(CNE) Cairn Energy

For Immediate Release                                                                                               17 May 2012

CAIRN ENERGY PLC ("Cairn")

Interim Management Statement

Cairn intends to announce its interim results for the six months to 30 June 2012 on Tuesday 28 August 2012.  In advance of these results, Cairn is providing information on recent operations and guidance in respect of the Group's trading performance. This information is unaudited and subject to further review.

 
Highlights

Ø Return of US$3.5 billion (bn) to shareholders in February 2012

Ø ~ 22% interest retained in Cairn India Limited (CIL)

Ø Group cash at 31 March 2012 of US$1.1bn

Ø Production from Rajasthan reached a major milestone of 175,000 barrels of oil per day (bopd) with potential remaining to produce 300,000 bopd

Ø Acquisition of Agora Oil & Gas in UK and Norwegian North Sea; completed 9 May 2012

Ø Significant oil discovery for Agora at Skarfjell prospect in Norwegian North Sea

Ø Farm out of 30.625% interest in Pitu block in Greenland to Statoil ASA

Ø Bids submitted with JV partners, Marathon Oil Company, CC Energy S.A.L and Oranje-Nassau Energie B.V., in Cyprus offshore round

Simon Thomson, Chief Executive, Cairn Energy PLC said:

"Cairn's aim is to create and capture significant value through a balanced portfolio of exploration and production assets. In 2012, we have made an excellent start in establishing that balance with the addition of Agora Oil & Gas.

This acquisition, which has already yielded the significant Skarfjell discovery, secures a building block in the North Sea where we see the opportunity to build cash flow from near term, lower risk exploration, development and production assets.

We will continue to use our considerable financial flexibility to access new opportunities that have a good strategic and commercial fit with the business to deliver future growth."

Enquiries to:

Analysts / Investors
Simon Thomson, Chief Executive
Mike Watts, Deputy Chief Executive
Jann Brown, Managing Director and CFO
David Nisbet, Corporate Affairs                                                                Tel: 0131 475 3000

Media
Patrick Handley, David Litterick
Brunswick Group LLP                                                                             Tel: 0207 404 5959

FINANCE & CORPORATE

Following the return of $3.5bn to shareholders in February 2012, Cairn held $1.1bn in cash and cash equivalents at the end of Q1 2012 to fund the ongoing capital expenditure and new business opportunities.

The valuation of Cairn's remaining ~ 22% interest in CIL, accounted for on a mark-to-market basis, is based on share price and exchange rates on that day. In the first quarter, the Group held no oil and gas producing assets and generated modest operating losses as a result of new business activities and administrative expenses.

CORPORATE

On 9 May 2012, Cairn completed the acquisition of Agora Oil & Gas (Agora), a private Norwegian Company with non-operated exploration, appraisal and development assets in the United Kingdom (UK) and Norwegian North Sea.

The total consideration was approximately US$453 million (m), satisfied through a combination of approximately 43% / US$196m cash and 57% / 47,662,603 ordinary Cairn shares.  Following the issue of these shares, the total issued share capital of Cairn is 602,375,300 shares.

 
The transaction is an important step forward in Cairn's stated goal of expanding its portfolio by adding lower risk, near-term exploration, appraisal and development assets to complement transformational frontier exploration, resulting in a more balanced overall business. Agora has participated in the recent UK North Sea bid round in conjunction with a number of operators.  As a subsidiary of Cairn, Agora is likely to expand its exploration efforts and develop its relationships further with increased equity positions across the portfolio. The acquisition includes Agora's 15% stake in the Catcher area planned for development and a 40% interest in the Tybalt discovery, which both have ongoing drilling programmes

OPERATIONS

North Sea

Cairn is participating in three wells that are currently drilling in the UK Continental Shelf (UKCS): the Timon exploration well (P1633; Agora 25%), the Carnaby exploration well (P1430; Agora 15%) and the Tybalt appraisal well (P1632; Agora 40%).

Cairn is also expected to participate in the upcoming Norwegian APA licensing round.

Skarfjell discovery (Cairn 20%)

On 16 April, Agora announced that Wintershall Norge AS, as the operator of Norwegian production licence 418 (Agora 20%), was in the process of completing drilling of wildcat well 35/9-7 in the north-eastern Norwegian North Sea as an oil discovery.

The well drilled on the Skarfjell Prospect is located approximately 17 kilometres (km) southwest of the Gjøa Field between the Grosbeak Discovery in PL378 to the south and the Titan Discovery in PL420 to the north. The well found very good quality upper Jurassic reservoir sandstone containing light oil over a 168 metres (m) gross interval. No fluid contact was observed and down dip appraisal is therefore required to establish the height of the oil column in the Skarfjell structure.

 
An estimated preliminary resource range is between 60 and 160m barrels of recoverable oil. The discovery is likely to be commercial and a new 3D seismic acquisition programme over the discovery is already underway. With the potential for a stand-alone commercial discovery, Skarfjell could also act as a hub for stranded discoveries in this part of the Norwegian North Sea.  The licence group will now focus on integrating the well and seismic data in order to plan the required appraisal programme for the discovery. The 35/9-7 well has now been permanently plugged and abandoned.

The well was drilled by the Songa Delta drilling unit to a vertical depth of 2,976m below the sea surface and terminated in the Middle Jurassic Brent Gp / Rannoch Fm. Water depth at the site is 368m.

Cladhan South (Cairn 20%)

The 210/29c-5 Cladhan South exploration well in the UK Northern North Sea has been plugged and abandoned. The Cladhan South prospect was located approximately 7km south of the Cladhan field in a separate seismically defined Upper Jurassic reservoir fairway. No clear evidence of hydrocarbons was seen in the reservoir section drilled.

Tybalt (Cairn 40%)

Subsequent to the announcement of Cairn's acquisition of Agora, a farm-in agreement has been reached with Valiant Petroleum plc in respect of the Tybalt appraisal well, located in Blocks 211/8c & 13c in the UK Northern North Sea.  Cairn has increased its interest in Tybalt to 40% in return for a partial cost carry. Valiant will remain operator with a 60% interest. The Tybalt well is currently drilling ahead with the Borgsten Dolphin semi-submersible rig, with results anticipated during this month.

Timon (Cairn 25%)

The WilHunter semi-submersible drilling rig is on location to drill the Timon prospect (Agora 25%) located in the UK Northern North Sea in Blocks 211/11b and 211/16b. The well has spudded and is expected to complete in June.

Timon is an Upper Jurassic channelised sand play similar to the Cladhan and Tybalt discoveries also located in the UK Northern North Sea.

Carnaby (Cairn 15%)

Operations have begun on the Carnaby exploration well in the UK Central North Sea block 28/9 (Agora 15%). This is a prospect in the Greater Catcher area, testing additional volumes in the Eocene and Palecocene stratigraphic levels.  The well is expected to complete in Q2 2012.

Greenland

Cairn has established the leading early entry position in the frontier basins offshore Greenland.

The first phase of Cairn's pioneering exploration activity has confirmed that the necessary geological elements for success are present across the Greenlandic basins. Whilst no commercial quantities of hydrocarbons were found during 2010/11, a very considerable body of proprietary data has been gathered for future evaluation. All the necessary ingredients for a potential discovery have been encountered. The second exploration phase will be at reduced equity levels with financial exposure shared among partners.

The farm-out of an interest to Statoil in the Pitu block in the undrilled Baffin Bay Basin, announced in January, demonstrates that the second phase of the exploration strategy is underway. Cairn is delighted to be working with Statoil on this block given its extensive knowledge of, and track record in exploration, development and production in the Arctic.

The 3D seismic acquired over parts of Pitu in H1 2011 is currently being processed, with the final 3D migrated results expected during the summer. Depending on the outcome of the mapping and technical evaluation, exploration drilling of one or more Pitu prospects is currently targeted for 2014 subject to the approval of the Government of Greenland.

Also in Baffin Bay, Cairn is participating this year in a joint deep borehole drilling programme to be operated by Shell on behalf of an industry consortium which includes Conoco, Statoil, GdF and Maersk. This extensive core gathering programme, comprising at least 10 planned 800m boreholes, will provide valuable stratigraphic information, which can be extrapolated across the undrilled Baffin Bay Basin.  This planned drilling activity, subject to Government of Greenland approval, is expected to take place in H2 2012.

In South Greenland, where Cairn also acquired a 3D seismic survey in 2011, we will continue to evaluate and will progress to further exploration activity once partners have been brought in.  The interim processed 3D results, received at the end of April, suggest the acreage to be highly prospective and we expect final 3D migrated results in Q2 2012.

Mediterranean

The Mediterranean is one of Cairn's areas of focus as the business seeks exposure to transformational exploration potential within a sustainable and balanced portfolio.

Cairn is currently in the early stages of carrying out frontier exploration in Spain and also expects to participate in the offshore Lebanon bid round, expected later this year.

Cyprus

Cairn, via its operating subsidiary Capricorn Oil Limited, is participating along with consortium partners in the current bid round offshore Cyprus.  Bids were submitted on 11 May with awards expected towards the end of the year. Cairn holds a 40% share in the bidding consortium and other partners comprise Marathon Oil Company (40%), CC Energy S.A.L (an associated company of the CCC Group of companies, a Lebanese private company) (10%) and Oranje-Nassau Energie B.V. (10%).  Cyprus offers early stage frontier exploration acreage with moderate technical risk. A number of recent discoveries in the region have stimulated industry interest in a potential new source of gas, most likely for European markets.

CAIRN INDIA

Cairn has a 22% interest in CIL. Recent highlights from CIL include:

Ø Rajasthan potential resource for the block is now estimated at 7.3bn boe in place, up from 6.5bn in place

Ø Rajasthan resource base supports a basin potential to produce 300,000 bopd

Ø Net unrisked exploration potential for the entire portfolio stands at 2.1bn boe

Ø Post Government of India approval for higher Mangala offtake of 150,000 bopd, production from the block is  currently at 175,000 bopd

Ø Bhagyam field, the second largest discovery in the block, commenced production in January 2012; currently producing ~25,000 bopd

Ø Mangala Processing Terminal integrated production facilities supports production of more than 175,000 bopd in line with unified block offtake capability

NOTES TO EDITORS

Cairn Energy PLC

Ø Cairn Energy PLC ("Cairn") is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange.

Ø "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries as appropriate.

Ø Cairn currently holds approximately 22% of the issued share capital of Cairn India Limited (CIL).  Production from CIL's Rajasthan operations is 175,000 bopd.

Ø Cairn (including Capricorn) is run from Edinburgh with operational offices in Kathmandu, Nuuk, Madrid and Stavanger.

Cairn in Greenland

Ø Cairn through its subsidiary, Capricorn, operates 11 blocks offshore Greenland.

Ø Cairn carried out extensive Environmental and Social Impact Assessments to identify how potential environmental and social impacts of its drilling programme can be avoided or mitigated.

Ø A total of 14 exploration wells have been drilled offshore Greenland to date, five of which were drilled in the 1970s, one in 2000, three in 2010 by Cairn Energy and five by Cairn Energy in 2011.

Agora Oil & Gas

Ø Agora is now 100% owned by Cairn

Ø Formed in October 2009 by the former management team of Revus Energy ASA and based in Stavanger, Norway.  Agora has focused on creating exploration and appraisal value in mature parts of the North Sea in areas of low-moderate geological and operational risk.

Ø Agora Gross Assets were NOK 717,941,000 which at 31 December equated to $120,101,208.  The Group had no profits for the year.  Loss for the year was NOK 50,347,000 or $8,978,700.

Ø Agora's Board of Directors is led by Chairman Andrew Armour and Chief Executive Svein Ilebekk.  The senior management team includes Tim Sullivan (Deputy CEO and UK Manager), Chris Elliott (Exploration Manager), Erik Samuelsen (Commercial Manager), Ingrid Landråk (Chief Financial Officer) and Callum Smyth (HSE & Operational Manager). 

Ø Agora has 15 employees who are based in Stavanger and the UK.

For further information on Cairn please see: www.cairnenergy.com