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Wednesday, September 06, 2006

Cairn on track for Dec. India IPO, field delayed

UK-based oil explorer Cairn Energy Plc is on track for an Initial Public Offering of its Indian operations in December but said its biggest oil field would come onstream later than planned, knocking its shares.

Cairn added in a statement on Tuesday that its oil reserves were slightly higher than earlier stated but investors were disappointed there were no significant reserves additions, which they had grown used to the Edinburgh-based company reporting.

Cairn's shares traded down 3.12 per cent at 2050 pence at 0737 GMT, compared to a 0.13 per cent rise in the DJ Stoxx European oil and gas sector index.

Cairn is planning to float its Indian oil and gas assets -- which account for over 90 per cent of the company's value, analysts said -- on the Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE).

Chief Executive Bill Gammell said in the statement that Cairn intended to retain a majority stake in Cairn India, as the unit controlling the assets is called, following the IPO.

The startup of the key Mangala field is delayed to 2009 due to tightness in the market for oil services, Chief Financial Officer Kevin Hart said on a conference call with journalists. The field was originally due to come online in 2007.

Richard Rose at Oriel Securities said the delay was "not wholly surprising".

Hart said that Cairn was considering becoming involved in building a pipeline to transport the oil at its Rajasthan fields to a refinery, to avoid further delays.

Earlier, it was envisaged that a state-owned oil company would build the pipeline and a new refinery to process the crude.

Cairn also increased its estimates of expected recoverable reserves at its three largest fields to 820 million barrels from 795 million barrels, exploration director Michael Watts said.

Cairn added that its pre-tax profit, excluding exceptional items, fell to $12.7 million on the first half, from $48.5 million in the same period last year, partly due to a 2 per cent fall in production and a 35 per cent rise in average, per barrel, production costs.

The company made a net loss of $5.8 million, after tax and exceptional items including a $5.7 million write-down in the value of a gas field.

However, as the vast majority of Cairn's value is tied up in non-producing fields, investors are generally not very concerned about the profitability of day to day operations.

State-run explorer Oil and Natural Gas Corp. Ltd. (ONGC) is Cairn's partner in its core Rajasthan assets.

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