Cairn Energy’s share price falls on full-year results, asset sales and acquisition news

The Cairn Energy share price has fallen on Tuesday. Here’s what it’s had to say on its full-year results and plans to sell its Kraken and Catcher assets.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

.The Cairn Energy (LSE: CNE) share price has fallen in Tuesday trade so far following a string of market updates. The UK oil share has since pared gains but, at 192p per share, it remains 3% down from Monday’s close.

Cairn Energy announced today that revenues slumped 26% year-on-year in 2020 to $324.5m. This was due to the collapse in oil prices which accompanied the Covid-19 outbreak and the subsequent economic downturn. Cairn realised an average price of $42.56 a barrel last year versus the $65.70 it achieved back in 2019.

Meanwhile, production costs rose 12% between 2020 and the previous year to $75.9m. This added to Cairn Energy’s woes and, as a consequence, the company swung to a pre-tax loss of $117.5m. This compares with the profit of $119.2m the oilie reported back in 2019.

Production drops too

On the production front, Cairn Energy said that its net average was 21,350 barrels of oil equivalent per day in 2020. This was in line with guidance, but down from the 23,739 barrels which it reported in 2019.

The fossil fuel giant said production at its Kraken asset in the North Sea “remained strong throughout the year.” Production here averaged around 37,500 barrels of oil equivalent a day, up from approximately 35,600 barrels in 2019. But output at its offshore Catcher field was less impressive. Operational problems in the fourth quarter meant production here averaged around 51,200 barrels per day in 2020. This was down from around 67,200 a day the previous year.

Big changes at Cairn Energy

Tuesday’s been a busy day over at Cairn Energy. On top of those full-year results, the oil company announced big changes to its asset portfolio.

First off, Cairn announced its intention to sell its interests in Kraken and Catcher to Waldorf Production Limited for $460m. An additional contingent will be payable depending upon oil prices between now and 2025 too.

Cairn Energy said that “the divestment of these assets, as they fall into natural decline, will further strengthen our ability to pursue Cairn’s strategic goals.

Oil rig

The company also announced it plans to acquire “a portfolio of upstream oil and gas production, development and exploration interests” from Royal Dutch Shell with fellow fossil fuel explorer Cheiron.

The assets — which are located in Egypt’s Western Desert region — will initially cost a combined $646m. An additional $280m will be payable on certain requirements being met. Cairn and Cheiron will be liable for a 50/50 split on these amounts.

Cairn Energy said that the portfolio “offers low cost production, near-term development and exploration potential, provides immediate operating cashflow contribution and adjusts our overall hydrocarbon split towards gas.”

The company estimates that the assets will add between 33,000 and 38,000 barrels of oil equivalent a day to group production in 2021. Approximately two-thirds of this total is comprised of natural gas.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

How I’m trying to make a million from passive income

Invest as much as possible, regularly, and use the passive income to plough back into more shares. Here's how millionaires…

Read more »

Investing Articles

I’d buy 30,434 shares of this UK dividend stock to target £175 a month in passive income

A top insider has spent over £1m buying this 9%-yielding passive income share over the last year. Roland Head explains…

Read more »

Growth Shares

Should I buy Rolls-Royce shares for 2025?

Edward Sheldon’s missed out on the huge gains that Rolls-Royce shares have generated this year. But should he buy the…

Read more »

Investing Articles

30,000 shares in this FTSE 250 REIT could earn me £559 a month in passive income

Real estate investment trusts can be great passive income investments. And Stephen Wright likes one from the FTSE 250 with…

Read more »