Britain’s Cairn Energy pledged to return up to $700 million to shareholders this year through a special dividend and share buyback, as it indicated a long-running $1 billion tax dispute with India may be coming to an end.
Oil and gas producer Cairn, which has major operations in the country, said on Tuesday it is considering legal obligations with the government following changes to a retroactive tax law at the heart of the spat. Last month, India proposed to repeal the 2012 law and said it would repay businesses.
Cairn was awarded damages of more than $1.2 billion last year in a Dutch court decision challenged by New Delhi. “The Indian government is very focused on resolving this as soon as possible and they are aiming for completion in the coming weeks,” said Simon Thomson, Chief Executive of Cairn.
London-listed Cairn is pursuing opportunities to seize Indian assets abroad, including those of its flag carrier Air India, in the absence of a settlement. A resolution would also drop these cases.
“If we say it soon, we are anticipating the near-term resolution of this matter — that means all our lawsuits and the Indian government paying us the $1.06 billion,” Cairn’s Thomson added during a conference call, referring to the expected refund.
That amount is just below Cairn’s $1.35 billion market cap, and $500 million would be paid as a special dividend, with $200 million set aside for the buyback.
“This move means that recent developments in India have reached a point where (Cairn) is confident in getting funds back and the matter is over,” JPMorgan analysts said.
Shares in Cairn, initially up a staggering 8.2%, were up 2.3 percent at 199.5 pence at 0857 GMT
Cairn also recorded a smaller operating loss in the first half, lowering its 2021 production outlook for its UK assets to a range of 17,000 to 19,000 barrels per day.