(Adds analyst comment.)
By James Herron
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Cairn Energy PLC's (CNE.LN) shares rose more than Wednesday after the company secured $1.6 billion in debt to fund oil developments in India and raised another $310 million in cash by selling shares in its Greenland and India operations to the international arm of Malaysian state oil company Petroliam Nasional Bhd.
Petronas International has acquired a 2.3% stake in Cairn India Ltd. (532792.BY) for $240 million - a slight discount to the closing price on Oct. 12 of INR262.65 ($5.70) a share, Cairn said. Cairn Energy retains a 62.75% interest in Cairn India.
Petronas has also bought a 10% stake for $70 million in six oil exploration blocks Cairn operates offshore Greenland, subject to government and partner approvals. It will also have the option to increase its Greenland stakes to 20% in the future at a fair market price and will participate with Cairn in any future licensing bidding rounds at the same level of interest, it said.
Cairn has shown that it can make significant gains through monetization of its assets and has taken advantage of the premium at which Cairn India was trading compared with its U.K. parent Cairn Energy, said Oriel Securities analyst Richard Rose.
The monetization of part of its position in Greenland is also exceptional, he said.
"It's very rare to get hard cash, rather than a carry on well costs," for exploraton acreage in a frontier province like Greenland, he said. Applying the Petronas sale valuation across all of Cairn's Greenland assets could give a gross upside of $300 million to $400 million, or an extra GBP1.00-1.50 a share, he said.
"The acquisition of additional Cairn India shares by Petronas reflects our shared belief in the continuing growth potential of Rajasthan while giving Cairn increased financial and operational flexibility in line with our growing confidence in Greenland," Cairn Chief Executive Bill Gammell said. "We are delighted that Petronas is joining with us in Greenland as we take forward our leading exploration position," he added.
Cairn India is developing several large oil discoveries in the state of Rajasthan. Oil from the first field, Mangala, began to flow in August. Production from Mangala and other fields in the area should reach 175,000 barrels a day within the next few years.
Earlier Wednesday Cairn India confirmed that it has secured $1.6 billion of debt to fund developments in India. Standard Chartered Bank fully underwrote $500 million; $250 million is from World Bank unit International Finance Corp.; and State Bank of India underwrote domestic borrowing of INR40 billion ($850 million).
Cairn said it will reinvest cash received from Petronas into exploration in Greenland, where it has identified significant oil resource potential and has built up a leading acreage position. It has conducted seismic surveys of its exploration blocks and plans to drill its first well in 2011.
At 1447 GMT, Cairn Energy shares were up 292 pence, or 10%, at 3,101 pence.
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com
(Rakesh Sharma in New Delhi contributed to this article.)