Daily Telegraph: First Calgary seeks partner but Cairn set to go it alone: “At these kinds of levels, only big players such as Shell or Total would be able to afford to buy First Calgary.” (ShellNews.net)

By Christopher Hope, Business Correspondent (Filed: 19/10/2004)

First Calgary's shares yesterday surged to an all-time high after the gas exploration company admitted it was probably too small to exploit its giant gas field in Algeria and was considering a £1.2billion sale or finding a partner. 

The news came as rival Cairn Energy, which has found oil five times in India this year, cleared a significant hurdle in its plan to start producing oil from its Rajasthan field without help from a bigger partner by the end of 2007.

Richard Anderson, chief executive of Aim-listed First Calgary, said that he wanted to decide within "the next 30 to 45 days" the best route forward. Three investment banks, including Lehman Brothers, are being considered for the mandate.

He said: "We are looking at bankers to look at strategic alternatives to maximise shareholder value. We are looking at various options including enlisting a strategic partner or a sale of the company."

Mr Anderson said that First Calgary was not the right size to exploit its Algerian field, which might hold as much as 20trillion cubic feet.

He said: "We are an exploration company. We have found a big asset in Algeria. This is a big asset for a little company and it is a three to seven-year project [to develop the field]. This would take millions of dollars so it is a big company play, not for a little company like us."

First Calgary's shares jumped 31.5 or 4pc to close at 785p - more than 10 times the price at which the company floated in London in 2002 - giving the company a market capitalisation of £1.2billion.

At these kinds of levels, only big players such as Shell or Total would be able to afford to buy First Calgary. However, Tony Alves, analyst at KBC Peel Hunt, was doubtful that anyone would be tempted to pay out.

He said: "Their resource reporting is quite accurate but I am very sceptical that people will pay the price. This is something that was in their plan pretty much from day one. It is the right thing for them to do."

The news came as Cairn said that it had received formal approval from the government of India for a "declaration of commerciality", giving it development rights for three of its five Indian discoveries until 2020.

The declaration covers just over a third of the size of the total concession that Cairn is drilling between now and next May.

Bill Gammell, chief executive, said Cairn was on course to produce the first oil by the end of 2007.

Cairn also disclosed that it was likely to have to pay more than the $6.9m it had budgeted to pay to resolve a production-sharing agreement in Andhra Pradesh, India. Cairn's shares closed up 8 at £14.99.

Oil prices fell more than $1 a barrel yesterday. Brent crude for December delivery was down $1.25 at $48.68 in late trading in London. In New York light crude for one month delivery was down $1.48 at $53.45.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/10/19/cncalg19.xml