Cairn Energy (LON: CNE) announces big shareholder return

The Cairn Energy share price has been climbing since August. Will the latest first-half news send it on a further upwards path?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Cairn Energy (LSE: CNE) is making two big strides in its plans for the future, both covered in its first-half results announcement Tuesday.

One is the firm’s new acquisition in Egypt, which chief executive Simon Thomson says will add “material gas-weighted production, low-cost, near-term growth and attractive exploration potential, in a region with strong demand trends.” Cairn should complete the deal in Q3.

At the same time, it proposes to divest its UK North Sea assets, which should conclude by Q4. What we’re seeing is a clear move away from high-cost production to lower-cost assets. Cairn says the move towards Egypt should, among other things, help with the company’s cash flow growth.

Speaking of cash, Cairn is edging closer to the resolution of its India taxation dispute, which has moved in its favour. It’s a legal issue, though, so I’ll remain cautious until the judges have put the final stamp on the papers. But the apparent resolution has helped boost the Cairn Energy share price since the start of August.

Shareholder return

The other key step is the proposed return to shareholders of up to $700m, pending the conclusion of the Indian issue. Cairn is already in a decent cash position, with $341m on the books at 30 June 2021. That’s with no debt drawn, and after paying January’s special dividend of $257m.

It reported cash outflow from capital expenditure of $25m during the first half. The company expects net capital expenditure for the full year to reach $125m. With the taxation dispute in India almost settled (fingers crossed), that looks to be well covered. The Cairn Energy share price opened 2.5% ahead of Monday’s close.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »

Dividend Shares

A closer look at the 11% dividend yield forecast for Phoenix Group shares

Phoenix Group shares have one of the highest dividend yields in the FTSE 100 index today. Could this be a…

Read more »

Investing Articles

If I’d put £25,000 into the FTSE 350 at the start of 2024, here’s how much I’d have today!

Many FTSE shares have rebounded this year as interest rates look set to keep heading lower and market appetite for…

Read more »

Investing Articles

Up 40%, but experts forecast the easyJet share price could soon hit 664p! Time to buy?

The easyJet share price has been flying lately and stock analysts are predicting more fun to come. But there's only…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »