Cairn Energy
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| The [Neutral point of view>neutrality] of this article is [NPOV disputedisputed]. Please see the discussion on the [Some of the information in this has not been [Verifiabilityverified] and might not be reliable. It should be checked for inaccuracies and modified as needed, [cite sourcesciting sources]. Cairn Energy Plc is an independent oil exploration and production company. Its headquarters are based in Scotland and it is listed on the London Stock Exchange. The company was founded by Bill Gammell, who remains its CEO. It rejoined the FTSE 100 Index after the September 2005 reshuffle. According to their web site, the company has operations in the North Sea, and is seeking expansion in South Asia, where they currently (2006) hold material exploration and production positions in West and East India and Bangladesh.
Company ImageThe company sees itself as a dynamic and entrepreneurial company that is willing to take a number of large risks which traditional risk-averse larger integrated oil companies (such as BP and Royal Dutch Shell) would shy away from. They see this is as a core strategy in expanding their commercial reserves by gaining as much of the ownership of a field as possible early on and then go on to create value through exploration. This is a risky strategy where the risks are as big as the rewards but in Cairns case they have paid off. This was especially evident at the Sangu gas field in Bangladesh where they decided to go it alone and drill an 8 million dollar well when their total company cash reserves were just 50 million dollars. This field though is a success now and helps provide 18% of the country's energy needs and is worth an estimated 500 million dollars at current international gas prices. This scenario was repeated several times in the following years in the Rava, Gujarat and Rajasthan fields.RajasthanOil and gas fields and exploration blocks in Rajasthan are currently Cairn's largest asset in India. A large part of the company’s value is dependent on reserves estimates (as with all oil and gas exploration and production companies) and revisions to the estimates for these fields has led to large gains and losses in the share price depending on the amount of recoverable hydrocarbons estimated to be in situ.The company projects that the three key Rajasthan fields will produce as much as 150,000 barrels of oil per day at their peak. Cairn was involved in a frantic exploration and drilling stage trying to turn as much as their licensing field into development area before their license ran out in May 2005, as the conditions of the auction of oil and gas exploration blocks in India dictate that the un-developed area will revert back to the government for resale. However, due to the size of the field and Cairn's commitment, this agreement has been revised. Cairn has been involved in the field for almost 10 years, initially as a small partner, with Shell. This increased to an even partner as early indications from the field (called Mangala) looked promising. Several wells were drilled during this joint ownership with Shell and hydrocarbons were demonstrated to be present, however they were all relatively small gas fields. Shell took this as a sign that there was little to be had from this area and put their remaining 50% up for sale. Cairn took the view that they were on the tip of a huge field in a previously unexplored area. They readily took the remaining shares and stepped up exploration. Since then it has been confirmed that there is over 1 billion barrels of oil in place with an estimated 330 million barrels recoverable. Future ExplorationCairn's new area of potential exploration is along the border of Nepal and India and has an underlying geology which is the reverse of some of the big Canadian fields in Alberta (see Athabasca Oil Sands for more detail). They hope this area will prove to be equally successful. This though is subject to the security state in the region due to the civil unrest in Nepal.Company StrategyCairn’s business strategy in the past has involved acquiring large initial positions in potential exploration areas and then, by establishing large commercial reserves through successful exploration drilling and production, add value to the company for shareholders. They also seek to exploit their unique position in South Asia as one of the few companies that have extensive relations with the member state’s governments and where possible to employ as many local representatives of the community as possible, thereby integrating themselves even further (and possibly mitigating any negative backlash from local peoples and politicians). Their future plans see them moving away from their jigsaw approach to business as they become sufficiently secure to hold onto their successful exploration assets and still carry out further new exploration and development. Where previously to finance this further development Cairn would have had to sell off some of their core assets, the company is now sufficiently well-capitalised that it can afford to fund development without any divestment of producing assets.References
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