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Cairn Energy Pre-tax Loss Widens On Unsuccessful Exploration Costs - Update

UK-based exploration firm Cairn Energy Plc (CNE.L) on Tuesday reported a sharply wider pre-tax loss from continuing operations for 2011, hurt mainly by unsuccessful exploration costs and impairment that surged from last year. The company managed to post a profit for the year, thanks to a hefty sale gain related to assets in India.

Pre-tax loss from continuing operations totaled $1.19 billion, wider than $303.6 million last year.

Profit from discontinued operations climbed to $5.75 billion from $1.39 billion, owing mainly to a $4.39 billion gain on disposal of a 40 percent interest in Cairn India to Vedanta Resources (VED.L).

Profit attributable to equityholders of the parent climbed to $4.10 billion from $794.3 million. The company reported an operating loss of $1.14 billion for the year, compared to last year's $298.9 million loss. The unsuccessful exploration costs for the year include $732 million in relation to the drilling campaign in 2011 and $210 million from the 2010 campaign relating to the Alpha-1 well drilled on the Eqqua block. Another $141 million was charged as an impairment relating to non-drilling costs and goodwill.

Production increased to 168,010 boepd from 126,360 boepd at an average price realised of $106.02 per boe, compared to last year's $69.17 per boe. Looking ahead, the company is still hopeful of hitting it big in Greenland. Cairn currently operates 11 blocks in Greenland, with a combined area of 102,000 square km.

"Commercial quantities of hydrocarbons have yet to be discovered, but the first phase of our exploration programme in Greenland has demonstrated that all of the geological ingredients necessary for success are present,'' said Simon Thomson, Chief Executive of the company.

Cairn said its main exploration focus in 2012 will switch to the Pitu Licence in the Baffin Bay area over which 3D seismic and geochemical seabed sampling surveys were acquired in 2011.

The company believes the combination of cash on the balance sheet and its residual holding in Cairn India now provides a strong platform to enter a new phase of growth opportunities in 2012 and beyond.

CNE.L closed on Monday at 331.90 pence, down 1.20 pence or 0.36 percent, on a volume of 3.85 million shares.

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by RTT Staff Writer

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