Cairnآ’s preoccupation with IPO halts BG sale talks

Vol 9, PW 25 (06 Apr 06) Exploration & Production
     

Cairn Energy has postponed talks to sell a small chunk of its Indian portfolio to British Gas fast emerging as a significant upstream player in India.

PETROWATCH learns preliminary discussions between the two UK-listed companies began sometime in the middle of March. Soon after, both companies began talks on signing confidentiality agreements.

These agreements were to be signed towards the end of March. Following this, Cairn was to set up a dataroom so that BG experts could view data.

But last week Cairn is learnt to have informed BG that it would be unable to move the talks forward because of the pending public listing of its Indian operations on the Mumbai Stock Exchange. Cairn has four major assets in India: the producing Ravva oil and gasfield offshore Andhra Pradesh; the producing Lakshmi (gas) and Gauri (gas and oil) fields offshore Gujarat; a 10% stake in eastern offshore KG basin deepwater block KG-DWN-98/2, where it originally held 100% participating interest but sold off 90% in September 2003 to ONGC; and finally, the companys Jewel in the Crown block RJ-ON-90/1 in Rajasthan, where the Mangala discovery counts as the single largest onland oil discovery in the country since ONGC discovered the Gandhar oilfield in Gujarat in 1984.

Mangala and Cairns other discoveries on the Rajasthan block are expected to go on production only in 2007-08. Cairn also has 30% participating interests in each of two ONGC NELP blocks GV-ONN-97/1 and CB-ONN-2001/1.

Besides, Cairn has interests in several other NELP blocks. Analysts describe as prudent Cairns decision to put off its talks with BG till the IPO is over.

Investors would have been confused to learn that Cairn is in talks with BG to sell its Indian assets and is also planning a public listing, says an analyst. It is not good for BG.

If the response to the IPO is good Cairn can ask a higher price from BG.