Cairn's cash call hits shares

SOARAWAY oil explorer Cairn Energy saw its shares fall sharply today after it announced plans to raise around £100m to begin development of its finds in the Indian province of Rajasthan.

Cairn said it was placing 7.5m shares with investors after they closed at 1410p last night, close to an all-time high for the stock which has made millions for investors over the past year.

But news of the placing immediately raised questions in the City after Cairn's own broker, ABN Amro, was openly punting the stock yesterday.

In a research note entitled Staying Ahead of the Curve, analyst Finlay Thomson put a value of 1700p on the shares, stating: 'Three of Cairn's directors [including chairman Hamish Grossart, the merchant banker] have recently bought close to £1m of shares, despite the price more than trebling this year.

'This suggest to us that internal expectations remain heavily weighted to the upside.'

Rival brokers were aghast when Cairn announced today's placing, jointly handled by ABN Amro division Hoare Govett and boutique-broker Canaccord. 'This is either very fishy or it shows the Chinese Walls are working,' said one broker.

Thomson said today he had believed Cairn needed to raise money but had not known the placing was due today. 'We have strict Chinese Walls here,' said Thomson. 'I was not aware of it. If I had been, clearly the note would not have come out. The fact they [the research note and placing] coincided is purely coincidental.'

Cairn's brokers had been hoping to get the placing away at 1410p, but the shares slid 35p at the opening and later recovered to show a fall of 12p to 1398p. At these levels, Cairn is valued at more than £2bn which could see it get into the FTSE 100 at September's reshuffle.

Cairn is raising the money to begin financing production - estimated at up to £300m - in Rajasthan, where it reckons to have reserves of up to 350m barrels.