The chairman of Cairn Energy, Sir Bill Gammell, described 2011 as "a watershed in Cairn's corporate history" – as well he might. After a protracted wrangle over sale conditions, Cairn finally managed to offload a 40 per cent stake in Cairn India to Vedanta Resources for $5.4bn (£3.4bn). In keeping with previous practice, Cairn promptly returned $3.5bn to shareholders last month, but still retains a cash pile of $1.2bn, the equivalent of 136p a share.
Although Cairn effectively ceded control of its Indian subsidiary, it still retains a 22 per cent in the company, which could quite conceivably garner value for shareholders given a highly promising development programme in Rajasthan. Moreover, that stake alone is worth £2bn at current market prices or the equivalent of 361p per Cairn ordinary share. That's more than its own share price.
Admittedly, investors have some right to be cautious considering Cairn was left nursing a $942m exploration bill, which accounted for the bulk of last year's $1.14bn operating loss, post disappointing drilling results on four blocks within its vast exploration catchments in Greenland. Seismic survey analysis from South Greenland is expected during the second quarter, but it's unclear as to when Cairn's drilling activities will recommence, given the limited operational window in Greenland.
JPMorgan Cazenove has a core net asset value (NAV) estimate of 455p a share.
| CAIRN ENERGY (CNE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 342p | MARKET VALUE: | £1.9bn | |
| TOUCH: | 342-342p | 12-MONTH HIGH: | 537p | LOW: 288p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 607¢* | NET CASH: | $1.2bn* | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 0.29 | 1,590 | 114 | nil |
| 2008 | 0.30 | 441 | 26.9 | nil |
| 2009 | 0.23 | -73 | 1.4 | nil |
| 2010** | nil | -304 | -55 | nil |
| 2011** | nil | -1,189 | -215 | nil |
| % change | – | – | – | – |
*Adjusted for $3.5bn 'B' share return to shareholders in February 2012 £1=$1.59 | ||||
