Subdivision of Share Capital

RNS Number : 5018D

Cairn Energy PLC

03 December 2009

 



EMBARGOED FOR RELEASE AT 0700

3 December 2009

CAIRN ENERGY PLC ("Cairn" or "the Company")

Proposed Subdivision of the Company's Share Capital, 

Conversion of Certain Share Incentive Awards and

 Notice of Extraordinary General Meeting ("EGM")

The Company will today post a circular to its shareholders convening an EGM at which two substantive items of business will be considered, being:

• a "10 for 1" subdivision of the share capital of the Company; and

• the conversion of certain outstanding share incentive awards held by the group's executive directors and other employees.

Subdivision of Share Capital

A "10 for 1" subdivision of the share capital of the Company is proposed, the intended effect of which is to seek to improve the liquidity and marketability of ordinary shares in the capital of the Company by reducing the market price of an ordinary share and increasing the number of shares in issue.

If approved by shareholders at the EGM, the proposed subdivision will result in each existing ordinary share of 6 2/13 ("Existing Ordinary Shares") being subdivided into 10 new ordinary shares of 8/13 pence each ("New Ordinary Shares") in the Company.

The rights attaching to the New Ordinary Shares will be the same as those currently attaching to the Existing Ordinary Shares and it is expected that the market price of a New Ordinary Share on the date on which the subdivision becomes effective will be approximately one tenth of the market price of an Existing Ordinary Share immediately prior to the subdivision. As a result, the aggregate value of a shareholding in the Company immediately before and after the subdivision should be approximately the same.

If approved by shareholders, the proposed subdivision will become effective on admission of the New Ordinary Shares to the Official List of the UK Listing Authority and to trading on the main market of the London Stock Exchange plc ("Admission"). It is expected that this will occur at 8.00 a.m. on Tuesday, 22 December 2009.

Shareholders who hold their Existing Ordinary Shares in uncertificated form will have their CREST accounts credited with New Ordinary Shares on Admission. Shareholders who hold their Existing Ordinary Shares in certificated form will be sent a new share certificate in respect of their holding of New Ordinary Shares by 31 December 2009. Share certificates in respect of holdings of Existing Ordinary Shares will cease to be valid following the issue of the new share certificates.

Conversion of Certain Share Incentive Awards

The second item of business to be considered at the EGM is the proposed conversion of certain existing rights that were granted by the Company to its executive directors and other employees under the long term incentive plan and share option plan that were introduced in 2006 as part of the process surrounding the flotation of Cairn India.

Following that flotation, the Company had two distinct arms to its business; namely a majority shareholding in a listed Indian business and an exploration and production business (operated by the Company's subsidiary, Capricorn) focused principally on the Company's then remaining assets in Bangladesh, Nepal and Northern India. The long term incentive plan and share option plan introduced in 2006 were designed with these two distinct arms in mind and were intended to incentivise management and employees by reference to the performance of the specific parts of the business that they could affect. The plans were also designed to facilitate a proposed demerger of Capricorn, which was also under consideration at that time. However, following the subsequent establishment by Capricorn of a significant strategic exploration position in Greenland, it was considered that it would be in the best interests of shareholders to retain Capricorn (and the potential upside presented by the new acreage in Greenland) as part of the group.

In a circular to shareholders, dated 22 April 2009, the Company advised that some practical issues had arisen in relation to one part of the above plans; namely, in the absence of a demerger and a separate quoted price for Capricorn, the measurement of the performance of the Capricorn business.  The April 2009 circular went on to advise that the Company was in the process of assessing how to treat awards and options affected by these practical issues and that when a preferred approach had been identified, appropriate proposals would be put to shareholders for their consideration and approval.  The Company has now identified, and consulted with certain significant shareholders in relation to, its preferred approach and this is summarised below.

Long Term Incentive Plan Awards

In the case of Capricorn-related awards granted in 2007 and 2008 under the long term incentive plan to the Company's executive directors and senior managers, the Company's proposal is to convert awards into replacement rights over ordinary shares in the capital of the Company. This conversion will be carried out using an implied valuation of Capricorn (of approximately US$953 million) derived from the recently announced conditional "farm-in" to its Greenland assets by PETRONAS International Corporation Ltd. 

On the vesting of these converted awards (which will be conditional on specified performance conditions being achieved) any ordinary shares in the capital of the Company to which an employee becomes entitled will normally be subject to an extended "holding period" during which they cannot be sold (save to meet tax liabilities arising on vesting). This holding period will generally last until January 2013. Where a participant ceases employment during this holding period, his/her ordinary shares will normally be forfeit for no consideration. In addition, if prior to the end of the holding period, events occur which cause the remuneration committee of the board to consider that the above implied value of Capricorn was overstated as at the date on which the conversion took place, then a proportion of a participant's unreleased ordinary shares may be forfeited.

The conversion proposal in relation to these long term incentive plan awards is designed to leave the relevant employees in no better or worse position than they were in prior to the conversion (as assessed by reference to the above implied valuation of Capricorn) but with a simplified arrangement such that any subsequent performance and value creation is based on the Company's share price performance rather than that of Capricorn alone. Similarly, the introduction of an extended holding period for the converted awards will help to ensure that participants' interests remain aligned with those of shareholders until the final release of the ordinary shares to the participants in January 2013.

Option Awards

In the case of Capricorn-related options granted in 2007 and 2008 under the share option plan to less senior employees, the Company is proposing an alternative conversion mechanism that seeks to put these individuals in the same position as they would have been if, on the date they were granted these options, they had instead been granted options on equivalent terms over ordinary shares in the capital of the Company.

The conversion proposal in relation to these options is intended as a sensible and practical solution, which ensures that the relevant employees and former employees will be rewarded as if they had received options over ordinary shares at the outset with no "lock-in period" beyond vesting.

Circular

The Circular to shareholders in connection with the above proposals will be posted to shareholders today and contains a full explanation of the above proposals, including an illustration of how the conversion proposals in relation to share incentives will operate in practice. 

The EGM seeking approval for these proposals will be held at the Company's offices at 50 Lothian Road, Edinburgh, EH3 9BY at 10.00 a.m. on Monday, 21 December 2009.

The Circular will shortly be available to the public for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS

Tel. No. [phone], during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted).

The Circular is also available to download from the Investor Relations section of Cairn's website at www.cairnenergy.com/investors/downloads 

Enquiries to:

Cairn Energy PLC Sir Bill Gammell, Chief Executive Jann Brown, Finance Director David Nisbet, Corporate Affairs	Tel: [phone]
Brunswick Group LLP Patrick Handley David Litterick	Tel: [phone]

NOTES TO EDITORS:

• Cairn Energy PLC ("Cairn") is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange. Following the IPO of Cairn India in January 2007, there are two separate parts of the business:

• Cairn India limited ("Cairn India") is listed on the Bombay Stock Exchange and the National Stock Exchange of India and has interests in a total of 13 acreage blocks in India and Sri Lanka. Cairn now retains a 62.39 % interest in Cairn India.

• Capricorn Oil Limited ("Capricorn"), is a wholly owned subsidiary of Cairn focused on exploration. Capricorn now has assets in Bangladesh, Nepal, Northern India, Greenland, Tunisia, Albania, and pending licence awards in Spain.

• "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries (including Cairn India and Capricorn), as appropriate. 

• "Cairn India" where referred to in the release means Cairn India Limited and/or its subsidiaries, as appropriate. 

• "Capricorn" where referred to in this release means Capricorn Oil Limited and/or its subsidiaries as appropriate.

• Cairn through its subsidiary Capricorn operates six blocks in Greenland. It also has non operated interests in two other blocks.

• Cairn has focused its activities on the geographic region of South Asia, which has already resulted in a significant number of oil and gas discoveries.  In particular, Cairn made a major oil discovery (Mangala) in Rajasthan in the north west of India at the beginning of 2004. Cairn has now made more than 20 discoveries in Rajasthan block RJ-ON-90/1. 

• Cairn India is headquartered in Gurgaon on the outskirts of Delhi, with operational offices in Chennai, Gujarat, Andhra Pradesh and Rajasthan. 

• Cairn Energy PLC (including Capricorn) is run from Edinburgh with operational offices in Dhaka, Chittagong, Tunis and Kathmandu.

 

END

 

 

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