Cairn India tax solution gives shareholders $700m

Edinburgh-based oil and gas company Cairn Energy pledged on Tuesday to return up to $700 million to shareholders through a special dividend and a share buyback this year as it suggested that a long-running billion dollar tax dispute with India may be nearing an end.

“The expected near-term resolution of the India tax dispute would result in a refund to Cairn by the Government of India of INR 79bn (approximately US$1.06bn),” said Cairn Energy.

“In accepting the terms of the new legislation in India, Cairn would be required to withdraw its international arbitration award claim, interest and costs and to end all legal enforcement actions in order to be eligible for the refund.  

Payment of the tax refund would enable a proposed return to shareholders of up to US$700m, via a special dividend of US$500m and a share buyback programme of up to US$200m.

“The remainder of the proceeds would be allocated to further expansion of the low cost, sustainable production base.

The proposed return following the expected near-term resolution with the Government of India will be in addition to payment of US$257m to shareholders in Q1 following the sale of our Senegal interests.

“The Senegal divestment proceeds also supported the proposed acquisition of Shell’s Western Desert Assets in Egypt, replacing risked offshore development with sustainable, gas-weighted onshore production with significant growth potential.”

Cairn also posted a smaller operating loss in the first-half of the year and narrowed its 2021 outlook for production from its British assets to a range of 17,000 to 19,000 barrels per day.

Cairn Energy CEO Simon Thomson said: “Our significant acquisition in Egypt, which we expect to complete shortly, adds material gas-weighted production, low-cost, near-term growth and attractive exploration potential, in a region with strong demand trends.

“We intend to use our differentiated financial flexibility to add further scale to our production base and look forward to the next phase of strategic delivery.

Progress in resolving our Indian tax issue and active portfolio management leave Cairn well-positioned to deliver growth from a sustainable business, focused on generating further value and returns for shareholders.”

 

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.