Cairn net profits sky-rocket, upbeat on Vedanta deal

Cairn net profits sky-rocket, upbeat on Vedanta deal

London: Cairn Energy Plc raised expectations of Indian approval for the long-delayed sale of a stake in its Indian business to Vedanta Resources, as the UK oil explorer posted a return to profit in 2010.

The group agreed in August to sell up to 51% of Cairn India for up to $9.6 billion, in a closely-watched deal which is still awaiting Indian government approval.

Shares in Cairn were up 1% to 424 pence at 1015 GMT.

“Cairn continues to believe the necessary approvals to complete the Vedanta transaction will be received and is working with the government of India in a positive and constructive manner," chief executive Bill Gammell said in a statement.

Cairn said earlier in March it hoped to complete the divestment, which will see it return substantial amounts of cash to shareholders and enable it to focus on exploration in Greenland, by 15 April.

“It’s a sensitive issue and therefore the timeline is difficult to say. The only thing I would say is under the sales purchase agreement, by 15 April we need to know whether that approval is happening or not," Gammell told reporters.

“We continue to believe that both parties are committed to the deal and that the April 15 deadline would be extended in the event of government of India approval either being granted, or at the very least, imminent," Royal Bank of Scotland analyst Phil Corbett said.

Arctic prospects

Cairn, which in 2010 drilled three wells north of the Arctic Circle as part of the first exploration campaign in Greenland for a decade, said it would also look to drill south of the Arctic Circle in 2011.

The company is hoping to open up a new oil province in Greenland, which energy consultancy Wood Mackenzie estimates could have oil reserves of 20 billion barrels.

“We’ve specialised over many years of going into frontier areas ahead of the pack," said Gammell.

He added that the company was looking to add new opportunities to its portfolio, but would not give details on which geographies were of interest.

Cairn moved to a full-year pretax profit of $577 million in 2010, after it started oil production in India, compared with a loss of $27 million in 2009.

The consensus forecast for pretax profit was for $665 million from a range of $522 million to $928 million, according to a Thomson Reuters poll of 18 analysts.

Deputy chief executive Mike Watts said that the company was well-financed to pay for exploration in Greenland.

“Cairn is sufficiently funded through Plc cash of $187 million and an undrawn committed loan facility of $900 million to ensure it can meet all of its commitments even if the Vedanta deal drags on into the Summer," Evolution Securities analyst Richard Griffiths said.