CAIRN Energy chief executive Simon Thomson has held out the prospect of big payouts to investors if the company wins the long-running tax dispute it is embroiled in India.

Mr Thomson also highlighted Edinburgh-based Cairn’s excitement about the potential to achieve good returns off Ireland and in the North Sea, which it is screening for acquisitions.

Cairn is launching an exploration programme off south-west Ireland after achieving success with the drill bit in Senegal recently.

Mr Thomson is confident one of the finds it made off Senegal is big enough to justify bringing into production in coming years.

He told the company’s general meeting the giant fields Cairn is developing in the North Sea will start to generate huge amounts of cash when they enter production this year.

Speaking after the meeting, he noted the cash expected from production means Cairn should have plenty of flexibility about what it does with any money received in India. Cairn is seeking $1bn (£0.8bn) compensation from the government in respect of a dispute which started in 2014 and put pressure on its finances at the time.

Noting Cairn expects a judgement within weeks, Mr Thomson said: “Our view is when we win, because we’re still confident of the outcome, and the money comes back that is money we would have used back in 2014 but from that perspective it’s bonus money.”

Cairn could then look at the potential for further returns to shareholders.

“We are pretty unusual for an exploration and production company having returned $4.5 billion over ten years and we’d like to continue with that differentiation,” said Mr Thomson.

Cairn paid out $3.5bn to investors in 2011 after selling the bulk of its holding in the former Cairn India subsidiary to Vedanta for $5.4bn.

It has been prevented from selling its remaining holding valued at around $750m pending resolution of the dispute.

Cairn India controls the huge fields Cairn made under its founder Sir Bill Gammell.

The results of recent drilling off Senegal have left directors increasing confident the company can generate plenty of value there. Recent appraisal wells have underlined the commercial potential of the SNE find it made in 2014.

“The development plan will be submitted by the summer of next year, that is an inexorable fact,” said Mr Thomson

Cairn acquired acreage off Senegal in 2013 under his plan to combine exploration in what are classed as frontier areas with lower risk activity in the North Sea.

It will drill a frontier well off Ireland this summer on what Mr Thomson described as a very, very large prospect.

He noted Cairn didn’t get anything like the number of exploration blocks it bid for in the latest Irish licensing round, which attracted strong interest in the industry.

On possible acquisitions, Mr Thomson said: “We continue to screen the North Sea, we also continue to screen elsewhere.”

The cost of exploration and development activity has fallen dramatically since the crude price plunge started in 2014.

The expected cost of the Kraken and Catcher developments, which Cairn expects to bring onstream in coming months off Shetland and Aberdeen respectively, has fallen by more than $1bn in total.

Mr Thomson thinks the government formed after next month's General Election must ensure the investment environment in the North Sea remains stable.

Shareholders appeared content at the general meeting, where there were no questions from the floor.

The new remuneration policy for directors was approved by 98 per cent of votes cast.

Loading article content