Cairn relishes Indian summer

13 April 2012

WORTH around £550m in January,

Cairn Energy's

Who would have believed it? Up another 41p initially, the shares closed steady as a rock at 1410p as investors continued to pin their hopes on the huge potential of its discoveries in India.

Broker ABN Amro's 12-month target price is £17 and Merrill Lynch is also a big fan. Directors have been filling their boots and how!

Non-executive deputy chairman and investment banker Hamish Grossart recently forked out more than £600,000 on buying 50,000 shares at 1248p, while exploration director Mike Watts spent nearly £200,000 buying 16,500 at £12 each. Many shrewd investors followed their lead and are sitting on nice paper profits.

The amount of personal wealth being put into the stock by directors suggests that the company's huge discoveries at its Rajasthan field in India could be even more bullish than previously thought.

Cairn has revealed three gushers at Rajasthan during the past six months. Analysts believe Cairn could now be sitting on recoverable reserves of at least 500m barrels from the region.

Cairn's gain is Shell's pain. Their find in India is on land sold off by Shell for a paltry £4m two years ago. Shell eased 3 1/2p to 401p.

Burren Energy, which is being tipped as the next Cairn, jumped 25p to a peak of 350p. Geologist Finian O'Sullivan's stake was valued at £17m when the shares floated at 130p in December.

Burren has 90 producing wells in the oil-rich Caspian sea region which includes the Turkmenistan deserts. Earlier this week it said it had found oil at a well in the Republic of Congo.

The Footsie lost an early 23-point gain to close 39.4 points down at 4,424.7. Dealers on their way home heard that sellers were busy in New York. Rumours that Intel, the world's largest manufacturer of component chips, was about to issue a profits warning dragged Nasdaq 33 points lower and Wall Street 121 in the early exchanges. Bearish profit statements from data storage components maker Emulex and chip equipment provider Amkor made matters worse.

The Fed's quarter-point hike in interest rates to 1 1/4% - its first increase in four years - had prompted early modest buying on optimism that it will slow inflation without impeding growth of the world's largest economy.

Back at home, profit-taking in the absence of the rumoured bid from Spain's biggest bank Banco Santander Central Hispano left Abbey National 17 1/2p down at 496p.

P&O chugged 9p ahead to 229p after revealing its property subsidiary is on track to meet its target of £250m sales in 2004 after selling two significant properties in the US and Germany.

Struggling support services group Jarvis edged up 1p to 79p following the £6.75m disposal of Baltic Rail Services. Chairman Stephen Norris will be rolling out a strategic review of the business later this month. Dealers say he will either outline more significant disposals or hoist a 'for sale' sign above the company.

Bids in the region of £100m - £140m are rumoured to have been made for its big stake in the London Underground. US hedge fund K Capital recently bought 13% at 70p per share and would obviously like to see a lot more upside. Broker Altium Securities' sum-of-the-parts valuation is 170p.

In-car entertainment specialist Armour Group revved up 9p to 79 1/2p after saying results for the year to end-August will be significantly ahead of market expectations. Operating profits will be not less than £3m against current forecasts of £2.75m.

Engineer CH Bailey jumped 3 1/4p to 11p after receiving an offer for the Bute Dry Dock, situated in the undeveloped area of Cardiff Bay, from Quada (Dockside).

Aim-quoted drugs company Sinclair Pharma looked sick at 112 1/2p, down 26p. Broker Baird downgraded forecasts after the company announced a delay in signing a licensing deal for one of its key products, Atopiclair.

Russian gold miner Trans-Siberian Gold firmed 6 1/2p to 144p on hearing that Anglo Gold Ashanti will be acquiring 29.9% for £17.6m.

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