Oil firm sees profits dive 40 per cent

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The Independent Online

High-flying oil and gas explorer Cairn Energy today blamed the weak US dollar for a 40-per-cent fall in interim pre-tax profits to £22.9 million.

Cairn, expected to be promoted to the prestigious FTSE 100 Index of top flight firms today after several company-transforming oil finds, said the dollar's decline against sterling since last year had a "huge impact" on turnover, which fell 22 per cent to £61.1 million.

The group added that higher production costs and the impact of its recent acquisition of Shell's interest in the Sangu gas field in Bangladesh - which doubled its stake in the field to 75 per cent, but was not included in the half-yearly profit and loss account - also contributed to the fall.

The Edinburgh-based company's prospects have been transformed in 2004 by a string of discoveries at a site in India that it bought from Shell two years ago.

Last month, it celebrated its fourth major discovery at the site in northern Rajasthan.

Chairman Norman Murray said Cairn remained excited about its prospects because it was still at an embryonic stage of exploring and understanding the potential of the Rajasthan basin.

"We remain ideally placed to further accelerate our drilling programme in Rajasthan whilst also pursuing the other growth opportunities in our south Asian portfolio," he said.

Chief executive Bill Gammell set up the company in the 1980s and has switched its focus to South Asia from interests in the US and Europe. It operates in Bangladesh and Nepal as well as India.

Cairn has seen its share price triple since January when it announced the first of 10 finds in Rajasthan on an oil field purchased from Shell for £4 million in 2002.

It said the success had resulted in a substantial increase in operational activity and confirmed Rajasthan as the group's major focus area.

The group said an independent assessment had found one billion barrels of oil at the Mangala site in the Rajasthan field, with more than two billion barrels estimated to have been discovered to date in the basin as a whole.

The group said it had completed the acquisition of Shell's upstream assets in Bangladesh, with the Sangu gas field so far generating almost 500 million US dollars of gross revenue.