mature basin, the underlying balance sheet strength funding the transformational exploration wells going forward. And because we have shrunk the capital base and we have re-geared to the drill bit, the focus is very much on value not scale. And obviously we need to crystalize the value. We need to demonstrate success in the portfolio. But we believe we're extremely well positioned to do that.

 If we move on to the next slide, what does that program look like? Well you can see here what we've created is a relatively continuous program of activity combining the non-operated wells in the North Sea with the operated wells initially commencing in Morocco, moving on to Senegal, potentially back to Morocco, including Greenland, and additional new venture activity.

 Now we are in the closing stages of discussions on a long-term rig contract, which can drill in all of these areas. But you can see there is the potential to add additional rig or rigs depending on the exact timing of well slots and the location of where we're drilling at any given time. But I would emphasize again, as I said on the previous slide, our focus now is in adding additional new venture activity that will pan out that program going forward. We're not just looking at the next 12 months or the next 18 months; we're looking at a long-term sustainable program with that balance of transformational exploration and the ongoing North Sea exploration.

 So I think in summary we're very comfortable with where we are now, we're very comfortable with what we achieved and what we believe is that we have an exciting portfolio going forward. And we look forward to talking to you more about it with Mike, but in the meantime I'm going to hand over to Jann for the financials. Jann?

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 Jann Brown,  Cairn Energy plc - Managing Director and CFO   [2]
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 Okay. Thank you and good morning. The financial strategy is obviously set to underpin the general business strategy nd in particular that cycle that Simon has talked about, investing to create value, realizing that value and then returning value to shareholders. And the cash return that we made last year marked the start of a new investment cycle. And it was set at a level to provide the re-gearing to the drill bit, which Simon has talked about, but also give us enough cash on the balance sheet to fund the growth that we needed from the business.

 We focused on value opportunities throughout the year as we tried to convert our balance sheet strength and to upstream E&P assets. And initially we targeted predevelopment assets which give the sustainability as they move on to generate operating cash flow and provide the platform for the real core activity of the Company, which is exploration. And the exploration-led growth is very much at the forefront of the strategy. But it's always with a focus on the capital discipline that you need in this business.

 So just looking in a bit more detail at each of those, the re-gearing of the capital base allowed us to farm down our cost exposure on Pitu last year without any adverse impact on the reward side of the equation. The acquisitions of Agora and Nautical, the two corporate acquisitions that we made, give us access to those predevelopment and development assets which over time will provide the operating cash flow that's always been part of our business mix. And the farm-in to Foum Draa and the announcement today of the farm-in to Senegal provide that exploration upside and growth potential.

 So looking at the balance sheet, Simon's already talked about the strength of our balance sheet. And the cash at the year end, $1.6b, was significantly ahead of the August estimate and that's primarily because we made a second sale of our stock, our Cairn India stock, in September last year, taking advantage of market conditions at the time. There were two sales of Cairn India stock. The net back to us in cash terms was $1.3b and the residual 10% holding is still worth over $1b, and we're satisfied that there's growth potential in that holding.

 So it's obviously key in a balanced portfolio how you allocate your capital between your development or producing assets and your exploration. And over the next five years we've allocated up to $1.5b on the development assets, and that $1.5b, debt will contribute to fund that. The debt markets are very open to these sorts of opportunities at reasonable terms. And the exploration budget will be allocated over both mature basin opportunities and the frontier opportunities.

 If we look at the comparison between 2012, in 2012 the main cash outflow was on the two corporate acquisitions. That was about $720m net cash outflow and a relatively modest exploration and development budget. But in 2013/'14 we're targeting a budget of about $530m on exploration; that's 65% of our total capital budget. And the reason for giving you the figure over two years is because the program is very concentrated into the back end of this year and just into 2014.

 So in summary we have the funding in place to support the growth of the business and to deliver the strategy goals that Simon set out really clearly. We're targeting an exploration spend in line with the size of the Company. And that means that we will both farm-down our cost exposures when we think that's appropriate and we'll partner with others when we're going into license bid rounds. But fundamentally the self-funding model is exactly the same as Cairn has always had. We are an exploration-led growth story but we fund that through our equity cash. At the moment that's the equity cash on the balance sheet, but moving forward it will be the operating cash flows that come from the developments.

 And with that I'll hand over to Mike.

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 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [3]
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 Thank you Jann and good morning everyone. We've just heard from Jann how well funded we are, how self funded we are going forward and how we intend to allocate capital towards exploration and development. We've heard from Simon how we have delivered in the last year on our strategy, building a balanced portfolio with transformational potential.

 I hope I can take that forward and give you a compelling explanation of our opportunity set, which I think, as time goes on, even our most ardent critics are going to have to increasingly take note of or at least stop ignoring. I think we have a strong case. We have not only the senior management people in the room that you can interrogate afterwards. We have strong technical and commercial teams in all our offices, both Edinburgh, Stavanger, London and Madrid, and I think we've got a great team going forward.

 We've spoken about how we've built that portfolio in the last year and I think it's worth reminding it's easy to focus on the farm-outs with an added-value partner like Statoil in Pitu; the corporate acquisitions, Nautical and Agora; bought Catcher, Kraken and Mariner; the cash flow going forward, as Jann has explained; the farm-in to the Serica [et al] Group in Morocco; the announcement this morning of Senegal all taken together.

 But our watchword is hidden value, discovering hidden value. And if you just take the Agora and Nautical acquisitions for a moment, I don't believe there was a single analyst that saw or attributed any value to Skarfjell when we announced the acquisition of Agora. I don't believe a single analyst attributed any value to 9/1a in the UK or to the Moroccan position that Nautical had when we look them over. So we do focus on hidden value. And I think as time goes on, yesterday's hidden value is tomorrow's real value.

 If -- briefly we are now well positioned in terms of gearing as we move forward. Our focus, as ever, is on technical, political and commercial risk. Technically we're looking for high-value opportunities, whether they be in frontier basins or in mature plays, such as Norway and the North Sea. It's all about emerging plays in frontier areas and new play concepts in established areas.

 The commercial background to all of these contracts is very important. And if you notice, everywhere that we're moving we have I think very appropriate and exciting commercial terms in the event of future success. Even in Norway you have attractive tax positions for exploration in Norway.

 So where we sit today as we look forward to the end of this year, we'll start this multi-well campaign. I think we can look for some very interesting high, potentially high-impact but also high-value, which is the most important thing, opportunities.

 We've spoken about geological theme. The -- you'll see on the map, this is a reconstruction of [post-assynian] supercontinent. And you'll see the opportunities that we have, although they may appear to be dispersed, geologically are very focused. We're focused along the play fairway analysis along the Atlantic margin, the break-up from south and Senegal, where we've announced this morning, right up to the north in Greenland. And I think we're almost uniquely positioned to understand the new emerging plays in these areas.

 There's a very interesting well in our block in the Juby Maritime block, an old Esso well in Morocco. It had encountered heavy oil in the upper Jurassic. It's become very clear recently to the entire industry that that well also encountered very interesting middle Jurassic oil, with particular biomarker, gammacerane biomarkers indicative of lower Jurassic oil source rocks. You only have to look at the moves that the oil industry has done in the recent weeks on the Nova Scotian side and on the Moroccan side to see that companies are positioning themselves for new plays.

 And you have to remember when you look at that map that much of the whole eastern seaboard of the US is off limits for drilling. So the African side is pioneering the way for these new plays. We're looking for type 1/type 2 source rocks as different stratigraphies, possibly in some areas mixed type 2/type 3. We're looking at geological processes which are very similar along this margin during the extensional [sin-rift] phase, but also we're looking at reservoir distributions and trapping styles with different geological ages. So there's a coherent theme. And I think as Simon talks about new ventures, I think if we do make more moves in a normal business sense, they will be adhering to that them.

 No difference at all to what we did in India, the break-up of the Indian subcontinent away from Africa; and Antarctica, the plays that we were looking at; the turbidite fans on the east coast of India; the shelf fall plays; the extensional plays in Rajasthan graben; the compressional plays in Bangladesh. Geologists take these things as read, but I think just for everybody's purpose, just realize there is a geological theme to what we do.

 So let's just have a quick race through these areas. So I'll start with Morocco. And the conjugate margin I've just mentioned, this is a reconstruction. Morocco conjugate margin is Nova Scotia. You will have seen in December last year companies such as BP and Shell, essentially the majors, build significant positions on the Nova Scotian seaboard of over $1b of commitments in some cases.

 You tend to see on the Moroccan side smaller companies, one or two, Total and Chevron, but mainly smaller companies on the Moroccan side. The terms are much better on the Moroccan side than they are on the Canadian side. But right now there's intense industry activity. Cairn will be right at the forefront of these new play concepts as we start our drilling campaign.

 We mentioned the positive contractual terms, but this is an area where we have proven hydrocarbon systems. On the Canadian side you have known fields, Sable and Panuke Deep etc., but we also, as I mentioned, have important wells on the Moroccan side. So this is what I would consider to be an opening up area.

 We have two positions. One is the Foum Draa position, where we have three blocks covered by 3D, a Shell-shot 3D survey. Remember Shell relinquished this block in 2006, a year before Jubilee, for example, was found and before the importance of the turbiditic play was really established.

 We are looking at an area where we have multiple leads, multiple prospects. We're focused on what we believe are the most attractive features. This one to the left, it looks a bit like an archaeopteryx, at least in my mind. And we're choosing to drill a well somewhere in the navel there of that F prospect later this year. We're looking at about 140m, 150m barrels of potential on that prospect, and follow-up potential with the A prospect and indeed beyond that. And if we take our total Moroccan position, we have running room, as we like to say, in scope for a yet-to-find of over 1b barrels. But this is where the first well is.

 Further down the coastline, away from the lower cretaceous turbiditic fan plays, we're looking at the carbonate margin. Here we're with Genel. We have the Cap Juby discovery, as I said. It's a heavy oil discovery. It's in the upper Jurassic. We're not at all focused on that. We're focused on the middle Jurassic and perhaps the lower Jurassic where we have encountered or the old wells encountered light oil.

 We can position a well location at least 100 meters up-dip of the known oil in the middle Jurassic. And we've put a modest potential of over 70m barrels, but there is follow-up. There's also follow-up in the 3D area that we've shot just before Christmas and we'll be going through that interpretation this year. And that could also provide another location sometime in 2014.

 Moving down the coastline, the same features, the same Mesozoic carbonate shelf edge runs through Senegal. The Senegalese basin is the largest of the West African basins. We've just announced this morning, farmed in to FAR. We've taken the operatorship. And again could be the very end of this year or more likely early next year that we start drilling. Again we have multiple prospects. Again these are plays that have not really been tested. There is a known petroleum system, but we're looking at stratigraphies which are deeper than have been tested before.

 You look at the 3D there, you can see the shelf edge, the Mesozoic shelf edge, and you can see a series of fan systems coming off that shelf edge. We're focusing our attention on the moderate water depths on the shelf part of this block first of all. We think the block itself has more than 1.5b barrels of potential. The prospect that we're going to drill first of all is located there. It's a dual-objective prospect, with the upper horizon having about a 250m barrel potential, the deeper horizon about 180m barrel potential. So again, an exciting new area with three existing 3D seismic.

 If we move on to Greenland, again I know people, some people are perhaps tired by this story. We're still very excited about parts of Greenland. We've put it into a position now where we're focused almost exclusively on the Pitu area, where of course we have a carry from Statoil, an added-value partner. And we saw last year, as Simon's already mentioned, intense industry activity on the -- in the adjacent acreage.

 So we're well positioned, I think, in Greenland to hold a lot of acreage and pursue Pitu. And if you just notice on the Northeast Greenland where there's two bid rounds happening this year, there's about 50,000 square kilometers of acreage on offer. Cairn's existing acreage position was about 110,000 on the west coast. So we have a vast acreage position, but our clear focus is on the Pitu block.

 And if we just look at the regional situation in Pitu, what you saw last year was cooperation of the industry for the first time. These blue dots here indicate where Shell operated a consortium shallow borehole program. It was very important to establish stratigraphy for the first time. You can see that we're well north of the volcanic province. This is where we drilled some of the Disko wells, where we did have encouragement in the Alpha well. We did get pre-tertiary oil to surface, but we encountered an enormous sequence of volcanic rocks. That volcanic province peters out well south of our Pitu block.

 But the most important thing on that map is look at the restricted basin of the Melville basin. Just as you see offshore Morocco, just as you see offshore Senegal, the early phases of extension, you have restricted high-quality source rocks. And we are well situated to take advantage of any migration.

 In cross section you can see roughly where this bar is. This is where the Shell wells were drilled, so at relatively shallow depth, a few hundred meters. You had important stratigraphic control which could take you 200 kilometers away to our basin. And here's the deep Melville basin.

 The Shell wells encountered good cretaceous reservoir rocks. Remember, the Disko wells that we drilled did not encounter cretaceous rocks offshore. We didn't get through the volcanics. These wells encountered good reservoir rocks. You see them onshore in the Nuussuaq peninsula. We also encountered oil-prone source rocks, similar source rocks that you see all along this Atlantic margin.

 What Cairn did proprietary, we continued the geochemical work that we did in 2011. So in 2011 we did a number of seabed, very shallow seabed cores, a meter or so seabed cores, analyzed them for microbial activity, and there are microbes that only live on hydrocarbons. They either indicate oil or they indicate gas.

 What we found in 2011 was an incredible match between the structural picture, the culmination and where we saw oil at the seabed. Last year we went on to do a more significant geochemical survey over the entire block. And again we've demonstrated oil signatures at the seabed, interestingly following the pattern that you would expect of migration from a [kitchen] area. One small area we encountered gas anomalies too.

 So when you look at prospectivity, we have five prospects identified in the 3D area. Elsewhere, of course we've not -- 80% of this block we've not covered with 3D; we have 2D. But obviously if we have any encouragement in Pitu it opens up the possibility of real follow-up play potential all the way down the eastern margin of this basin.

 So if we look at just the 3D area, the five prospects, we have -- three of them we've called the Py prospect. The consolidated prospective resource is about 2b barrels of oil or just over 3.1b barrels of oil equivalent. And a single well can test the three objectives. You can see on the cartoon there's the structure. In the P10 case it would extend southwards. So I think we are in a position where we have shot 3D seismic. We have geochemical data. We have AVO-supportive data. We have amplitudes that conform to structure. We assign a 25% chance of success to the Pitu structure at just over 3b barrels. And we have Statoil carrying us through much of the work.

 Elsewhere in Greenland, just to point out that the northeast in Greenland, it'd be interesting to see just who bid in this round. Of course it was restricted to the majors; we couldn't participate. But it's juxtaposed to some of the large, in geological terms, to some of the large discoveries off the coast of Norway. In Western Greenland, again we've got a holding pattern. We are evaluating data. We will be relinquishing acreage as we go forward, but no serious expenditure. Southern Greenland as well, we did acquire a 3D. We've evaluated that 3D. We see significant potential in that 3D area, but again it's a holding pattern.

 And just to show you the southern area 3D maps, the same sort of turbidite fan plays, this time on the extensional faults from early rifting that you see elsewhere, offshore Senegal for example.

 If we look at the Mediterranean, we have an existing position in Spain. We have relinquished the block, which was a problematic block, wasn't a block that we were -- we actually inherited, which was a coastal block. It had the, happened to have the name of a national park in Spain. We've relinquished it and I think we're better off for having done that. Our focus is on getting environmental clearances for the 3D in the offshore. The Spanish offshore is untested.

 Up in here off Catalonia, we've put a box. We've had a number of blocks submitted to the government for bidding application. The process in Spain is that these blocks were gazetted for a 60-day period where competitors could bid. That 60-day period closed last Friday so we're waiting to see if there were any competing bids or whether we have been awarded anything. So there may be some more news. Again, I think an exciting area and geologically not dissimilar to the Eastern Mediterranean, where the Lebanese have announced finally their licensing round which will take place this year and there will be awards in 2014.

 Planning for the longer term, Malta, North Malta in the Hopper, we've got a large area, a steady area. And again that's something that could provide drilling locations in the years to come.

 So if I move to the more mature area of the portfolio, which itself I think is exciting, we have built up a rather -- from a standing start a commanding position. Obviously we've reassembled the Agora team. We've added it, complemented it with the Nautical team and we've got our own guys. And I think it's, as Simon said, it's a portfolio that you would work normally in as time goes on.

 We've been successful in the UK round and also in the Norwegian round, and this area is going to provide us with drilling locations on a routine basis, essentially on a non-operated basis as time goes on. Highlighted the predevelopment projects. Highlighted also Skarfjell, which was the discovery made last year. And I've also highlighted the 9/1a block, where we -- Cairn has 100% and we're the operator.

 If we look at Skarfjell, look at the cross section in the top there, this was a discovery that was made last year. We encountered two reservoirs totally oil-bearing. No indication of water, saturations or water contacts at all. The operator, Wintershall, came out with estimates of 60m to 160m barrels after the discovery well. We at the time said that we thought this field had the potential to be over 200m barrels.

 That may yet come to fruition, but we're actually now operating an appraisal well. And the appraisal well has been designed to test the reservoir extent down-dip, to test the reservoir thickness down-dip, to test the fluid contacts down-dip. And there are plans to sidetrack this well, if necessary up-dip for a contact or down-dip for a contact. This feature still has the potential we think to be one of the most significant discoveries of the last few years. So we're all keen to see this well and to see where Skarfjell goes.

 The K prospect, the 9/1a area is just to the west of Kraken. So we acquired Nautical this -- EnQuest had an option; they didn't exercise their option. We are quite excited. We see 50m to 250m barrels of potential. We're just the sort of the company that might drill this 100%, but we don't have to. Kraken, as you'll see on the next slide, is due for appraisal. That may or may impact on our decision.

 So if we look at the, finally just look at the developments. Everything is on track. We've got three very strong, competent operators. EnQuest operate Kraken, Premier operate Catcher and Statoil operates Mariner. The Kraken FDP will be submitted to the government first half of this year. The Catcher FDP will be submitted probably the second half of this year. Still we're operating at the moment or Premier are operating at Bonneville well. This is potential additional satellites.

 It's interesting to note in that Catcher block there's not a single dry hole. Every well has found hydrocarbons. And Mariner is going forward with Statoil. That received FDP last year. The block to the south we have 80% of and there's a possibility that the Mariner field extends southwards into our block.

 That's it. Thank you.

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 Simon Thomson,  Cairn Energy plc - Chief Executive   [4]
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 So, in conclusion, we've shrunk the equity base and we've re-geared to the drill bit. We retained balance sheet strength and financial discipline. And as I hope today has shown, we've created an exciting portfolio of transformational potential exploration leading forward over a sustained basis in the coming years and we believe that in combination that provides a very attractive opportunity to go forward, an attractive opportunity for us to repeat on the cycle and to create and add value once more for shareholders.

 So with that I'd like to open the floor for questions. I think there's probably a microphone because of the webcast. Nathan?



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Questions and Answers
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 Nathan Piper,  RBC - Analyst   [1]
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 Good morning. Nathan Piper from RBC. I'll try and put this question correctly if I can. So looking, starting back slightly and looking at your overall portfolio, how would you rate the risks of the new frontier acreage that you've added into the portfolio? So in the context of Greenland, which is extreme frontier acreage perhaps we could say, where does Morocco and Senegal fit into that and within that context is that why other parts of Greenland are now being de-emphasized and is that another example of your discipline that you're trying to exert across your portfolio?

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 Simon Thomson,  Cairn Energy plc - Chief Executive   [2]
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 Yes, I'll let Mike answer on the specific risking but absolutely the focus is on getting ourselves as comfortable as possible in terms of data and therefore focusing on those areas that we believe that we can high grade. But Mike, on the risks in particular?

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 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [3]
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 Yes, the areas in Morocco and Senegal and what we're focusing on in Greenland are all 3D defined and we think petroleum systems have been established. I think the geochemistry in Pitu has convinced us that there is a petroleum system active. So you're in the 15% to 25% POS for each of these areas. As I said, for Pitu the main prospect there is a 25% POS, a world apart from where we were on the rest of Greenland.

 But the point is we're in a holding pattern on a huge acreage base and we can relinquish and just continue background. I'm looking forward to the day, if we make a discovery in Pitu, what the valuation will be for the rest of the acreage but we can just sit on it. And as I tried to point out, the entire industry is fighting on the north east of Greenland for blocks which were a third of the size of each individual block that we have.

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 Nathan Piper,  RBC - Analyst   [4]
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 I guess what I mean is risk around reservoir. Reservoir is one of the problems in Greenland so do you think it's less of a risk in Senegal and Morocco? Obviously you've got oil and gas in both locations. I'm just trying to -- what parts can you tick off already for Senegal and Morocco that you never could with Greenland?

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 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [5]
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 Yes I think it's different. We're playing clearly different play types. Essentially there's a carbonate bank play type, which is sort of Albian/Aptian in age. In Senegal it's a middle Jurassic, lower Jurassic age in Morocco. There's a clastic play type which is turbidite fans. We've got confirmatory wells like the Tan Tan well in Morocco, which demonstrates a huge clastic input delta. I think we're testing new plays in areas where we have a handle.

 The problem we have in Greenland, we did not encounter reservoirs in the tertiary or the Paleogene section in the Disko area. We did encounter oil in the volcanics which is important and those oils were typed to pre-tertiary source rocks.

 We can see a similarity. As I tried to say, we've got an experienced team poring over all sorts of play fairways along this and I think we are in a unique position right from the very southern end now Senegal right to the very north in Greenland to have a different perspective.

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 Nathan Piper,  RBC - Analyst   [6]
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 Just one final one. The approval process in Morocco and Senegal, is it predictable?

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 Simon Thomson,  Cairn Energy plc - Chief Executive   [7]
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 Yes. And I think that's obviously the thing we're absolutely focused on in terms of achieving our drilling targets. So for us it's not just about getting the rig and so on; it's about getting on with the environmental application and so on, and we're doing that right now. In fact we have been doing that for some time.

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 Jamie Maddock,  Morgan Stanley - Analyst   [8]
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 Hi. It's Jamie from Morgan Stanley. I think you said at the very beginning you might be fairly close to signing a rig contract. I'm just wondering how advanced those discussions are and might they conclude soon enough that we could drill -- because I think the prospects you have identified are drill-ready. I'm just wondering that might come forward, to what extent they might slip with negotiations or prolonged etc.

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 Simon Thomson,  Cairn Energy plc - Chief Executive   [9]
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 We're not expecting it to slip but by the same token I don't think there's much chance of them coming forward simply because of the timing, as Nathan was touching on, in terms of the environmental impact assessments and approval process and so on. So I think we're being reasonable in our expectations in looking at the September to commence the drilling operations. But the rig contract that we're on, we feel confident about there are other rigs if that for whatever reason doesn't proceed.

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 Jamie Maddock,  Morgan Stanley - Analyst   [10]
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 Just on that point, to what extent is the market restricted or are you restricted by water depth, rig type etc., and then -- that's what I'm trying to understand.

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [11]
------------------------------
 Yes it's a good question. The rig that we're targeting which obviously we can't talk about at the minute because we're in discussions, but it's capable of drilling everything that we have in the portfolio. But you're right, you need to get specific types of -- some are suitable for some things, some for others. I think that leads into it may well be that you'll see us expand the number of rigs as we move forward and as that theme develops in terms of the program that I set out in my first slide.

------------------------------
 Laura Loppacher,  Jefferies - Analyst   [12]
------------------------------
 Hi. Laura Loppacher from Jefferies. Two questions, both on the exploration side. One, you've mentioned a couple of times about the Cap Juby light oil discovery in the middle Jurassic. Can you just give us a little bit more information? Was that reservoir or what happened in the middle Jurassic in the well?

 And on Skarfjell, can you just give us a little bit more information on timing and if we should expect an initial announcement and then discussions about what's happening with possible sidetracks?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [13]
------------------------------
 On Cap Juby the well drilled late 60s flow to 2,500 barrels a day from the upper Jurassic, heavy oil. But the important thing and that's -- Nautical for example saw themselves as a heavy oil play company, but it's become apparent that the light oil samples recovered from the middle Jurassic which have a particular biomarker in them which were indicative of hypersaline source rocks which is what you get at the incipient rifting phase as the Atlantic was opening. And it's this oil play that people are chasing on the Nova Scotia side. They're not piling in because they think there's a gas province; it's they think it's an oil play that's not been tested in deep water.

 And remember these situations of passive margins that for 150m years, once the rifting ceased, have just sat there. That's why they're called passive, passive margins.

 Skarfjell I think is an interesting one. We're not the operator. The well started early February. We're operating -- there will be announcements in due course. It's just I think potentially a very significant well and I think from the discovery well it was very clear to have thick fully oil bearing reservoirs was quite important.

------------------------------
 Phil Corbett,  Deutsche Bank - Analyst   [14]
------------------------------
 It's Phil Corbett from Deutsche Bank. Sorry, just two questions. Firstly, following up on the earlier rig question, from those comments should we assume that you will be getting a rig that is capable of drilling Greenland next year as well as drilling Morocco and Senegal?

 And the second question is I guess just on overall strategy. I guess over the past couple of months across the sector we've been seeing companies putting in place the funding and evolving and maturing prospects, frontier-type prospects, so 200m, 250m barrels, got a 15% to 20% chance of success, and those funded for 2013, '14. What do you say to investors as what is your competitive advantage? So why should investors play that story through Cairn as opposed to another company? Is it technical? Do you have some view of technical competency over everybody else or is it something else?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [15]
------------------------------
 I think on the first point, yes, the rig with winterization could be capable of that, but I wouldn't want to labor the point. There may be another rig that we would use.

 I think on the second point, the last --

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [16]
------------------------------
 If I just add to that Phil, in Greenland there's tremendous cooperation happening behind the scenes there with the other operators. In particular we shut our 3D a year ahead. Everybody else --- Shell shot 3D last year, Maersk 3D, Conoco another 2D. We're having discussions with all of these operators but particularly with Shell who have a rig called the IceMAX rig for example which is a well-known Arctic rated rig and it's possible that we could cooperate on that. But the rig that Simon's talking about can be winterized relatively easily. So I think we hope to have a couple of options.

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [17]
------------------------------
 And in terms of the competitive advantage, it's a combination of things. You're right, a number of companies have built up cash positions and I think what we've demonstrated is that we've exercised, we've been very clear in terms of the financial discipline and therefore the longevity of our balance sheet strength and our ability to year on year on year repeat on that. So I think that's one strong advantage.

 Obviously we've got a very strong operational track record in terms of our drilling ability and our approach to safety and so on. And I think in terms of technical, hopefully Mike has outlined why we believe that we have a good understanding of the Atlantic margin, what we're particularly pursuing. But I don't know if you want to comment any more on that.

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [18]
------------------------------
 From an investor point of view it becomes a matter of taste. You can buy -- how many different car models can you buy? I think we have an edge. We have strong sub-surface skills. We've added to those sub-surface skills, people from Agora have joined the team, and I think we have a good understanding of the play types. You add the entrepreneurial spirit that I think we can wheedle out opportunities that for one reason or another have been deemed to be ugly and we can take them forward.

 We've always backed our technical and commercial judgment and I think that's -- you can start talking about other companies. We have our own technical views and we have our own commercial judgment. The skill of Cairn over 20-odd years has been to back those judgments when you see the encouragement.

------------------------------
 Phil Corbett,  Deutsche Bank - Analyst   [19]
------------------------------
 Sorry, just a very quick follow-up question. Has your geological model on Kraken changed at all since you acquired the assets?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [20]
------------------------------
 No, I don't think at all. Kraken is an interesting one. Obviously it's a field which will be developed by, entirely by horizontal wells, both from a producing point of view and from an injector point of view. We have -- we're an explorer. We have different views. The operators come in very focused on the field, the phase development of the field etc. Particularly when it comes to 9/1a we see interesting potential. And, as I said, 50m to 250m barrels potential at 100% is what I would call transformational potential in the North Sea.

------------------------------
 Alejandro Demichelis,  Exane BNP Paribas - Analyst   [21]
------------------------------
 Alejandro Demichelis from Exane BNP Paribas. A couple of questions. The first one is on the farm-downs on Greenland, both South Greenland and Lady Franklin. How are you thinking about that? Do we need to see first results on Pitu and then you're going to farm down or is it completely separate?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [22]
------------------------------
 No, I think it's just down to data. What we said last year was look, it's probably more likely that some point in 2013 we may seek to farm down the South and Lady Franklin seismic. But I think as Mike said it's kind of -- from our perspective we're not in a rush there. The focus obviously has been very much on Pitu, but it's about getting comfortable with the level of data that we have so that we can have a proper discussion with somebody. But there have been some approaches, for example, on the south. So it's kind of work in progress but there's no defined time period on it.

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [23]
------------------------------
 But I do believe it'll be easier to farm out after Pitu, that's for sure.

------------------------------
 Alejandro Demichelis,  Exane BNP Paribas - Analyst   [24]
------------------------------
 And my second question is, I think you've said that now transformation has finished so how is it we're going to be thinking here going forward? You're going just to focus on what you have and gradually deliver that or more farm-ins?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [25]
------------------------------
 No, no. I think it's a good point and I think perhaps over the last year, when you build a portfolio or rebuild a portfolio in the public glare it's not an easy thing to do because you can't be clear about the acquisitions you're going to make because they're commercially sensitive so perhaps that creates some uncertainty. And you can't be clear about the objective in terms of the strategy of the transformational exploration you're pursuing.

 I think what we would like people to walk away from here today with is the reassurance that we have, that we are comfortable that we have rebuilt the portfolio, that we like the balance that we now have. And therefore that the focus for us will be in adding in additional exploration should we feel that it's attractive enough for us to do so in addition to any success that we might have out of the current portfolio, and to perhaps stop people from thinking are Cairn about to make another big acquisition or something like that. We're comfortable with what we've created.

------------------------------
 Michael Alsford,  Citigroup - Analyst   [26]
------------------------------
 Morning. It's Michael from Citigroup. Two questions if I could. Just firstly on the UK/Norway exploration, I guess when you bought Agora you talked about the deep prospect inventory that the business had. But if I look through, you're drilling obviously new appraisal on Skarfjell and then I think maybe one other well within the Agora legacy portfolio. Is that a capital allocation decision or is that more about maturation of the portfolio?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [27]
------------------------------
 Yes. I think it says something about the opportunities. You may look at 100 opportunities and you may find one or two that you really want. I think it's that sort of scale. There's a lot of sifting, filtering done by that team. And you've only got to look at that Skarfjell area and see how many fields around there have been discovered by that same team in different guises to know they're in the zone. Opportunities don't come up every moment. But I think as time goes on either we apply them, and opportunities are coming forward in the North Sea, or we can assign them to other areas. So we're in a, I think from a sub-surface expertise point of view we're in a very strong position.

 But you're right, the capital discipline is applied across the portfolio. So it is down to, for example, if a farm-in prospect comes from, as one did recently, from the team in the North Sea, it's got to be justified as against what else we're going to be spending our money on. So there's a full ranking peer review.

------------------------------
 Michael Alsford,  Citigroup - Analyst   [28]
------------------------------
 Okay. And the second question more I guess related to capital discipline. Obviously you run a very strong balance sheet. You've highlighted $2.7b of financial assets. Maybe a question to Jann around the debt/equity split on the development CapEx that you're trying to target. You've talked about $1.5b of development spending so what kind of debt/equity are you looking to target on that spend?

 And then I guess on that basis I'm assuming you've got a bit of extra cash so are you going to give more money back to shareholders in 2013? Thanks.

------------------------------
 Jann Brown,  Cairn Energy plc - Managing Director and CFO   [29]
------------------------------
 So taking them in reverse order, I don't think we do have extra cash because our primary target is to make sure that we are funding the sort of exploration spend each year that Simon set out. And that's going to take us a few years to get to the free cash flow point in the developments and the equity cash from the operating cash flow takes over.

 On the debt/equity split, it's probably still too early to say in terms of the specific CapEx on those projects because we've not even reached FTP stage on either of them but what I would say is we've tended to run a gearing through development phase of roughly 25% of our balance sheet.

------------------------------
 Michael Alsford,  Citigroup - Analyst   [30]
------------------------------
 Perfect. Thank you.

------------------------------
 Sanjeev Bahl,  Numis - Analyst   [31]
------------------------------
 It's Sanjeev Bahl at Numis. A couple of questions. First, just following on from that question on funding, Mariner, a potential disposal, is that still on the cards? Would you look to potentially sell that stake to Statoil or another operator?

 The second question really going back to Foum Draa. It feels like the targets that you've identified are slightly different to that of the previous operator or partner group because I think they had some larger sand plays up against the salt diapers and were looking at prospect sizes up to 300m barrels. I was just wondering what's changed there between the partner group?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [32]
------------------------------
 So I'll deal with Mariner and then hand over to Mike. I'm not sure about you're -- is that still the plan -- because we never said anything other than we'll be developing Mariner. I think the point is in any part of our portfolio anywhere we will be actively managing and it's always a focus on value. But right now we're a 6% holder of Mariner. Mike?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [33]
------------------------------
 No. I think one of the things, we do look at data differently and we do have a slightly different interpretation. So, yes, well spotted, but we'll find out who's right when we drill the well.

------------------------------
 Sanjeev Bahl,  Numis - Analyst   [34]
------------------------------
 But can I assume it's the same play type that you're targeting?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [35]
------------------------------
 Yes. We're talking about Tan Tan clastic reservoir in Foum Draa coming off the shelf edge and forming these turbidite fans. And of course you're right, there's a lot of salt domes in the area. It's restricted marine conditions at the time as they were opening up. And those salt domes have affected the distribution of the lower cretaceous reservoirs which are untested. Untested. There's a lot of wells on the map -- there's three wells on the map that didn't get to that horizon. And, as I said before, that's the same play as what they're going for and they signed up for in December last year on the Nova Scotia site.

------------------------------
 Thomas Martin,  Canaccord Genuity - Analyst   [36]
------------------------------
 Thomas Martin at Canaccord. Could you give us an update on the Greenland side, where do we sit on the discussion regarding drilling rig provision and availability of a rig for relief wells? Do we still need to have two rigs on the go if you're going to drill in Greenland?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [37]
------------------------------
 I think that's a stipulation of the government, Greenland government. Obviously we are involved in the Greenland Oil Industry Association. In fact the chairman is sitting in front of you, Ian Watt, and I think we will just work with the Greenland authorities to find the most appropriate drilling solution for the ongoing program. Obviously it's in everybody's best interest to stimulate drilling and to do it safely. I think we've proven that we can do that and that's a decision for them.

------------------------------
 Thomas Martin,  Canaccord Genuity - Analyst   [38]
------------------------------
 Okay. But no change at the moment?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [39]
------------------------------
 I can't say today whether that will be one rig or two rigs. It's down to the Greenland government.

------------------------------
 Thomas Martin,  Canaccord Genuity - Analyst   [40]
------------------------------
 Okay. And is anyone else committed to drilling offshore Greenland in 2014 at the moment?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [41]
------------------------------
 I don't think there's any formal commitments that we're aware of. There's obviously positioning going on. And I think one of the things, as Mike talked about, is that as an industry obviously we'll be seeking to cooperate wherever we can. From a Cairn perspective we'll be seeking to cooperate with other players and with rigs in the vicinity.

------------------------------
 Thomas Martin,  Canaccord Genuity - Analyst   [42]
------------------------------
 Thanks.

------------------------------
 Alex Topouzoglou,  Exane BNP Paribas - Analyst   [43]
------------------------------
 Hi. Alex Topouzoglou from Exane. You seem to have revised down your CapEx, development CapEx down from $1.5b to $2b down to under $1.5b, so in which fields are you seeing these cost savings coming about?

 And then secondly based on the start of free cash flows and oil from the Catcher and Kraken fields, I think you're pointing to 2016, 2017 start-ups. Just which -- are you seeing these being pushed back into 2017 or why is 2017 in there?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [44]
------------------------------
 I think I'll let Jann answer the first point. And the second point, that's obviously really I guess a question for the operators. We can't say today because we haven't had formal confirmation from the operators and we need to wait to hear from them. Maybe there'll be for example more from Premier later on this week. So I think it would be premature for us. We're just trying to show flexibility in terms of the start date.

------------------------------
 Jann Brown,  Cairn Energy plc - Managing Director and CFO   [45]
------------------------------
 And specifically on the revision to the number, Skarfjell has now been deferred. It's going to really start ramping up on the CapEx side much later than we had expected when we gave the last estimate. And in general we're just getting better estimates. They're still not by a long chalk final because, as I say, we don't have the field development plans, but that's a number we're comfortable with today.

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [46]
------------------------------
 And what's very clear on Skarfjell, it has the potential to be a significant hub for the region. There's a lot of undeveloped resources around and Skarfjell could be the trigger.

------------------------------
 Alex Topouzoglou,  Exane BNP Paribas - Analyst   [47]
------------------------------
 Great. Thanks.

------------------------------
 Melanie Savage,  GMP Securities - Analyst   [48]
------------------------------
 Thank you. Melanie Savage at GMP. Mike, just a question on Senegal. Could you talk a bit more around the data points which de-risk the prospects that you're looking at drilling? Thank you.

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [49]
------------------------------
 Clearly we have actually on the block some old Esso wells which have established Cenomanian-Turonian source rocks which are critical in the area. We have some deep bore hole wells that have proven those rocks in the deep basin. We've spent a lot of time looking at the 3D seismic and taking it further, if I may say, from the current operator. And we have strong DHI indicators on the area that we want to drill, certainly conformance of amplitude with structure in the right location for prospects to be charged. And that's the one that we're talking about with the dual objectives.

 So I think we've done a lot of geophysical work but I think the basic geochemical work has already been done. What we're talking about here is deeper stratigraphy than has been tested before. This about a 900 meter water depth well, a little bit more.

------------------------------
Unidentified Audience Member   [50]
------------------------------
 Morning. I had a few questions on Morocco and some of the risks to the play over there. Just starting on the source rock side of things, wondering if you see any Cenomanian-Turonian source rock potential in Morocco.

 And I think the main source rock you're targeting is the Jurassic source rock. Can you just talk about the quality of that source rock and the risks that you see around that?

 And then secondly, looking at the reservoir quality in Morocco, I think you mentioned the main target is going to be carbonate reservoir. Have you got any other wells in the area that give you any data on the quality of the reservoir?

 And then the final question's just on --- the last one -- I think the area has seen quite a lot of tectonic activity. Just wondering how that's influenced the basin.

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [51]
------------------------------
 There are a variety of reservoirs. Carbonate is one, the carbonate mine, the carbonate shelf edge. And the other is the clastic fans which cut through so the Tan Tan delta drilling in Foum Draa is going for clastic fans of lower cretaceous which have not been tested. Companies like Cosmos may be planning to test that same play. And so while you have high quality reservoirs on the shelf, on the deep water it's unproven and that's part of the exploration risk.

 The carbonate play, upper Jurassic heavy oil, fractured carbonates. We're going through for the middle Jurassic where there was light oil. Carbonates historically are patchy reservoirs. You have sweet spots and you have not so sweet spots, and there's a lot of effort has to go into it. What we're trying to do here is structurally 100 meters or more at dip of known oil drill a clean vertical well, take clean cores, take modern logs and then contemplate further action because there will be sweet spots and better places. But I think we're hopeful of primary porosities of decent percentages in the carbonates.

 The source rock, what we're talking about here is the incipient rifting phase or even early post syn rift restricted marine oil source rocks, restricted basins. We've seen the potential all along that Atlantic margin, but chasing the reservoirs associated with that charge is what we're about. And that's what the industry is about. And it hasn't done it. It hasn't done it on the eastern seaboard of the United States. The moratorium on drilling started in 1982.

 The wells off the coast of Nova Scotia were all shelfer wells. You've got Panuke Deep, you've got Cap Juby, you've got our Alpha well in Greenland which is very significant in the story. You've got the old Cenomanian-Turonian source rocks in Senegal. It's all part of the same geological process and to treat it as a whole is what a big company would do and we as a small company are treating it that way. And I think we're putting together an exciting program and no doubt have we got things to learn on the way, but I think the potential is there for some significant follow-up.

 So I really see Pitu, Senegal, Morocco, all have running room and on standby is Southern Greenland if Pitu comes in then everybody's perception of Southern Greenland will change. So we've got Greenland on a standby hold-pattern position, focus in Pitu. We've got Morocco, Senegal and we've got also a new ventures focus that if we make some other moves it will fit that strategy. I think the picture we were trying to paint last year or the jigsaw puzzle, whatever, the picture should be very clear. As I said, analysts or investors have to -- I don't think you can ignore the story much longer. It's a compelling story.

------------------------------
 Colin McEnery,  Edison Investment Research - Analyst   [52]
------------------------------
 Hi. Colin McEnery from Edison. Two questions on Morocco. Following up from the Foum Draa, Juby has materially different resource estimate than your partner Genel. I was wondering if you could expand on whether there's any reasons for that and why you are more conservative on that prospect?

 And just on the other prospects in both licenses, could you provide any guidance on the geological chance of success?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [53]
------------------------------
 Actually it's not actually just a Genel thing. On every block that I've just spoken about this morning, our non-operating partners have higher resource potential than we are saying publicly. That I think is a good place to be.

 There's a lot of uncertainty. The lower Jurassic, it's a target I've not spoken about. The 3D survey that we've shot in December will again provide dual objectives. So I think 1b barrels of potential in Morocco, greater than, is where we're comfortably at. And I think we've got to run before we can walk on the Cap Juby. And for the reasons that we said about the variability of carbonate reservoirs, you need a little bit of stamina drilling these wells before you can lock into the sweet spots. It could be away from the structural high. It could be more inbound. We're looking for [oolitic] cores.

 So I'm comfortable with the numbers we've put. I realize that other people have bigger numbers, but I think with our yet-to-finds we've set out that we too see that huge potential but I think it's we're being realistic with what we're putting forward.

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [54]
------------------------------
 Let us walk before we can run.

------------------------------
 Colin McEnery,  Edison Investment Research - Analyst   [55]
------------------------------
 And just on the geological chance of success, if you're able to provide any guidance on the prospects?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [56]
------------------------------
 All of these areas are 3D defined and we're in that 15% to 25% range. And I think it's difficult to get out of that in a frontier sense.

------------------------------
 Tom Robinson,  Numis - Analyst   [57]
------------------------------
 It's Tom Robinson from Nomura. Just a question on Senegal please. On the details of the farm-in, can you just talk about the commitment you have in terms of wells?

 And also I think FAR spoke about an AMI agreement. I'm just wondering if, if that's the case, and also what is the extent of that, how that may impact any running room in a success scenario?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [58]
------------------------------
 There is an offshore AMI with FAR. We're quite keen to work with like-minded companies but we don't lock ourselves in to any long-term arrangements and if it's mutually beneficial early then we can renew things. So FAR, like a lot of small companies, has spent a lot of time focusing on certain areas. They have very good relationships, they have very good knowledge and that's useful to us. What we're bringing is the funding, the operational capability and also some reinterpretations of the geology. So it's a good combination.

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [59]
------------------------------
 And the funding of the well and I think here there's optional follow-up for us in terms of discretionary drilling. But, yes, the deal is funding the well.

------------------------------
 Rob West,  Sanford Bernstein - Analyst   [60]
------------------------------
 Hello. Rob West from Bernstein. I have a question on the level of competition you're seeing with the farm-ins such as in Senegal and Morocco. Were there other parties -- I know you won't say who -- bidding on Senegal and how do the trends in competition for new acreage like that inform your preference for continuing with further farm-ins?

 And would past-cost-plus-carry be the preferred mechanism for further farm-ins if you did them?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [61]
------------------------------
 I think it's a fairly standard mechanism, put it that way, in terms of the industry.

 I think there is competition both in terms of farm-ins and obviously, as we found intensively, in terms of bid rounds as well. As we've talked about earlier on, we spent some considerable time building this focused position and choosing the right areas that we want to go into and there's lots of opportunities out there. Some of them are attractive, many of them aren't from our perspective. So it's finding the right ones and then working them up. And inevitably there are other people that are in competition and therefore you have to bring -- what do we bring to the table.

 And I think from a number of people, and perhaps FAR might comment on this, what we bring is certainty in terms of our balance sheet, in terms of our drive, in terms of wanting to include this well in the program in the very near term. So we can differentiate ourselves perhaps from others who might have to wait and raise funds or whatever else. But it is a highly competitive environment but I think that's why we're carefully and possibly for the market perspective last year slowly but building the right kind of portfolio. And that's why we're excited now going forward.

 Andrew?

------------------------------
 Andrew Whittock,  Liberum Capital - Analyst   [62]
------------------------------
 It's Andrew Whittock from Liberum. Just a couple of very quick questions I hope. Just going back to Senegal, can I just ask again what the work commitment is and when the exploration period is going to end?

 And secondly for Jann, can you just give us some guidance for G&A costs this year?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [63]
------------------------------
 The first one, work commitment, yes, there's a well.

------------------------------
 Andrew Whittock,  Liberum Capital - Analyst   [64]
------------------------------
 Just the one well?

------------------------------
 Mike Watts,  Cairn Energy plc - Deputy Chief Executive   [65]
------------------------------
 Yes, we're going to drill a well and we'll be drilling it end of this year, beginning of next. And, sorry, what was the next question?

------------------------------
 Andrew Whittock,  Liberum Capital - Analyst   [66]
------------------------------
 Is there a -- there must be a defined exploration period?

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [67]
------------------------------
 Andrew, very clear, I think as an incoming party willing to invest in a country we have a certain amount of leverage right now and you would expect us to be in discussions with the government which we are, trying to give ourselves flexibility. That's one of the entrepreneurial edges we bring to the table as opposed to other people seeing, well, you're right up against the wall.

------------------------------
 Jann Brown,  Cairn Energy plc - Managing Director and CFO   [68]
------------------------------
 And on the G&A, there are a number of one-off costs that we incurred this year in integrating the two teams but other than stripping them out I would say it's likely to be flat.

------------------------------
 Simon Thomson,  Cairn Energy plc - Chief Executive   [69]
------------------------------
 Okay. I'm aware that we've taken up a lot of your time. In the absence of any further questions please do feel free to ask to meet with the team -- that's what they're here for -- to have a chat, but otherwise thanks very much for your time and thanks for coming.




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