suite du 15/6/11

[frédéric]

There may be a final decision on the USD 9.4 billion Cairn-Vedanta deal as the Cabinet Committee on Economic Affairs (CCEA) meets on Thursday, reports CNBC-TV18.
Earlier, Oil Minister S Jaipal Reddy had said that the CCEA, chaired by Prime Minister Manmohan Singh was to meet in order to consider the recommendations of a Group of Ministers that went into the issue of granting approval for Cairn India's parent firm, Cairn Energy, to sell its stake to Vedanta.
The GoM headed by Finance Minister Pranab Mukherjee had on May 27 asked for the contentious issue of royalty-sharing between state-owned ONGC and Cairn India in the Rajasthan fields to be renegotiated and stated that Cairn should accept its liability to pay cess on oil production. If the conditions are imposed it is likely to affect the deal materially.
The CCEA is expected to go along with the GOMs recommendations. It is an interesting set of event to watch out if these conditions are indeed accepted by Cairn Energy as well as Cairn India.

[frédéric]

récupére sur Boursorama :

Morgan Stanley keeps Cairn India (532792.BY) at Overweight with a target price of INR429 citing the energy producer's strong production CAGR of 21% over FY11-FY15E.

The house adds, Cairn India's EPS should double over the next two years and valuations are attractive with the stock discounting the oil price of $76/bbl excluding royalty, and trading at a P/E of 6.1 times, one of the cheapest among global peers.

It notes, Cairn India has underperformed the market by 4.0% and oil prices (Brent) by 57%, since Cairn Energy's (CNE.LN) plan to sell its stake in Cairn India to Vedanta Resources (VED.LN) was announced, largely on concern that royalty would be made cost recoverable.

Assuming royalty, Cairn India's net asset value would be INR371, implying an about 10% upside from current levels, it says.

Valuations for FY2012E would still be attractive at a P/E of 7.5X, EV/EBITDA of 4.2X, and free cash flow yield of about 10%. Cairn India is now up 0.5% at INR335.60.

[mgauthi4]

NEW DELHI: A Comptroller and Auditor General (CAG) report indicting the oil ministry and its regulatory arm for showing favours to three private oil companies is expected to cast its shadow when the Cabinet decides on Londonlisted Vedanta Resouces' proposal to acquire control of Cairn India, an arm of Scottish explorer Cairn Energy Plc, for nearly $10 billion.

The Cabinet Committee on Economic Affairs (CCEA) is expected to examine the brief on the deal prepared by the petroleum ministry either this week or the next. The brief clearly endorses the conditions recommended by a ministerial panel under finance minister Pranab Mukherjee on May 27. The conditions would adversely affect the valuation of the deal but the CCEA is unlikely to dilute or overturn the ministerial panel's decision for fear of stoking allegations of favouring private companies, the theme of the CAG report on three acreages being operated by private entities.

As first reported by TOI on Monday, the draft CAG report has indicted the ministry and its regulatory arm for exploration, Directorate General of Hydrocarbons, for laxity in oversight. Cairn is one of the three companies—the others being Reliance Industries and a BG (British Gas)- led consortium of Reliance and state-run ONGC—that was criticized for violating terms of contract and benefitting from lax government oversight. The CCEA would also find it tough to dilute conditions for clearing the deal because, according to the solicitor general's opinion, these arise from the "Public Trust Doctrine". The conditions, first put by then oil minister Murli Deora, were aimed at protecting state-run explorer ONGC's interests and the CAG report only strengthens the doctrine.

ONGC is 30% partner in Cairn's Rajasthan oil fields, which contributes 90% to the deal's valuation, but pays 100% royalty on account of a historical policy anomaly. Cairn is paying cess under protest and has launched arbitration proceedings claiming that even this is to be paid by ONGC. Deora's main condition for clearing the deal, upheld by the ministerial panel on May 27, said Cairn and its successor must agree to pay royalty and cess in proportion to their stake.