Daily Telegraph: Cairn joins the big time and pledges to go it alone: “Mr Gammell was generous to Shell, the crisis-hit major that sold its 50pc in the concession for just $7.5m three years ago.”: “Cairn also admitted that it had sold some gas assets in Bangladesh for $180m in 1996 to Shell, only to buy them back this year for $50m, netting Cairn a profit of $130m at Shell's expense.” (ShellNews.net)
By Christopher Hope, Business Correspondent (Filed: 08/09/2004)
Cairn Energy, the £2.3 billion Scottish oil explorer that will enter the FTSE 100 index this month, yesterday said it had no plans to share its five billion barrel oil find in India with one of the oil majors.
Cairn also announced that it had found oil for the fifth time in eight months on its concession in Rajasthan, northern India, but added that it had no idea about its scale.
Bill Gammell, chief executive, insisted that Cairn had the capability and resources to develop the concession alone, scotching suggestions that it would have to rely on a bigger partner.
He said: "When I started this company in 1980 with two people, I assumed that everyone was brighter than me. I no longer think that they are smarter. I have a high regard for the team - why did Greece win Euro 2004?"
Mr Gammell insisted that Cairn had enough cash - it raised £103m in June - to exploit the oil it has so far found in Rajasthan. The first oil is due to be extracted towards the end of 2007.
Before then, Cairn has to construct a mini-town, with a school and hospital, for the thousands of workers needed to develop the field. Cairn and its Indian partner ONGC must also build a pipeline between the field and existing infrastructure, which will take any oil to two refineries in Delhi.
Mr Gammell was generous to Shell, the crisis-hit major that sold its 50pc in the concession for just $7.5m three years ago. He said: "Beauty is in the eye of the beholder." Cairn also admitted that it had sold some gas assets in Bangladesh for $180m in 1996 to Shell, only to buy them back this year for $50m, netting Cairn a profit of $130m at Shell's expense.
Cairn is now planning to increase its drilling rate on the concession - the equivalent to 30 North Sea blocks - between now and the end of the year.
The company is in a race to drill exploration wells across the concession before May, when its licence runs out. It can ask for an extension from the Indian government if it has not completed the drilling programme.
Cairn has so far drilled 22 exploration wells, 10 of which have been successful. It estimates that total oil ranged from two billion to five billion barrels, of which between 400m and 1.25 billion could be recoverable. Only about one billion total barrels have been checked by consultants so far.
Despite the news from India, Cairn's half-year results showed pre-tax profits down 40pc to £22.9m, caused by the effects of the exchange rate and an increased take from its Indian partners.
There was also a £3.2m provision to pay for Cairn's directors' long-term incentive performance bonus, which is linked to the shares, which jumped from 401p to £14.10 by the end of June.
Analysts are now expecting Cairn's directors to collect another bonus of more than £6m in the second half if the share price remains at current levels. Cairn's shares yesterday closed down 24 at £14.50. The company is due to enter the FTSE100 at around number 75, pushing out Bradford & Bingley.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/09/08/cncairn08.xml