Financial Times: Cairn Energy share placing set to raise £100m: “fourfold jump in its share price”: “field it acquired from Shell”

By Friederike Tiesenhausen Cave

Jul 03, 2004

Cairn Energy yesterday cashed in on the fourfold jump in its share price since the start of the year by placing 7.5m shares to raise approximately £100m.

The Edinburgh-based company has become one of the outstanding successes on the London Stock Exchange this year after striking oil three times in Rajasthan, western India, in a field it acquired from Shell, the oil and gas group.

Bill Gammell, chief executive, said: "The proceeds of the placing will provide additional flexibility for ongoing operations, supporting accelerated development of existing discoveries and further exploration activities in Rajasthan."

Shares in Cairn have risen from 400p in January to more than £14 in June, giving Cairn a market capitalisation of more than £2bn. However, yesterday's announcement of a 5 per cent increase in the issued capital sent the shares down 45p to £13.65.

Market sources said the placing, run as an accelerated bookbuild by Hoare Govett, was covered within hours. The shares went to institutional investors at a little less than the market price. Canaccord, Cairn's other broker, acted as joint global co-ordinator.

Richard Rose, oil analyst at Oriel Securities, said there was currently great demand for the stock as it was sought after by fund managers investing in large as well as in small companies and because today's share placing created some extra liquidity.

Mr Rose explained: "Cairn is still the largest stock on the Hoare Govett Small Companies Index. But unless there is a major disappointment, the company is also going to be promoted to the FTSE 100 at the next reweighting."

Several industry analysts commented that the placing had a slightly opportunistic air about it. Richard Slade at Seymour Pierce said: "There isn't a really pressing need to raise £100m now. I would have expected them to get a better handling on the licence situation first and then put a financial package [on how to fund further drilling] to the market."

Cairn said it had applied to the Indian government to declare its three existing discoveries in Rajasthan commercial and to obtain a production licence. The company is also doing seismic mapping of two blocks in Bangladesh, which it last year agreed to buy from Shell for $50m (£29m) plus future royalties.

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