Investors in explorer Cairn Energy were toasting the prospect yesterday of a £5.5billion windfall from the Indian oil fields it bought control of more than a decade ago for only £4.7million.
Edinburgh-based Cairn owns 62.4% of Cairn India, which struck oil in Rajasthan in 2004 and has kept finding more since.
Cairn’s chief executive is former Scottish rugby international Sir Bill Gammell.
Sir Bill stands to gain the best part of £10million from his own shareholding in Cairn and Mike Watts, his deputy chief executive, around £6million from his stake, although this will depend on how much of the cash mountain Cairn decides to return to investors.
Sir Bill said yesterday shareholders would get more than 50% of the net proceeds.
Cairn is selling most of its stake in Cairn India for up to £5.5billion after buying out Shell from a 50-50 exploration joint venture between 1997 and 2002 before the transformational discovery six years ago.
The sale of up to 51% to India-focused miner Vedanta Resources will allow Cairn to invest more resources in its Greenland drilling activities, where it is targeting billions of barrels of potential reserves.
Cairn first entered India in the early 1990s and made the discovery in the Mangala field in 2004. This was the largest onshore discovery in India for more than 20 years and propelled Cairn India to become the country’s fourth-largest oil and gas company.
The company, which has interests in 11 blocks in India and Sri Lanka, has since made 25 further discoveries.
Cairn will sell a maximum 51% of the Indian business to Vedanta, leaving the firm with a minimum stake of about 11% in the company.
Other major shareholders in Cairn India are institutions with 20.2% and Malaysian state oil company Petronas with 14.9%.
Sir Bill, who attended Fettes College in Scotland with former prime minister Tony Blair, said yesterday: “I’m very happy. This is a good deal all round.
“We’re selling 40% initially and have another 11% locked in at a good price. Our retained stake of about 11% will give us good value going forward as Vedanta is committed to investing and developing in Rajasthan.
“We don’t know yet how much of the proceeds will be spent on drilling offshore Greenland. That will depend on progress there.”
Shares in Cairn rose 5.3% to 493.2p yesterday, but Numis Securities analyst Sanjeev Bahl said Cairn would be a “very different kettle of fish” following the sale.
He said: “The large proportion of the company’s value will be in its high-risk/reward Greenland exploration portfolio.
“This high percentage of exploration exposure, and implied share price volatility, may not appeal to those with lower risk appetites.”
Vedanta Resources was up 100p to £21.53.