Cairn Energy Shares Fall on Impairment at Kraken Field -- Update

--Cairn Energy booked an impairment after cutting its reserves estimate at the Kraken field

--The company swung to a net loss on derecognition of an asset after Indian tax authorities ordered it to sell its stake in Vedanta Ltd.

--Cairn Energy sees 2019 production in a range of 19,000 to 22,000 barrels of oil a day

 
   By Oliver Griffin 
 

Shares in Cairn Energy PLC (CNE.LN) fell Tuesday after the company said that it booked an impairment on the Kraken North Sea field following cuts to the proved and probable reserves estimate.

The U.K. oil-and-gas company said it reduced the proved and probable reserves estimate, known as 2P reserves, following reservoir underperformance.

As a result, Cairn Energy recognized a $166.3 million impairment on its financial results for the year ended Dec. 31.

However, while analysts at Citi Research described the impairment as disappointing, Kraken-field operator EnQuest PLC (ENQ.LN) said its own methods for calculating the field's 2P reserves differed to Cairn Energy's, and that its estimates were unchanged.

For 2018, Cairn Energy said it swung to a net loss of $1.14 billion, compared with a net profit of $272.8 million in the previous year.

As well as the impairment on the Kraken field, the company said it also booked a loss worth $713.1 million on derecognition of an asset after India's Income Tax Department ordered it to sell its share in Vedanta Ltd. (VEDL).

The tax authority also seized dividends that were due to the company from its shareholding in Vedanta worth $164 million.

Cairn Energy is locked in a dispute with the Indian tax authorities, and is currently awaiting an arbitration decision. Cairn said it is claiming compensation of $1.4 billion.

Revenue in 2018 soared to $410.3 million from $33.3 million in 2017, Cairn said.

While Cairn Energy faced difficulties during 2018, this year looks to be more exciting for the company.

The company forecast that its capital expenditure in 2019 will be around $300 million, up from $252 million in 2018, as an exploration program targets a billion barrels of gross resources.

Cairn Energy also said it expects production in a range of 19,000 to 22,000 barrels of oil a day in 2019.

Shares at 1040 GMT were down 4.6% at 166.70 pence. Shares in EnQuest were down 9.3% at 16.76 pence.

Write to Oliver Griffin at [e-mail]; @OliGGriffin

(END) Dow Jones Newswires

March 12, 2019 07:30 ET (11:30 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.