The Hindu Business Line : Cairn Energy plans IPO in December

Cairn Energy Plc announced plans to come out with an initial public offering (IPO) for its India operations in December. The Scottish exploration major, which has discovered 3.6 billion barrels of oil reserves in Rajasthan, also said that the Group is being restructured to create two separate sub-groups — one under Cairn India and the other under a new exploration subsidiary company.

Elaborating on the public issue, Mr Kevin Hart, Finance Director, said that the IPO proceeds are to be used both to return cash to shareholders and to fund the continuing business operations in Rajasthan. Sir Bill Gammell, Chief Executive, Cairn Energy, would head the Indian subsidiary as its non-Executive Chairman.

The company plans to come out with the draft prospectus by September. A decision on the pricing of the IPO is expected by November, with listing to be done by December. The majority equity stake is to be retained by the holding company.

Cairn has planned an investment of $2 billion for its projects in India. The company has already made an investment of $2 billion in the Indian projects. Following the IPO, Cairn India is intended to be a majority owned subsidiary of Cairn listed in India.

The Cairn India sub-group would hold the entire development and exploration interests in India (including Rajasthan), except the three exploration blocks in the Ganga Valley, which will be shared with the new exploration company, that will also hold the Bangladesh assets and the exploration blocks in Nepal, said Mr Michael Watts, Exploration and New Business Director.

Asked whether this would result in Cairn India competing with the holding company Cairn Energy for fresh New Exploration Licensing Policy (NELP) rounds on offer by India, Mr Hart said that they would not compete with each other. Both the entities could, however, participate in the NELP with separate consortium partners.

Rajasthan project delayed

Cairn has delayed the production of oil from its gigantic Mangala field in Rajasthan to 2009. The company said oil production from Mangala field, the largest of the 18 discoveries Cairn has made in the Rajasthan block, has now been rescheduled to 2009.

On estimates of reserves from the Rajasthan fields, the company said independent valuer DeGolyer and McNaughton (D&M) has estimated 3.4 billion barrels of oil equivalent (BOE) in place in Rajasthan.

"Cairn estimates 3.6 billion BOE in place in Rajasthan, of which 2.2 billion BOE in place are currently under active development planning and 1.4 billion BOE in place are identified in other fields under review," it said.

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