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Cairn storms on after Indian field breaches forecasts

Daily Telegraph: Cairn storms on after Indian field breaches forecasts

“Cairn has now found 2.5billion barrels of oil – 1.7billion of which have already been verified by independent consultant DeGolyer & MacNaughton – since January last year.”: “The company has drilled 100 wells – 12 of which have struck black gold – on a field the same size as 12 North Sea blocks. Cairn bought the prospect from Shell for just $7.25m (£4m) in 2002.”

Wednesday 21 Sept 2005

By Christopher Hope, Business Correspondent (Filed: 21/09/2005)

Cairn Energy’s shares gushed through £20 yesterday after the Scottish oil explorer boosted forecast daily production from its key Indian field again and said it was confident of finding more oil there.

Bill Gammell, chief executive, also moved to reassure investors concerned that the Indian government might step into take a bigger chunk of the field in Rajasthan, north-west India.

Cairn said its daily production would be “in excess of 150,000bpd” from the fields, ahead of the previous range of 120,000bpd to 150,000bpd and more than double the 60,000bpd forecast this time last year.

Asked how high the daily figure might rise again, Mr Gammell said: “There’s no bar on the potential to what we can do in Rajasthan. Whatever it is, it will be in excess of 150,000bpd.”

Cairn has now found 2.5billion barrels of oil – 1.7billion of which have already been verified by independent consultant DeGolyer & MacNaughton – since January last year.

The company has drilled 100 wells – 12 of which have struck black gold – on a field the same size as 12 North Sea blocks. Cairn bought the prospect from Shell for just $7.25m (£4m) in 2002.

Mr Gammell said: “We have a reasonable expectation that we will continue to find oil. What size we don’t know. It is going to continue to make discoveries.”

The ongoing success of Rajasthan has forced Cairn to delay the likely start date of major oil production from the end of 2007 to mid-2008.

The company has to spend $750m in capital expenditure before it can start pumping. Once full production gets underway, the field will net £1billion of annual cash flows. Mr Gammell is forecasting oil to stay at around $50 a barrel for the next five years.

The company believes India’s desire for more indigenous production combined with attracting greater inward investment meant the reserves were secure from state tampering. Currently about half the revenues go to the Indian government.

The company yesterday unveiled first half pre-tax profits of £31.2m, up 1.3pc, on turnover ahead 6pc to £65.6m. No dividend was paid, although Mr Gammell said one might be considered when production starts in India after 2008. The shares, which started the year around £11, closed up 95 at £20.09.

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