By Toby Shelley: Published: November 2 2006 02:00 | Last updated: November 2 2006 02:00
Cairn Energy expects to receive gross cash proceeds of at least £618m from the sale of 30.5 per cent of its Indian operations when they are floated on the Bombay Stock Exchange in December.
The UK company disappointed some investors last month when it said it would retain 69.5 per cent of the new Cairn India, thus reducing the likely cash pay-out to shareholders.
Cairn had previously suggested as much as 49 per cent might be sold.
However, yesterday it did not rule out future sales of tranches of its majority stake, subject to Indian law.
Cairn said it would seek ways to maximise shareholder value, including the sale of Cairn India shares.
The floor price for book-building will value Cairn India – essentially the Rajasthan oilfields bought from Shell and which are set to transform the company into a leading producer – at £2.7bn, of which some £316.3m will be retained for continuing capital requirements. The amount to be returned to shareholders and the manner of its return have yet to be decided.
The flotation is to be put to shareholders for approval at an extraordinary meeting on November 17.
The residual assets of Cairn are largely gas production in Bangladesh and exploration acreage in Nepal and northern India.
These will be run by a new company to be known as Capricorn, which will be wholly-owned by the Cairn group. Capricorn will have a non-compete agreement with Cairn India.
Fields under development in Rajasthan alone are estimated to contain proven and probable reserves of 864m barrels of oil equivalent (boe).
First oil from Rajasthan is expected to flow towards the end of the year. However, production from the large Mangala field is facing some delay and the company said in September that first oil was now expected in 2009.
Cairn shares rose 18p to close at £17.73, down from a £25.68 high in May and valuing the company at £2.84bn.
Copyright The Financial Times Limited 2006
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