Cairn Energy (CNE) has been endeavouring to re-establish a revenue stream after selling the bulk of its holding in Cairn India, but apart from a new farm-in agreement with Petrosen in Senegal, there were no surprises in the group’s 2012 results. And with the possible exception of appraisal work at Skarfjell (Norway), there are few realistic price catalysts ahead of a fourth-quarter frontier exploration programme in Morocco, although the group could conceivably hive-off its residual 10 per cent stake in India.
During the year Cairn incurred $159m (£105m) in unsuccessful exploration costs compared with nearly $1bn in 2011, which was primarily linked to a drilling campaign in Greenland. Though Cairn extended a geochemical survey last year, drilling in Greenland is on ice till at least 2014 and with limited activity elsewhere, Cairn has at least been able to reduce its full-year operating loss by 78 per cent to $247m. A $267m tax-credit enabled the group to post positive earnings.
Aside from Morocco, Cairn’s focus during 2013 is on its North Sea/Atlantic coast assets, although most of this year’s work is unlikely to deliver a significant step-up in valuations. A handful of exploration/appraisal wells are in progress, with a material upgrade at Skarfjell a possibility.
With $400m in estimated 2013 capital expenditure, Investec reduced its core valuation from 267p to 225p a share based on net cash and the remaining Cairn India stake (from 112p a share in 2012).
| CAIRN ENERGY (CNE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 284p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 284-285p | 12-MONTH HIGH: | 351p | LOW: 245p |
| DIVIDEND YIELD: | nil | PE RATIO: | 39 | |
| NET ASSET VALUE: | 604¢* | NET CASH: | $1.56bn | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 0.30 | 441 | 26.9 | nil |
| 2009 | 0.23 | -73.0 | 1.40 | nil |
| 2010† | nil | -304 | -55.0 | nil |
| 2011† | nil | -1,189 | -96.0 | nil |
| 2012 | nil | -194 | 11.1 | nil |
| % change | - | - | - | - |
£1 = $1.51 *Includes intangible assets of $900m, or 149¢ a share. †Restated to reflect continuing operations post Cairn India disposal | ||||
