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Cairn Energy upgraded as analyst eyes exploration catalysts and a possible Indian windfall

Published: 12:28 29 Jan 2018 GMT

oil and gas operations
Cairn is entering a new ten-well programme

RBC Capital has upgraded its target for Cairn Energy PLC (LON:CNE) as the oiler could later this year see a long awaited windfall, when a protracted arbitration over its former Indian business comes to a close.

The new target of 300p sees some 34.5% upside to the current price of 223p.

READ: Cairn Energy estimates 2018 net production of 17,000 to 20,000 barrels of oil per day

“On conclusion of the International arbitration in Q4/18, Cairn could be awarded $1.3bn (172p/share) vs $1.8bn market cap,” RBC analyst Nathan Piper said in a note.

“A 'significant amount' is expected to be passed onto shareholders.

“This cost-free optionality combines with Cairn's existing virtues; debt-free, self-funded with an extensive exploration portfolio.”

Piper, meanwhile, highlighted the successes with two new North Sea oil fields, Catcher and Kraken, which supports Cairn’s production-based growth, meanwhile, the exploration portfolio provides further catalysts.

READ: Cairn Energy shares on back foot as final India hearing slides to August 2018

“The company plans to drill ten exploration wells offshore UK/Norway ($60m post-tax cost) and two exploration wells offshore Mexico over the next two years,” the analyst added.

“We view this as an overall campaign of drilling that offers investors unrisked upside of 402p/share and 92p/share downside our overall 369p/share risked NAV (ex arbitration) over the next 24 months.”

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