Cairn Energy shares rocketed 11 per cent today as the oil and gas firm reported it had swung back into the black after significant losses last year.
The London-listed firm had suffered sizeable losses on impairments and a disastrous investment in Indian copper miner Vedanta Resources, but made a profit of more than £30m in the first half of 2019.
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Cairn Energy’s pretax profits came to $43.4m (£35m), a swing from more than $1bn in losses for the whole of last year.
Revenue from oil and gas sales was $257m, with an average realised price of $68 per barrel of oil equivalent (boe). This was helped by a rise in oil and gas production to 23,700 barrels of oil equivalent per day (boepd), having been 14,400 boepd in the first half of 2018.
Net cash inflow from oil and gas production was $177m, while cash outflow was $135m. Group cash at 30 June was $58m.
Why it’s interesting
Net production was higher than expected at Cairn, and it has upgraded its full-year guidance to 21,000 to 23,000 boepd, marking a significant turnaround from March’s losses.
Brewin Dolphin investment manager John Moore said: “Sustained production at its Catcher Area development in the North Sea, as well as an improved outlook at Kraken will encourage investors in the short term and reflecting this, revenue from production in the first half of 2019 sits at more than £257m compared to just over £174m for the same period last year.
“Looking ahead, Cairn has established a position in up to 14 wells next year, is about to start drilling offshore in Mexico, and its development in Senegal is on target. All of this makes for positive momentum for the company, which any further increase in the oil price would add to.”
What Cairn Energy said
Chief executive Simon Thomson said: “As a full cycle exploration and production business Cairn has seen good progress in the first half of 2019 with the opportunity to develop and deliver multiple catalysts for future growth.
“Production performance from our North Sea assets is ahead of expectations, delivering significant cash flow to reinvest in the portfolio.
“Our drilling programme is about to commence offshore Mexico, where Cairn has built a material footprint in one of the world’s most prolific basins. Recent portfolio acreage additions provide line of sight to future high potential exploration prospects.”