Cairn Energy unveiled a surprise management shake-up today, opting for a more streamline board and dispatching two directors to India to sort out its tax dispute on the sub-continent.
The Edinburgh-based driller, which was thrown into turmoil earlier this year as Indian tax authorities appeared to line up a retrospective tax grab, is dispensing with the roles of deputy chief executive and managing director.
Chief financial officer Jann Brown, who was also MD, is leaving the board and will be replaced in the finance role by James Smith, who recently joined the firm from Rothschild.
Like Brown, deputy chief executive Mike Watts will stand down at the firm’s annual meeting next month. However, both will remain at Cairn for at least the rest of the year, on a mission to resolve the tax dispute.
In January, the company was contacted by India’s income tax department to discuss tax assessments for the year ending March 2007.
The firm has been co-operating and has now provided the documentation requested, and has so far not been issued with an additional bill.
However, the group has also been ordered not to sell its remaining shares in its former subsidiary Cairn India while the discussions continue.
The stake is valued at about $1 billion (£600m) and was intended to fund Cairn’s latest exploratory programme across the Atlantic margin. Its inability to access the cash has weighed heavily on Cairn’s share price. The firm insists its operations do not fall under the net of India’s 2012 retrospective tax law, which prompted the request for information.
Watts headed Cairn’s Indian exploration programme, which eventually made the group’s fortunes. Brown was closely involved in the flotation of Cairn India and its sale to Vedanta Resources.
With a general election in India promising a change of government, it is understood that the experienced duo are to spend much of their remaining time with the company lobbying for the dispute to be resolved.
Chief executive Simon Thomson said: “I would like to thank Mike and Jann, both for their instrumental contribution to the growth of Cairn over the years and for agreeing to remain in their new roles seeking a resolution of the Indian tax matter.
“The changes announced today offer the best way of organising our business for the future – both in delivering our ongoing balanced growth strategy and in dealing with the situation in India.
“I am delighted to announce James’s appointment. James has been a trusted adviser to Cairn for years, and I look forward to working with him, the rest of the board and senior management team in delivering our strategic objectives.”
Analysts expressed some surprise at the move, but pointed out that both the executives who are leaving are in their late 50s, whereas Smith is in his 30s and Thomson – who took over from founder Sir Bill Gammell in 2011 – is in his 40s.
Gammell is stepping down as chairman at the meeting on 15 May, and will be replaced by former Balfour Beatty boss Ian Tyler.
It was also announced today that Brown will join Wood Group as a non-executive director, and will chair the its audit committee.