LONDON (Alliance News) - Cairn Energy PLC said Tuesday it swung to a loss in the first half of its financial year on the back of constrained production and downtime and fair value losses.
For the six months to June 30, the oil & gas production company posted a pretax loss of USD602.9 million, compared to a USD77.7 million profit in the half-year period last year. This was due to the company swinging to a USD319.4 million loss on the fair value of its financial assets compared to a USD200.5 million profit the year prior.
The swing to a loss on financial assets was mainly caused by Cairn's 3% stake in Vedanta Ltd. Cairn recognized a USD230.8 million loss on the holding, after it was sold on the demand of the Indian tax authority and USD231 million in proceeds from the sale seized. Cairn said it remains confident of its legal position in the tax dispute.
Meanwhile, Cairn's half-year revenue multiplied to USD182.4 million from USD10.8 million a year ago, with revenue from gas and oil sales at USD172.1 million after adjusting for hedging transactions.
The steep increase in revenue was due to Kraken and Catcher - two UK North Sea assets in which the company owns a 29.5% interest and 20% stake respectively - entering into production in June 2017 and December 2017.
Cairn, which owns assets in the UK and Norway and it is currently developing in Senegal, said it "made strong progress across its balanced portfolio" in the recent half.
Cairn said: "Cash flow from the North Sea is now established and development projects in Senegal and Norway are well advanced to support the production base over the long term.
"This continued strategic delivery, together with our strong balance sheet, ensures Cairn remains well-positioned to access material value growth potential."
During the half-year, production at Catcher averaged 27,000 barrels of oil equivalent per day as it was constrained while ramp-up continued. In August, Catcher produced up to 60,000 boepd.
At Kraken, total average production was 30,700 boepd as a result of planned and unplanned production downtime.
Combined production net to Cairn from the two UK fields in the first half averaged 14,400 boepd. The company now expects combined net production in the second half to average 20,500 to 22,000 boepd.
At the Nova development in Norway, in which Cairn holds a 20% interest, the plan for development and operation has been submitted in the first half. Cairn expects to deliver 50,000 barrels of oil per day, of which 10,000 will be net to the company, from 2021.
Cairn Energy shares were trading down 5.0% at 220.40 pence each, the worst faller in the FTSE 250 index of London mid-caps.