Credit Suisse starts Cairn Energy at 'underperform'

It said Cairn is in the process of rebuilding its asset portfolio after generating significant value through exploration success in India, destroying value through unsuccessful explorations with high equity stakes in Greenland and then returning capital to shareholders in 2012.

It noted that the company does not currently produce any hydrocarbons, but has interests in Catcher (20%) and Kraken (25%), which are two non-operated development assets in the UK North Sea that appear to be on track to reach first oil in 2017.

“Successful execution of these projects should provide Cairn with a more balanced portfolio, and the potential to, at least partially, self-fund its exploration activities in Senegal and the UK/Norwegian North Sea,” said Credit Suisse.

However, it said the company’s non-operator status makes it difficult to ascertain exactly how much influence Cairn has on delivering these projects on time and on budget.

CS said results from upcoming exploration and appraisal drilling in Senegal are the main catalysts, with drilling expected to start in the fourth quarter of 2015.

Beyond exploration, a resolution to the ongoing tax dispute with Indian tax authorities could either support or de-rate the stock depending on the outcome, it said.

At 13:03, Cairn shares were down 2.1% at 170.70p.