Cairn Energy boardroom departures 'unexpected', says UBS

11th Apr 2014 09:53

UBS has kept a 'neutral' rating on Scottish oil and gas group Cairn Energy after the surprise departure of two high-level executives.The company announced on Thursday that its Deputy Chief Executive Officer (CEO), Mike Watts, and Managing Director and Chief Financial Officer, Jann Brown, would not seek re-election at the annual general meeting in May.The news came just a month after former CEO Sir Bill Gammell retired as Non-Executive Chairman, though Cairn said that the management changes were "part of its long-term succession planning". However, UBS said it regards the departures as "somewhat unexpected" and noted that both Watts and Brown are still some way from the default retirement age. UBS explained that the stock has "significantly underperformed" over the last three years, falling around 70% from its peak in September 2010 during "a period in which significant value has leaked away". This included investments in a number of failed wells and the impairment taken last month on its Catcher project."Meanwhile, the Indian tax issue has flipped the debate from Cairn being over-capitalised to potentially under-funded," the bank said, adding that clarity over the issue could take some time.UBS said that the stock is now in "urgent need of frontier drilling success" ahead of the upcoming drilling of its two wells in Senegal, 'North Fan' and 'L' prospects, and the 'Gargaa' prospect in Morocco."These offer company making upside, but well control is limited, the basins frontier, and likelihood of success low as a result."The bank has left its 175p target price for Cairn unchanged.The stock was down 1.66% at 164.8p by 10:06 on Friday.BC