CAIRN Energy chief executive Simon Thomson has said the company still expects to expand in the North Sea following the slump in oil prices as he underlined the profitability of its operations in the area.

While the start of a price war between Saudi Arabia and Russia at the weekend sent the Brent crude price plunging, Mr Thomson said the setback had not changed the company’s attitude to the North Sea.

“We are still moving forward,” declared Mr Thomson, who underlined his confidence in a strategy which has seen Cairn invest heavily in bringing fields into production off Scotland in recent years.

His confidence has not been dented by the fall in the Brent crude price from $50 per barrel on Friday to the low 30s on Monday. Brent has regained some ground since. It sold for $37.36/bbl yesterday afternoon.

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Mr Thomson’s bullish view will be welcomed amid concern the fall in oil prices this year could choke off the muted recovery in the North Sea. The area was hit hard by the fallout from the slump in the crude price from 2014 to 2016.

On Monday industry leaders said North Sea oil companies would be “immensely cautious” about their spending plans as they watched the situation unfold.

Mr Thomson said Cairn was eyeing North Sea developments on which it could make money with Brent trading at less than $20/bbl.

He was speaking after Edinburgh-based Cairn posted an annual operating profit of $155m (£120m).

The profit was generated on production from the Catcher and Kraken fields, which lie off Aberdeen and Shetland respectively. Cairn developed the fields with partners.

The companies produced oil from the fields for an average $17.40 per barrel last year.

Cairn is confident enough about the long-term prospects for Kraken that it has increased its valuation of the field by around $150m.

The increase is based on the assumption that the Brent crude price will average $65/bbl over the long term.

Mr Thomson believes that remains reasonable following the near 50% fall in the price this year.

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He said oil and gas are likely to remain a key part of the energy mix for years.

Oil and gas firms started to increase spending amid the partial recovery in the crude price that followed moves by Opec members and Russia to curb production to support the market.

The taps could be opened wide again after Russia last week rebuffed calls by Saudi Arabia for the curbs to be intensified to help offset the fall in demand triggered by the coronavirus.

Mr Thomson reckons Cairn is well place to cope with market turbulence.

The cash generated in the North Sea has helped the firm maintain a strong balance sheet.

Mr Thomson said Cairn had made good progress in other parts of the world in recent months.

In January the company gave the green light to a plan to develop a 500 million barrel discovery it made in 2014 off Senegal.

The company expects to achieve first oil from the field concerned, Sangomar, in 2023.

Cairn moved into Senegal under Mr Thomson’s plan to combine exploration work in what are seen as frontier areas with lower risk activity in the North Sea.

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Cairn cut its valuation of Kraken by $166m in 2018 following initial production problems. The impairment has been fully reversed. Cairn made an operating loss of $129m in 2018.

It recently made a find off Mexico estimated to contain up to 300 million barrels with Italy’s Eni.

Cairn expects to get a resolution to a long-running tax case in India in coming months.

This is being considered by an international tribunal, which is expected to announce a decision in the summer.

Cairn is seeking $1.4 billion compensation from the Indian government in respect of the case. It concerns events leading up to the 2007 flotation in India of Cairn’s former subsidiary in the country.

Cairn insists it has paid all taxes due. Mr Thomson said the company remains as confident as ever of its position.

Cairn made big finds in India under its founder Sir Bill Gammell.

Barclays analyst James Hosie said: “Cairn had a good 2019, but the significance of this is heavily diluted by the developing macro outlook for 2020.”

He added: “Positively, for Cairn it enters 2020 with no drawn debt and production assets that have been performing well.”

Cairn shares closed down 13.6p at 71.75p.