07-09-04 Bill Gammell, CEO of the FTSE 100-bound oil and gas explorer Cairn Energy, has ruled out selling any parts of the business, including the group's Rajasthan fields in India.
"We have no plans to dispose of Rajasthan," Gammell told. Cairn will keep Rajasthan -- which is believed to hold oil in place of over 2 bn barrels -- "right through the development" of the fields, he said. The sale of any parts of the group's business is also out of the plan, he said. He assured that Cairn has "tremendous financial flexibility" to fund the vast Rajasthan project.

Gammell was responding to speculation that the group may opt to cash in on Rajasthan following the series of oil strikes this year, sending Cairn's share price soaring for the past months. He declined to comment on persistent bid talks hounding the company, with analysts citing France's Total and Indian state-owned Oil and Natural Gas Co as among the likely predators.
The development of Mangala, the first of the five major discoveries in Rajasthan, and the N-A fields to bring them into production in three years' time will need about $ 500 mm, the CEO said.

Cairn currently has about $ 185 mm in cash and $ 240 mm in credit facility. Mangala and N-A fields are scheduled to come on stream in the fourth quarter of 2007 with production of anywhere between 60,000 and 100,000 bpd of oil.
Mangala alone is seen to have oil in place of 1 bn barrels, with recoverable reserves of 100-320 mm barrels, according to estimates checked by independent auditor DeGolyer and MacNaughton. An update on the N-A field will be published before the end of the year once it has completed the evaluation of the appraisal well, Gammell said.

Cairn will be stepping up its exploration work in India, carrying out a "drill-till-we-drop" programme in the coming months. To date, it has drilled 40 wells in Rajasthan. It will be spudding at least 15 holes in the coming months, and running five rigs at the same time until May 2005 when the exploration work on the block is set to end.
But Gammell tried to douse investors' enthusiasm over the project, as he preferred that the group "underpromise and overdeliver" on its performance.
"We think Rajasthan has a lot of potentials but we have to wait and see. We're still in the embryonic stage in exploring and understanding the fields. There's still an awful lot of things to do," he said.

Cairn gave the Rajasthan fields update after it delivered a pre-tax profit of £ 22.9 mm in the first half, down from 38.3 mm last time, after turnover fell 22 % to £ 61 mm, hit by the fall of the US dollar against the sterling.
Average production has fallen to 24,799 bpd of oil equivalent from 30,625 previously, as Cairn's share of the output in Ravva and Sangu fields decline.