Shares in Scottish oil explorer Cairn Energy fell back yesterday after it revealed another major loss.
Despite posting a $381 million loss for the year to December 31 the return represented progress from a year earlier, when the company was $556m in the red.
However, the Edinburgh-based firm insisted it was entering 2015 in a “strong position”, and revealed plans to increase its exploration activity in what it described as a “world-class asset” offshore Senegal.
The firm was confident about the prospects for its main North Sea assets, Kraken and Catcher, which it said were on track to produce first oil in 2017, with peak net production of circa 22,500 barrels of oil per day.
In his review of the year, chairman Ian Tyler admitted it had been a tough period for Cairn and the wider industry.
He highlighted the decline in the price of oil and an unresolved tax issue in India, which has seen the firm’s $1 billion stake in Cairn India frozen for months, as major obstacles for the business during the year.
“2014 was a challenging year both for Cairn and for the wider E&P (exploration and production) industry,” Mr Tyler said.
“In January, Cairn was notified of the previous Indian Government’s decision to freeze our 10% holding in Cairn India Ltd, following the introduction of retrospective tax legislation.
“During the second half of the year, and continuing into 2015, oil prices have fallen sharply, causing all players in the sector to reassess capital plans and focus on cost efficiency.”
Chief executive Simon Thomson said the business had taken a number of measures during 2014 to position itself for growth.
Among the steps he highlighted were the Senegalese discoveries, participation in the latest UK and Norwegian licensing rounds, the sale of a 10% interest in Catcher through a farm-out agreement with Dyas UK, and the maturing of prospects across the firm’s portfolio to “drill-ready status” for 2015/16.
However, he also said the “unexpected” Indian issue had led to a major restructure.
“First of all, the time for bringing in debt refinancing for our North Sea development activities was accelerated,” he said.
“Secondly, the business was reorganised to ensure we had the right size of company for the work programme ahead. The priority was to retain and protect the core technical, commercial and financial competencies which form the foundation of Cairn, whilst outsourcing non-core capabilities and reducing costs.
“The resulting new organisational structure was completed in early 2015 with a 40% reduction in the number of employees and contractors in the business.
“Thirdly, we looked to rebalance our portfolio.”
Mr Thomson said the measures had strengthened Cairn and it was positioned to deliver an “exciting” programme in 2015, especially in Senegal.
He added: “We have built a diverse and balanced portfolio and created the financial flexibility to progress our exploration, appraisal and development programmes.”
Shares in Cairn closed the day down 7.42% or 14.70p at 183.40p.