Mining firm agrees to pay up to $9.6 billion for Cairn India

By OGJ editors
HOUSTON, Aug. 16
-- Vendata Resources PLC, London, has entered a conditional agreement with Cairn Energy under which it will pay as much as $9.6 billion in cash for up to 60% of Cairn’s Indian subsidiary.

The deal, which is subject to regulatory and shareholder approvals, includes an offer for publicly held shares of the subsidiary, Cairn India. Cairn Energy now owns 62.4% in Cairn India.

Depending on outcome of the public offer, Vendata would hold 31-40% of Cairn India directly, and Sesa Goa Ltd., a Panaji, India, iron ore company in which Vendata holds a 57.1% interest, would hold 20%.

Cairn India holds interests in 11 blocks in India and Sri Lanka.

Its main project is development of three oil fields in Rajasthan, the first of which, Mangala, went on stream in August 2009 and now produces about 125,000 b/d of oil. Pipeline sales began last June via a 590-km, continuously heated and insulated pipeline between a terminal near the fields at Barmer and Salaya, near the refining center at Jamnagar.

The Indian government has approved production of 175,000 b/d from Mangala and nearby Bhagyam and Aishwarhya fields. Cairn India holds a 70% interest in the Rajasthan area, where it has reported 25 discoveries. State-owned Oil & Natural Gas Corp. holds the remainder.

Cairn India also operates producing Block PKGM-1 in the Krishna-Godavari basin off eastern India and Block CB/OS-2 in the Cambay basin off western India. It holds equity interests in eight nonproducing blocks under varying stages of exploration.

Cairn Energy said it would use proceeds of the deal to “advance its exploration program in its frontier basin positions in Greenland” and seek growth opportunities. In addition to its Greenland positions, the company has production and exploratory interests in Bangladesh, frontier exploratory interests in Nepal, and exploration licenses in the Mediterranean region.

If the transaction proceeds, Cairn Energy will receive $6.65-8.48 billion and hold 10.6-21.6% of Cairn India at completion.

At yearend 2009, Cairn India had gross assets of $3.07 billion. For the quarter that ended June 30, it reported after-tax profit of $62 million, compared with $9 million the comparable quarter of 2009.

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