Bloomberg: Cairn May Boost Oil Reserves When Giving Results, Analysts Say: “Royal Dutch/Shell Group, whose stock is the worst performer of Europe's biggest oil companies this year and has said it overstated reserves, sold its stake in the Indian prospect to Cairn in 2002.” (ShellNews.net)

Posted 7 Sept 04

Sept. 6 (Bloomberg) -- Cairn Energy Plc, the largest U.K.- based oil-exploration and production company, may boost its estimate of reserves at a field in India when it reports a drop in first-half profit tomorrow, investors and analysts said.

Cairn will probably publish the result of a reserves audit of the Mangala field in Rajasthan done by consultants DeGolyer and MacNaughton. Cairn in May said the field may hold between 100 million and 275 million barrels of recoverable oil.

``They are expected to update the market on the view of oil in place and the likely recovery rate for Mangala,'' said Ivor Pether, a fund manager at Royal London Asset Management, which owns about 1.3 percent of Cairn. ``Maybe they'll tighten the range, hopefully toward the top end.''

Cairn's shares have more than trebled since January after making a discovery that analysts said was among the most important in India. Royal Dutch/Shell Group, whose stock is the worst performer of Europe's biggest oil companies this year and has said it overstated reserves, sold its stake in the Indian prospect to Cairn in 2002.

The reserves update will overshadow the release of Cairn's first-half earnings, which probably declined because of lower production and a drop in the dollar against the pound, analysts said. Cairn is scheduled to report at 7:00 a.m. London time.

Cairn is expected to have after-tax first-half profit of 15.3 million pounds ($27.2 million), down from 26.3 million pounds a year earlier, analysts at Merrill Lynch & Co. said. Deutsche Bank AG analysts expect profit of 13.8 million pounds.

Cairn shares advanced 9 pence, or 0.6 percent, at 14.83 pounds in London at 2:09 p.m. The stock's rally has made it the best performer in the U.K.'s FTSE 350 Index this year and gives Cairn a market value of 2.23 billion pounds.

Indian News

The share-price rise started Jan. 19 when Cairn said it found oil at Mangala in Rajasthan. It made two smaller discoveries nearby -- N-A and N-C -- in March and April and announced a fourth strike, at N-V-1, on Aug. 10.

``Management will probably narrow and could upgrade its estimate of recoverable reserves for Mangala and N-A,'' said Al Stanton, an analyst at Deutsche Bank, in a research note. He has a ``buy'' rating on the shares.

Cairn on May 17 said Mangala's oil in place, or oil that's less certain to be produced than recoverable reserves, is between 650 million and 1.1 billion barrels.

Cairn may join the FTSE 100 Index of the largest U.K.-listed companies after the rise in its market value this year, FTSE Group said last week. Schroders Plc, Britain's second-largest publicly traded money manager, might exit.

Joining the benchmark can boost a company's stock because funds that track the index need to buy the shares of its members. A review of the index's composition will be carried out on Wednesday and any changes will take effect on Sept. 20.

Cairn's shares are more highly rated than those of other U.K. oil companies. The stock trades at 47 times earnings, compared with 14 times for Shell Transport & Trading Co. shares and 18 times for BP Plc, Europe's biggest oil company, Bloomberg data show.

To contact the reporter on this story:

Alex Lawler in London  at alawler@bloomberg.net

To contact the editor of this story:

Tim Coulter in London at  at tcoulter@bloomberg.net

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