Oil prices rebounded to within sight of their January and February trading range last week, and this was just one of the several positive factors pushing up the share price of our Value Tip of the Year Cairn Energy (CNE). The first came from VR-1 appraisal well offshore Senegal, which was drilled 5km west of the line of wells which include the major SNE-1 discovery. This revealed "reservoirs within the oil column as anticipated", and sands that were "better and slightly thicker than previously encountered". While a secondary exploration target was deemed non-commercial, the drilling programme is reported to be ahead of schedule and under budget.
Second, Cairn announced plans to sell its residual stake in Mumbai-listed Vedanta Limited, which the FTSE 250 group received as part payment for its sale of Cairn India in 2010. Cairn Energy says its 10 per cent holding in Cairn India is equivalent to a 5 per cent interest in Vedanta Limited, or $656m.
The annual report also contained details of chief executive Simon Thomson's revamped bonus package which, if approved at next month's AGM, will be reduced from 500 per cent to 375 per cent of his basic salary and with a greater focus on short-term performance. On average, analysts are expecting Cairn to book a pre-tax loss of $87.7m and an adjusted loss per share of 11.4¢ this year, swinging to profits of $88m and 12.5¢ in 2018.
