Canaccord Genuity slightly lowers target price on Cairn Energy

Analysts at Canaccord Genuity slightly lowered their target price on Cairn Energy from 220.0p to 210.0p on Thursday, citing challenges resulting from "a greater imperative for a transaction" in a higher oil price environment.

Canaccord highlighted that Cairn had "benefitted significantly" from two recent news stories - the completion of the Senegal assets sale in December and its recent success in an Indian arbitration case.

The Canadian bank said the Senegalese sale had "considerably bolstered" the group's balance sheet whilst also eliminating "still onerous development capital requirements related to the developments" and allowing Cairn to announce a special dividend of 32.0p per share to be paid on 25 January.

Cairn's win in India, securing it a $1.2bn award plus costs and interest, may be "more challenging to convert to cash in the short term", said Canaccord, but the analysts stated the game-changing potential was "obvious".

Canaccord stated it believes the next phase for the company, inorganic growth, was now likely to provide "the most significant market catalyst".

"We expect continued FCF generation in the coming years to result in ongoing balance sheet strength that should provide the company with opportunities for further shareholder distributions as well as inorganic growth," said the analysts, who kept their 'hold' rating on the stock.

"The challenge will be in sourcing compelling transactions against a backdrop of the company's own declining production, the stronger oil price environment, and the evident appeal of an acquisition war chest."