Cairn Energy, the independent oil exploration group, saw its market value rise by a half yesterday after it announced a significant discovery in the Rajasthan region of India.
Shares in the company leapt 49 per cent to 552.25p, valuing the business at £833m. Cairn said an exploration well drilled in the onshore block had discovered a field of between 450 million and 1.1 billion barrels, of which 50 million to 200 million barrels were likely to be booked as reserves, based on preliminary estimates. This could double the company's proven reserves.
The discovery is a minor embarrassment to the Anglo-Dutch oil giant Shell, which sold its stake in the exploration block to Cairn for less than £6m two years ago. The oil giant shocked the industry last week by disclosing that it had overbooked its own reserves by 25 per cent over a six-year period.
Cairn acquired 10 per cent of Shell's stake in the field in 1998 and gradually increased its holding, buying out Shell's remaining 50 per cent interest in 2002 for £4m. Oil analysts said that, in fairness to Shell, the block was of a type and size which would be marginal to an oil major such as Shell. It was also on a continent where Shell had only a limited presence.
Nevertheless, it is another small setback for the Shell chairman, Sir Philip Watts, who is under pressure to quit after infuriating investors by failing to attend the briefing at which Shell dropped its bombshell.
In an e-mail to staff last Friday Sir Philip admitted that his absence had caused "outrage" in some quarters. But he defended it on the grounds that there was a limit to what the company could say because it was in a closed period ahead of results on 5 February. By allowing Shell's head of investor relations, Simon Henry, to front the conference call with analysts, investors and press, Shell had also got the information out without the announcement being clouded by "personality issues", Sir Philip added.
A number of investors have called for the Shell chairman's head. Others have criticised the company's antiquated and arcane dual structure with British and Dutch boards and a committee of managing directors, of which Sir Philip is one, effectively making him chairman and chief executive of the group.
Cairn's activities are concentrated on the Indian sub-continent. It also has operations in Bangladesh and Nepal. Bill Gammell, the chief executive, said the Rajasthan find had the potential to "transform" the value of Cairn's portfolio. It owns 70 per cent of the block with the Indian government oil company ONGC owning the remaining 30 per cent.