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Cairn suspends share buyback

RESULTS: Cairn Energy has suspended its share buyback scheme and could scale back exploration next year if an Indian tax probe goes against it
March 19, 2014

Shares in Cairn Energy (CNE) plunged 12 per cent after the beleaguered oil explorer said it was suspending its $300m (£180m) share buyback programme in order to preserve capital. Cairn did not provide any fresh guidance in its financial results relating to the Indian tax probe disclosed in January, but has prudently initiated a review of its capital allocation after 2014.

IC TIP: Sell at 177p

The financial figures for 2013 show why. Strip out $543m of tax credits and Cairn recorded pre-tax losses of $1.1bn last year, roughly split between goodwill impairments, administrative and exploration expenses, and write-offs relating to oil and gas assets. Net cash stood at a healthy $1.25bn at 31 December, but that's down from $1.6bn a year ago. Cairn continues to discuss reserve-based borrowing facilities with lenders for its Catcher and Kraken field developments in the North Sea.

Still, Cairn is unable to sell its $1bn residual stake in Cairn India while the tax assessment is ongoing. Analysts from Investec suggest there won't be any progress until May at the earliest, following India's general elections, while analysts from Canaccord Genuity note press rumours that Cairn received a $1.3bn tax demand in February - substantially larger than previously thought.

CAIRN ENERGY (CNE)

ORD PRICE:177pMARKET VALUE:£1.0bn
TOUCH:176-177p12-MONTH HIGH:310pLOW: 176p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:551¢*NET CASH:$1.25bn

Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
20090.2-0.11nil
2010nil-0.3-55nil
2011nil-1.2-96nil
2012nil-0.211nil
2013nil-1.1-93nil
% change----

*Includes intangible assets of $662m, or 114¢ a share

£1=$1.67