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(Sharecast News) - Oil and Gas shares jumped to the top of the leader board after many of the world's major crude producers surprised traders with a decision to hold their combined output unchanged following talks on Thursday.
The Organisation of Petroleum Exporting Countries and its main allies, especially the Russian Federation, had been expected to coordinate an increase in output.
Key to the above, Riyadh said it would stick to a prior self-imposed 1.0m barrel a day reduction in its own production of crude oil.
Front-dated Brent crude oil sprang 5.15% higher to $67.37 a barrel on the ICE in response, reaching their highest intra-day mark since January 2020 in the process.
Adding fuel to the gains in Brent, overnight Iranian-backed Houthi rebels in Yemen had bombed a Saudi airbase and hit a Saudi Aramco facility in Jeddah, the kingdom's economic capital.
India set out its stall before the tribunal in The Hague and their case was comprehensively and unanimously rejected by the Judges, time for GoI to end its weaseling and settle its debt. As for the idea that the BoD should agree a settlement to satisfy only major ii's, well the board has a fiduciary duty to act in the interest of all holders large or small. Indeed smaller shareholders may well have a greater % of a portfolio invested here than the ii's. Having decided to move on from India years ago I would have thought the Co. through its Board would not be greatly attracted to further investment there after this imbroglio.
I'd 100% take $700MM now (i.e. cut the amount in half). Anything material would be good. Anyone who expects the $1.4B in full anytime soon is hoping for too much. India have already set out their stall.
Heart says get aggressive, and just enforce and sequestrate anything in sight that looks remotely Indian. But head says do what's actually best for shareholders given all the circumstances. If you trust the bod they should know the facts and detail and make the right judgement calls. That ultimately might be an ugly compromise taking part cash and part assets in lieu. This is the subtler approach CNE are indicating and the_beef is talking about. It hurts to say it but maybe it's right even though it feels wrong. I've personally trusted the bod over the years.
the_beef and flundra,
Well, I am covinced shareholders will take a very dim view of a deal that lands CNE with assets in India at the mercy of ad hocery legislation. How can the interests of the shareholders be protected if they are out once again at the mercy of India's government and courts?
After fighting the case in court over many years we can wait to get the cash. Let India pay 50% now, and the rest in 1 or 2 years. How could the Indian government give CNE oil producing assets? By expropriating others? Offering CNE licences with prospects is that same as not paying, because CNE would not see any money from such assets for many years.
I hope ST and JS and the board in general do not settle for a deal that effectively cuts the award in half...
Yes and let's hope the bod judge this well. Confrontation, or diplomacy with a commercial deal. They're best placed to call the practicalities of course, and they'll be acutely aware the flip side of simply taking on further assets in lieu (without watertight protective mechanisms akin to 3rd party guarantees or bonds etc if that's possible) will be the risk of going back to square one. Eg further domestic legislation changing the goal posts again, and another expensive protracted charade chasing our own cash. All in a country that CNE's strategy was to reduce exposure to.
Let's see what GOI and CNE actually come up with, and how it's spun and sold to us shareholders.
I think most shareholders would agree with this view, but unfortunately the practicalities of the situation means that a quick resolution with a 'good' deal would be better than receiving nothing in the short-to-medium term. Its clear that India have no intention of paying the full cash award anytime soon and will try every legal trick in the book to wriggle out of it. I think the bod would rather move on and focus on building the company than be distracted by never-ending court battles.
I know we should probably trust the bod's judgement, but it's hard to believe they're even countenancing further investment in India to settle this. It would be a major change of strategy and risk profile for CNE, taken for the wrong reasons. It's the tail wagging the dog. I doubt many shareholders want this. You could also say it's disrespectful of GOI (and indeed CNE) to the process and the Tribunal. The award is a cash award and shouldn't be used just as a bargaining chip for CNE in a negotiation. GOI should pay the award in cash asap. CNE should enforce it imo and exit India for good.
I do find it quite interesting that Cairn still seem willing to do more business within India, despite everything that the GOI have done to them over the years. It might not be a terrible idea if they can extract a decent cash settlement plus some viable oil assets, if the only alternative is yet more months or years fighting it out in the courts
A statement from our CEO, Simon Thomson:
Cairn has enjoyed a long and successful history operating in India, investing billions of dollars, bringing employment and benefitting local communities. The business we created in India has generated more than $20billion in... (1/8) https://t.co/EAT0KkyuFC
...revenues for the government.
The freezing of our assets in 2014 to enforce a retrospective tax measure has been extremely negative for all parties, and we are very keen to be able to put this legacy matter behind us and move forward positively. An international... (2/8)
...arbitration seated in The Hague and constituted under the terms of the UK-India Bilateral Investment Treaty has ruled conclusively on the matter and issued a final and binding award in Cairn’s favour ordering the refund of the value of the assets taken... (3/8)
...being $1.2bn, plus significant interest and costs. That arbitration also ruled decisively that this matter falls within the jurisdiction of the UK-India Treaty, having heard arguments from the parties on that subject. We have had cordial... (4/8)
...and constructive discussions in Delhi over the last few days with officials from the Ministry of Finance. Notwithstanding and without prejudice to our rights under the international arbitration award, we have discussed a number of proposals with the aim of... (5/8)
...finding a swift resolution that could be mutually acceptable to the Government of India and the interests of Cairn’s shareholders. Assuming such a resolution can be achieved, we look forward to being able to move on to further opportunities to invest in India which... (6/8)
...continues to import the majority of the energy sources it consumes. We remain hopeful that an acceptable solution can be found, in order to avoid further prolonging and exacerbating this negative issue... (7/8)
...for all parties. However, we have also been clear that we must continue to take all necessary steps to protect the interests of our shareholders. (8/8)
Thanks, MRC - that's a really encouraging Tweet; the mood music sounds very positive. An award of this size is going to double the mc overnight. What's the phrase...."hold for gold" ?
I think we could see a resolution soon. I think we need the award paid in full...but can be creative with giving us assets and potentially tax breaks on those assets.
Would look great for Gov of India if Cairn re-enter india after all that has gone on, and can be seen to be working together.
https://mobile.twitter.com/cairnenergy/status/1363774289204371457