CAIRN Energy has confirmed details of its plans to return $3.5 billion (£2.25bn) of the proceeds of the sale of the bulk of its Indian business to shareholders, which will generate average windfalls of about £8800 for private investors.
The Edinburgh-based oil and gas firm said it will make payments worth £1.60 for each ordinary share held by investors, who will be able to get the money next month if they want.
Sir Bill Gammell, the former Scotland rugby international who led Cairn on its pioneering drive into India, will get a payout of around £5 million in respect of his shareholding.
Cairn Energy said last month it would distribute around $3.5bn (£2.25bn) of the $5.5bn that it received for the sale of a controlling stake in Cairn India to Vedanta Resources.
Cairn India controls the acreage on which Cairn made a series of huge finds in the desert state of Rajasthan in India.
The plans were finalised following the completion of a tortuous sale process which dragged on for 16 months amid wrangling in India.
The company's Indian partner ONGC lobbied successfully for the terms of production on Cairn India's acreage in Rajasthan to be changed in its favour.
The payouts will provide the icing on the cake for those shareholders who bought into Cairn Energy at the right time and held on through the ups and downs which it experienced.
The company's market capitalisation has surged from £560m in January 2004, when it made the giant Mangala discovery, to around £4bn.
The paper value of each share has increased proportionately, although the picture has been clouded by the 10-for-one share split the company completed in 2009.
In February 2007, Cairn Energy paid a £3-per-share special dividend after it sold a chunk of the Indian business in a flotation in that country.
Shares in Cairn traded at 27p in 1992.
There are thought to be around 2900 private investors on the share register. These control some 15.9 million shares, putting them in line for payments totalling £25m.
Executives who led Cairn's India efforts will get big payouts.Mike Watts, who masterminded Cairn's exploration programme, has 2.8 million shares, which will qualify him for a £4.5m return.
Simon Thomson, who succeeded Sir Bill as chief executive in July, will get around £1.4m for his 870,000 shares.
The vast bulk of the distribution will go to institutions.
Edinburgh-based Walter Scott & Partners will get £100m for its 63 million shares.
Its eponymous founder worked with Sir Bill's father Jimmy at Ivory & Sime. Mr Thomson said that the remaining $2bn proceeds will be used "to pursue other material growth opportunities with the aim of creating and realising further value for shareholders".
Cairn Energy has invested around $1bn in the past two years exploring off Greenland, where it has yet to make a commercial find.
Cairn will seek approval for the cash return at a general meeting on January 30. It is also seeking authority from shareholders to sell part or all of its remaining 22% holding in Cairn India in the market.
It is understood that this is a formality that would allow Cairn to sell shares without facing the kind of complications encountered with the Vedanta transaction.
It is believed the company currently has no intent to reduce its holding in Cairn India further.
Investors can choose to take their payout as income or as capital in the current tax year or to defer it to next year. The company plans to complete a 13 for 33 share consolidation after the distribution.
Shares in Cairn Energy closed up 8.6p at 270.4p.
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