Cairn Energy may sell part of its 62.37% stake in Cairn India but will not exit the business, the Indian subsidiary’s chief executive, Rahul Dhir, said yesterday.
Edinburgh-based Cairn and India-focused mining giant Vedanta Resources confirmed on Thursday they were in talks about Cairn India, but both parties said there was no certainty a disposal would follow or on the terms of any such deal.
Buying into Bombay-listed Cairn India would be the diversified miner’s first move into oil and gas.
Cairn India shares rose 4.4% yesterday, valuing the company at £8.99billion.
It has huge resources in the north-west Indian state of Rajasthan, where it has the potential to pump up to 240,000 barrels of oil per day; double the current rate of production.
Analysts at Evolution Securities said yesterday that Cairn Energy selling part of its stake in the Indian business made sense because it could monetise part of the value in the subcontinent now and free up cash for expensive exploration offshore Greenland, where the Edinburgh group is exploring for millions of barrels of oil.
Evolution said retaining a stake in the subsidiary would also enable Cairn Energy to benefit from any further exploration upside and enhanced recovery of reserves from existing developments.
Other analysts have said a move by Vedanta into oil and gas would stretch the global mining giant’s financial resources because it is already committed to investing heavily in mining and in buying Anglo American’s zinc assets for more than £850million.
Credit Suisse has said oil and gas would not be a strategic fit for Vedanta and would be a strange move away from its core business.
Cairn Energy shares added 3.4% at 468.3p while Vedanta slid nearly 6% at £20.53.