Cairn Energy set to make 8m pounds by cutting Ceusa stake to 56%

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CAIRN Energy, the oil and gas exploration company, is set to end up with pounds 8m in the bank by cutting its holding in Ceusa, its American offshoot, from 98 to 56 per cent, writes John Shepherd.

The company plans to issue 4.75 million shares in Ceusa and sell up to 1 million shares it already holds.

Prices will be determined by mid-August after marketing of the issue and sale.

The price, though, will depend on the market value of a Ceusa share at that time.

Last price of a Ceusa share reported by the National Association of Securities Dealers Automated Quotation System was dollars 5.50 (364p) on 16 June.

Cairn added that assuming an issue and sale of 5 million shares at dollars 5.50, it would raise dollars 25m net, of which Ceusa would get dollars 20m.

From these proceeds, Ceusa would repay dollars 2.6m of debt to Cairn as well as dollars 3.6m for redemption of preferred stock.

The payments, together with the net proceeds of the sale of 1 million shares, would net Cairn more than dollars 11m.

Cairn's remaining interest, at dollars 5.50 per share, would be worth around dollars 38.5m.

On those assumptions, the value of the remaining interest in Ceusa is equivalent to 51p per Cairn share, which rose 2.5p to 62.5p on yesterday's announcement.

The Ceusa move comes just two months after Cairn won a bitter pounds 1.5m takeover fight for Teredo Petroleum.

Just before the Teredo bid, Cairn announced it had returned to profit, making pounds 855,000 in 1992 against losses of pounds 27.6m in the previous year.