Cairn chief Bill Gammell confident Vedanta deal will win Indian backing

Published on Monday 21 March 2011 22:02

SIR BILL Gammell, chief executive of Cairn Energy, yesterday remained confident of receiving official government approval on the sale of a majority stake the firm's Indian assets as the oil and gas explorer revealed record profits.

Gammell is in a race against time as the Indian government deliberates over the proposed sale of a 51 per cent holding in Cairn India to Vedanta Resources before 15 April.

The group agreed in August to sell the stakeholding for between $8.5 billion (5.2bn) and $9.6bn.

He stressed that getting the green light in the next few weeks was "critically important" as he confirmed he had no intention of extending the deal beyond the deadline after which time the boards of both Cairn and Vedanta would have to go back to shareholders to seek approval for an extension.

Some sources close to the Indian government have told newspapers there that the go-ahead could come as early as 28 March, when the issue is taken up in a cabinet meeting scheduled on the same day.

Cairn will retain a 22 per cent in Cairn India, which means the sale price would be at the lower end of the proposed deal value.

Although Vedanta is still a buyer of a 40 per cent stake in Cairn India, a further 20 per cent is subject to an open offer to minority shareholders in the firm.

Gammell admitted retaining a higher stake in Cairn India would reduce pay-outs promised to shareholders, but that the firm would still return a "substantial" amount.

He said: "Cairn shareholders expect 40 per cent as a base and anything above that is a bonus, and a substantial amount of that will be returned to shareholders."

Gammell added that Cairn was a "very happy holder" of a 22 per cent stake in Cairn India, particularly as the firm was enjoying a $100-a-barrel price. Cairn India is producing an estimated 125,000 barrels per day which is due to increase to 165,000 barrels a day in the second half of this year.

In 2010, Cairn moved to a full-year pre-tax profit of $577 million in 2010, compared with a loss of $27m in 2009, mainly due to the huge success of the Cairn India project.

Yesterday Mike Watts, the deputy chief executive of Cairn Energy, confirmed the explorer will push ahead with plans to drill four wells off the coast of Greenland this summer following necessary government approvals due in May.

He said two of the wells would be in the southern regions of the group's vast offshore prospect. There will be one well each in the Atammik and the Lady Franklin licences, after Cairn did a deal with partner Encana to up its share in the stake to 87.5 per cent in January.

Watt said exploring in more southerly regions would allow the firm to potentially extend its drilling season until October.Last year cold weather caused the firm shut down exploration in September.