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Sir Bill’s treatment at Cairn will make every board quake

The giant oil field sold for a song by Shell… it sold its 50% share to Cairn for $7.5 million, now worth billions…

James Ashton 24 Jan 2012

The momentum gained by the Government’s war on executive pay meant it was bound to claim some victims. The only surprise is that Sir Bill Gammell has become its first. As the chief executive of Cairn Energy, he was a stock market darling. The success he enjoyed after buying an unwanted Indian exploration site from Royal Dutch Shell has passed into oil industry folklore.

Cairn, which now has a market value of £4 billion, can thank the £4.5 million acquisition of an Indian exploration site for its good fortune. Sir Bill, a former Scottish rugby international, saw potential there after the big boys had given up trying. A similar spirit has given it the confidence to hunt for oil in far-flung corners of the world such as Greenland.

It is the partial sale of the Indian business which has got Sir Bill into trouble with investors now.

Cairn is offloading a 40% stake in its Indian subsidiary to fellow shareholder Vedanta Resources for a welcome £3.5?billion, with £2.2?billion coming straight back to shareholders.

There are few greater examples of value creation that can be linked directly to a single executive.

However, the mistake the board made was to misjudge the current mood.



Financial Times: Pioneer will be closely watched as it ventures into true frontier

By Ed Crooks

Published: January 5 2010 02:00 | Last updated: January 5 2010 02:00

Cairn Energy made its name spotting an opportunity that large oil companies had missed. Its giant fields in Rajasthan, in north-west India, which came into production last year, had been rejected as unpromising by Royal Dutch Shell.

Now Cairn, valued at just under £5bn, is aiming to repeat the trick in Greenland.

Not wanting to be caught out again, many of the world’s biggest oil companies, including ExxonMobil and Chevron of the US and Statoil of Norway, are following close behind.



But the disposal programme has also had the effect of highlighting some gaffes – the major discoveries in Rajasthan which have propelled Cairn Energy into the FTSE 100 index were found on acreage sold for a song by Shell.

Shell then sold its 50% share to Cairn for $7.5 million

‘Rajasthan oil find looked like West Texas’

Its most lucrative decision was to prospect in the Rajasthan region in the north-west of India. Drilling a desert prospect sold for a song by accident-prone Royal Dutch Shell yielded Cairn one of the country’s largest-ever finds and catapulted it into the FTSE 100.

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