Sunday Telegraph: Cairn's Indian oil find comes in at the top end of City forecasts: “Investors have become concerned about reserves bookings in the wake of the debacle at Royal Dutch/Shell. The Anglo-Dutch oil giant shocked the market in January by revealing it had overbooked its reserves by 25 per cent.” (ShellNews.net)
By Sylvia Pfeifer (Filed: 05/09/2004)
Cairn Energy will this week delight the City by revealing that reserves at its giant oil field in India are at the top end of forecasts.
An external audit report is understood to have concluded that the giant "Mangala" field in Rajasthan, northern India, holds close to 1.1bn barrels of oil.
The report says the field is likely to yield close to 275m barrels of oil - at the upper end of the previously estimated range of "recoverable" reserves of 100m to 275m barrels.
Cairn will publish the results of the reserves audit, carried out by Dallas-based oil reserves consultants, DeGolyer and MacNaughton, on Tuesday when it announces interim results. The company, led by Bill Gammell, the chief executive, has been a stock market sensation this year after its share price quadrupled following its four Indian discoveries. It is on course to enter the FTSE100 index this week.
Cairn appointed DeGolyer and MacNaugthon a few months ago in bid to reassure investors that the reserves figure presented to the City is watertight.
Investors have become concerned about reserves bookings in the wake of the debacle at Royal Dutch/Shell. The Anglo-Dutch oil giant shocked the market in January by revealing it had overbooked its reserves by 25 per cent.
Industry analysts believe the positive external audit will reassure investors that the premium in Cairn's share price is justified.
"A reserves report which endorses the upper end of the range says a lot about the fact that Cairn's management can be trusted to give investors an accurate view of things," said one analyst last night.
Cairn is also expected to announce details of its extensive exploration programme, which spans the size of 30 North Sea blocks. So far, it has drilled 25 exploration wells in Rajasthan and it plans another 15 by the end of the year.
Analysts will also want to find out whether the company decides to develop Rajasthan or sell it to a larger company. So far the board has insisted it can develop its Indian interests after it raised £100m in a placing in July.
Cairn has until next May, when its Rajasthan exploration licences expire, to decide.
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