Cairn in pounds 185m Australia oil bid

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The Independent Online
Cairn Energy, the fledgling Edinburgh-based oil group, yesterday took an important step towards maturity after unveiling an A$365m (pounds 185m) bid for Command Petroleum of Australia.

The deal, to be part-financed via a two-part rights issue to raise pounds 133m, will give Cairn access to a big oil-producing asset in India to complement its gas find in Bangladesh. The cash call is for a maximum of one new share at 360p for every three held, with the first call due to raise pounds 33.2m. This is the latest in a string of calls on shareholders, the most recent being for pounds 50m in July. Cairn's shares rose 22p to 394.5p yesterday.

The bid for the Australian-quoted Command, which is 33 per cent owned by Snyder Oil & Gas of the US, has effectively been agreed by the board. Cairn has arranged an option over a 19.9 per cent stake held by Snyder, the maximum allowed under Australian rules, and expects Snyder to sell it the rest of the holding. The Cairn offer is worth A$1.10 per Command share, with a two-for-13 share alternative.

Bill Gammell, Cairn's chief executive, said the group saw emerging markets for energy in Bangladesh and India. "We are already in Bangladesh and we think two plus two might equal four and a half or even five."

Command's main asset is a 22.5 per cent interest in the Ravva oil field in the Bay of Bengal. Currently in the start-up phase, Ravva is producing 13,500 barrels a day, rising to 35,000 by the end of the year. Subject to government permission, output will rise to 50,000 barrels a day by next year.

Production of 20,000 barrels a day will come in next year from a field in Yemen, in which Command holds a near-12 per cent interest. Other assets are in Tunisia, Papua New Guinea, India, Australia and Mongolia, with further production in Russia.

Including its Sangu field in Bangladesh, estimated by analysts to contain 1 trillion cubic feet of gas, Mr Gammell said Cairn's reserves would total 200 million barrels of oil equivalent after the acquisition. By 1997 or 1998, total group production could be between 45,000 and 50,000 barrels a day.

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