UK independent oil and gas producer Cairn Energy should be in good position when it reports its full year results on 12 March.
According to the company’s operational update in January FTSE 250-listed Cairn Energy has started 2019 with balance sheet strength and planned to fund some of its exploration projects with cash flow from its North Sea production.
Cairn Energy results come as the underlying oil market is being pushed and pulled in different directions. On the one side there is Russia, Saudi Arabia and the rest of the oil cartel, OPEC, who are all trying to make sure crude oil prices don’t slide back to below $40 a barrel as they did in 2016. On the other is President Trump who is less than keen on high oil prices as it directly effects the cost of living of his voter base.
While Russia and Saudi have been cutting production for the last three months nudging prices closer to the $70 mark, Trump has taken to Twitter whenever they moved much higher than $65. This is crucial for Cairn Energy as the company sold its oil last year at an average price of $68 per barrel of oil equivalent but managed to keep production costs at a relatively low $20.
At the time of its update the time the company said that its revenues from oil and gas sales were approximately $395 million. Its capital expenditure was fairly high in relation to the revenue, at around $335 million, but the company plans to bring that down to around $305 million in 2019.
The company has three major development projects on the go: the SNE field in Senegal which is 40% owned by Cairn, the Nova field in the Norwegian North Sea where the company has a 20%^ stake and the Catcher field in the UK. The three are at different stages of progress with the Senegal field expecting a final investment decision by mid-2019, the Catcher subsea project awaiting project sanction and the Nova field being the further down the line with production expected to start in 2021.
The progress in Senegal though steady remains relatively slow while the company attempts to jump over all the legal and regulatory local hurdles. But in all, with oil prices at current level the company will be in a good position to finance its projects over the year ahead.
Cairn Energy shares are currently trading at 199.5p.