The Edinburgh-based oil and gas explorer also revealed it racked up losses of more than $1 billion (£603 million) last year as it wrote down the value of its assets and counted the cost of unsuccessful exploration in the North Sea and off the coast of Morocco.
Cairn has returned almost $95m to investors through its share buyback programme, but is halting further purchases while talks continue with India’s income tax department. It has also been prevented from selling its 10 per cent stake in former subsidiary Cairn India, valued at about $1bn.
Chief executive Simon Thomson told The Scotsman: “We instituted the buyback with the ambition of buying back up to $300m of stock, to be reviewed quarterly. We’d prefer to be buying stock, but it’s prudent for us, given the uncertainty of the tax issue in India, to suspend the buyback.”
The firm will next month send information requested by the tax authorities, but Thomson was unable to say when the dispute might be resolved.
He added: “There’s a lot of work for us to gather that information, which dates back to 2006, and there’s a fairly fluid timescale in relation to how long the tax authorities may have to respond to that. We’re 100 per cent focused on getting this resolved as soon as we can.”
The suspension of the buyback programme sent Cairn’s shares tumbling, and they ended the day down 14.4 per cent at 168.2p. The move came as Cairn revealed deeper pre-tax losses from continuing operations of $1.1bn for 2013, compared with $194.2m the previous year, as it suffered write-downs and increased costs for unsuccessful exploration.
On Monday, the firm said it had abandoned a well off the coast of Morocco, where failed exploration efforts cost it $107m last year. The firm also took an $81m hit from unsuccessful wells in the UK and Norwegian sectors of the North Sea.
Cairn, which has put its exploration plans in Greenland on ice to focus on the North Sea and so-called Atlantic Margin, also wrote down the value of its Catcher asset – hailed as the biggest North Sea find since 2001 – by $251m.
However, Thomson insisted the group was “very upbeat” about its prospects, adding: “We’ve got a lot of flexibility in our portfolio.”
Analysts at SP Angel said: “While the success at the drill bit has been elusive to date, we believe that the increasingly balanced portfolio will enable the company to weather any setbacks caused by the exploration dry holes.”
Yesterday’s results were the last under the chairmanship of Sir Bill Gammell, the former Scotland rugby international who founded Cairn in 1981. He is set to be replaced by former Balfour Beatty chief executive Ian Tyler in May.
While the heads of oil giants BP and Shell have both said they would prefer to see Scotland remain part of the UK, Thomson would not be drawn on Cairn’s views over the outcome of September’s referendum.
He said: “We’re proud to be a Scottish company with our head office in Edinburgh, but we’re just looking for stability – that’s what’s important to us as a company and an industry.”