* Suspends share buy-back from March 21
* Lack of access to India shares could limit cash
* Posts higher-than-expected 2013 losses of $556 mln
By Karolin Schaps
LONDON, March 18 London-listed oil and gas
explorer Cairn Energy has called a halt to a $300
million share buy-back programme until a review of its Indian
income taxes is resolved, knocking its shares sharply lower on
India's tax authorities had contacted Cairn Energy in
January to discuss income tax assessments dating back about
seven years, making it the latest foreign firm to be embroiled
in the country's tax crackdown to try to cut its budget deficit.
Other foreign multinational companies have also been
targeted, including Anglo-Dutch oil major Shell, South
Korea's LG Electronics and France's Capgemini
Cairn Energy said it would suspend its buy-back as of March
21 in the light of the tax review, the outcome of which it said
would shape the company's way forward beyond 2014. Cairn has
completed about one third of the buy-back.
"Throughout its history of operating in India, Cairn has
been fully compliant with the tax legislation in force," Cairn
Energy Chief Executive Simon Thomson said on a conference call.
"We intend to take whatever steps are necessary to protect our
In January, India's tax authority had requested further
information on Cairn Energy's 2006 income tax that pre-dated the
flotation of its Cairn India business in 2007.
The company was ordered not to sell its shares in Cairn
India during the investigation, limiting the firm's ability to
raise cash from selling its 10 percent holding in Cairn India,
valued at around $1 billion.
"Whilst this shouldn't be an issue in the near term, it may
limit flexibility further down the line," equity analysts at
Cairn Energy's Chief Financial Officer Jann Brown said the
company was in the process of compiling the information
requested and would send it to the tax authority in April.
Cairn Energy shares were the biggest faller among London's
FTSE 250 companies, down 11 percent at 1023 GMT.
The oil and gas explorer also announced annual results on
Tuesday, where it reported a higher-than-expected loss after tax
of $556 million due to soaring costs for unsuccessful
exploration in Morocco and the North Sea.
The company's costs for unsuccessful exploration rose 34
percent year on year to $213 million, which included $107
million spent on drilling offshore Morocco and $81 million in
the Norwegian and UK parts of the North Sea.
Cairn Energy said on Monday that it had plugged and
abandoned a well in Morocco, a country whose offshore resources
are tipped as one of this year's promising exploration areas.
The firm's 2014 exploration programme, which includes nine
wells in places such as Senegal and Ireland, and the outcome of
the Indian tax assessment will shape the company's trajectory
beyond this year.
"Key risk is negative sentiment surrounding possible
disappointing exploration results and an unresolved Indian Tax
issue," Mark Wilson, equity analyst at Jefferies, said.