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From 20 Janaury 2004: Financial Times: Shell shocked as reject field strikes it rich

By Joanna Chung in London
Jan 20, 2004 

Royal Dutch/Shell, under pressure after slashing reserves estimates this month, suffered another blow yesterday when it emerged it sold its stake in an oil field that could be one of the finds of the year.

Shell sold its 50 per cent interest in the Rajasthan Basin in western India to Cairn Energy, the UK independent, for $7.25m (£4.1m) in September 2002. Cairn’s shares soared 49 per cent yesterday after it announced “a significant discovery” potentially worth 75 times as much.

Kevin Hart, Cairn’s finance director, praised Shell for setting up the site. “Shell did a wonderful job of negotiating with the government.” The find is one of the biggest in India and could be one of the largest in the world this year, analysts say.

Cairn said initial estimates for the oil in place are 450m-1.1bn barrels. Estimates for oil that could be recovered are 50m-200m barrels. Merrill Lynch analysts estimated that the net present value of the reserves to Cairn was $140m-$560m. Shell surprised investors on January 9 by cutting its estimate of reserves by 20 per cent, after recategorising wells.

Bill Gammell, Cairn’s chief executive, said: “One could go a lifetime in the oil industry and not be as lucky.” Cairn’s shares closed up 182¼p at 552¼p.

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