CNE

Cairn Energy (CNE) £28.34

The oil & gas explorer’s positive news on Rajasthan, alongside full-year results, only saw the shares add a little more than 1%. Analysts are not convinced by the announcement and are unlikely to touch up earnings forecasts, the real driver of share price growth short term. Evolution Securities says while Cairn upped estimates for Rajasthan (with production scheduled to start in H2 next year), they ‘remain cautious about the project development risks and timing of delivery’. Also, they point out that while production and reserves estimates for existing activities have been raised, so have capital expenditure forecasts, and in a disappointing way. Dresdner Kleinwort agrees, saying that ‘Rajasthan guidance for reserves and peak production was increased as expected, although this was at a cost with development spend,’ and that they see ‘limited drivers throughout the remainder of 2008’. We think investors will follow analysts’ guidance, especially in a market that is rerating equity risk.

ACTION: SELL Cairn Energy • Target £25.50 • Stop loss £29.75

TIME TARGET: 6 WEEKS