Investors added more than £290m to the market capitalisation of Cairn Energy yesterday when the shares surged 8% on renewed speculation that an oil and gas major was lining up a bid for the firm.
Market traders said the movement was driven by talk that Italy's Eni was considering a bid to be pitched at more than £40 for each share in the Edinburgh-based independent.
With both sides saying they they would not comment on speculation, there seemed to be nothing to distinguish the report from a series of bid rumours concerning Cairn which have come to nothing in recent years.
Thanks to a number of bumper finds in India's Rajasthan state, the company is sitting on huge reserves. Analysts say these could make it a prime takeover candidate at a time when majors want to grow their resource bases.
In October, BP was rumoured to be considering a £3.6bn bid for Cairn Energy.
However, an analyst who asked not to be named said that reports concerning Eni appeared to make some sense.
“We have heard it before, Eni has said India is a focus area.”
In September 2005 rumours emanating from Italy suggested Eni was planning a hostile bid for Cairn Energy. The company's chief executive, Paolo Scorani, said then that Eni saw India as a high-potential exploration area.
In that year the company was the only western major to bid successfully for Indian acreage, when it won a licence in Rajasthan with Cairn and India's Oil and Natural Gas Corporation.
The company's portfolio of Indian assets includes interests in Gujarat, where Cairn India operates offshore fields.
Cairn's Indian subsidiary has recently made progress towards agreeing a deal to build a key pipeline to take oil from Rajasthan to market.
Eni demonstrated its enthusiasm for acquisitions with an agreed £1.75bn bid for another UK independent, Burren Energy, in November after two previous approaches were rejected. In addition to acreage in countries including Turkmenistan and Congo, the acquisition will give it a stake in India's Hindustan Oil Exploration.
The analyst said Eni would likely prefer to acquire the subsidiary which owns Cairn's Rajasthan interests, rather than bidding for the whole group. Cairn Energy has a 69% stake in Cairn India, which is a listed Co. Its Capricorn subsidiary has interests in countries ranging from Greenland to Australia.
Malaysia's Petronas has a 10% stake in Cairn India.
Source: The Herald