Cairn Energy has called for an immediate payout of $51m from its embattled India subsidiary as its $1.6bn legal struggle with the Indian authorities nears its final chapter.
The two year dispute has saddled the loss-making oil producer with spiralling legal costs, and foiled Cairn's plans to sell off its remaining 10pc stake in Cairn India worth around $800m.
The company told investors on Wednesday that the Indian government has now submitted its full claim for retrospective taxes and that $51m of previously restricted dividends have been released. It has requested that the sum is returned immediately.
Simon Thomson, Cairn’s chief executive, said he remained confident that the outcome of the dispute, due next January, will be in Cairn’s favour.
“As far as international arbitration goes we’re very pleased with the rate of progress that is being made," he said. "The dividend may not be a huge sum but it is a help in strengthening our finances and it shows progress. It’s $1bn in total that we hope to reclaim so that would be significant." Cairn is planning to sell off its remaining 10pc stake in Cairn India worth around $656m.
The Indian government first began an investigation into Cairn India in 2014. A year later the authorities made a retrospective tax claim in relation to asset transfers made in 2006 when Cairn India was established.
The claim demands that the UK-based oil explorer pay $1.6bn plus interest and penalties arising from unpaid tax owed by Cairn's India operations in 2007. Cairn has consistently disputed the claim and is calling for $1.1bn in compensation.
The fresh progress was announced alongside narrowing losses for the Edinburgh-based oil company, which is hoping for a North Sea production boom. Cairn reported a pre-tax loss of $95m last year compared to a loss of $515.5m in 2015 due to low oil prices and heavy spending on a string of new projects that are almost ready to begin generating revenue. Cairn holds a 20pc stake in Premier Oil’s Catcher oil project and a 29.5pc share of Enquest’s Kraken development. Both of these should deliver their first oil later this year and boost Cairn’s production by 25,000 barrels of oil a day.
Cairn is also growing its presence in the Irish sea by taking a 30pc stake in Providence Resources’ Frontier exploration licence in the Porcupine basin through its subsidiary Capricorn Ireland. The subsidiary is also taking a 70pc working interest in the Europa Oil & Gas, also in the Irish Sea. Both oil minnows enjoyed a share price surge as a result of their respective deals. Providence Resources share price climbed over 7pc on AIM to 16.35p, while Europa jumped over 13pc higher to 5.38p. Mr Thomas said Cairn is also planning to push on with its “exciting” exploration and appraisal drilling programme in Senegal. Earlier in the week Cairn said that its latest successful well appraisal concluded ahead of schedule and under budget, taking the total number of wells to seven.