Finding the right buyer for Cairn at the right price

Vol 6, PW 6 (22 May 02) Exploration & Production

ONGC is only the latest in a long line of companies that have talked to Cairn about its India and Bangladesh assets.

"The phones haven't stopped ringing for the past year," we learn. "We have had lots of inquiries, many of them useless." Among the serious ones were from Unocal, British Gas, British Petroleum, BHP Billiton, Reliance and Shell.

But each took a long, hard look at Cairn's assets and decided not to go ahead. "They certainly have some good assets but we feel the price is too high," one company tells us.

Apparently Cairn has been asking for a little over $1bn - an amount nobody is willing to pay. We are told Cairn was offered much lower prices, ranging from $400m to $500m but rejected them.

"Reliance felt Cairn was asking an unreasonable price for its domestic assets." Potential buyers had issues about Bangladesh too. "Export of gas from Bangladesh is a remote possibility," he adds.

"There is no possibility of an early return so is it worth the price" Many spurned suitors are now waiting for Cairn to drop its price. Said one: "Cairn does not have enough money to develop its exploration assets.

It can't monetise many of its producing assets fast enough either. They will reach a point when they will not be able to go ahead unless they find a partner.

Cairn's speciality is exploration, not development and operating oil and gasfields." Some of Cairn's shareholders are keen to cash in on its assets as soon as possible. "Cairn will be forced to reduce its price," he adds.

"They have no choice."