Cairn Energy hit by Greenland drilling costs
Unsuccessful exploration costs charged during the year of $942m include $732m in relation to the 2011 drilling campaign and $210m from the 2010 campaign relating to the Alpha-1 well drilled on the Eqqua block. A further $141m was charged as an impairment relating to non-drilling costs and goodwill as noted above.
Administration costs were $33m, down from $35m in 2010. Non-cash items within administrative expenses include $3.7m (2010: $2.5m) of depreciation and amortisation costs and $6.5m (2010: $9.2m) of share-based payment charges. Exceptional administration costs of $6.7m relate to share-based payments arising on the replacement LTIP awards.
Following receipts from the sale of the 30% tranche of Cairn India to Vedanta in December, $3.5bn was converted to £2.3bn to allow the cash return to shareholders to be made in Sterling. This Sterling cash balance generated accounting exchange losses of $39m out of a group total of $41m to the year end, although these losses have reversed in 2012. Finance costs incurred of $14m relate to charges associated with the Group's facilities which were cancelled during the year.
The Group made a profit from discontinued operations of $5,755m. This consists of the year-to-date profits of Cairn India to the date of disposal on 7th December of $1.362bn and a $4.392bn gain on disposal.
Profits for the year to date of disposal for Cairn India ($1.362bn) reflect gross production in the year of 168,010 boepd (2010: 126,360 boepd) at an average price realised of $106.02 per boe (2010: $69.17 per boe). Prior to completing the sale to Vedanta, Cairn had agreed to allow Royalty paid by its Joint Venture partner in Rajasthan to be recovered as a contract cost, which reduced Cairn India's revenues by $629m.
The Group generated operating cash flows of $1,913m during the year (2010: $837m). The Cairn India Group generated operating cash flows to the date of disposal of $1,922m (2010: $875m) offsetting the operating outflows of the Group's continuing operations.
Investing cash inflows were $2,671m (2010: outflow of $1,388m) include the net cash impact of the Vedanta transaction of $4,722m reduced by expenditure of $963m on exploration/appraisal activities and a further $407m of development expenditure in Cairn India. Net proceeds received from the Vedanta transaction were $5,433m while $712m of cash and cash equivalents of Cairn India were derecognised on disposal. Exploration expenditure includes $831m largely related to Greenland drilling costs in the continuing group and $132m in Cairn India. Financing cash outflows of $394m (2010: $19m) reflect repayments of borrowings and debentures in Cairn India prior to disposal.
Closing cash and cash equivalents of the Group at the year end were $4,731m. There were no amounts on deposits greater than three months (2010: $626m with $453m on bank deposits; $438m and $453m relating to discontinued operations).
Post year end, $3,530m of cash has been returned to shareholders in February 2012 through a B share scheme, with a further $23m expected to be returned in April 2012.
Oil and gas assets at 31 December 2011 were $80.8m (2010: $262.8m).
Simon Thomson, CEO, said: 'Cairn has delivered on its key objectives for 2011: completion of the sale of 40% of Cairn India, the return of $3.5 bn to shareholders and the farm-down of the Pitu block in Greenland to Statoil.
'With full cycle capabilities and balance sheet strength, Cairn is well positioned to create significant value from transformational exploration, within a well balanced portfolio of exploration and production assets.'
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