RBC upgrades Cairn Energy to 'outperform'

1st Jun 2015 08:32

RBC Capital Markets upgraded Cairn Energy to 'outperform' from 'sector perform' and lifted the price target to 250p from 220p following recent share price weakness."The combination of Cairn's Capital Markets Day and the prospectivity outlined in partner FAR's AGM highlight the potential for low risk appraisal drilling and longer term resource/reserves growth offshore Senegal," said RBC.It noted that exploration/appraisal drilling offshore Senegal has resulted in an initial oil discovery, which could add a further 70p per share.It also pointed out that the company has begun to create strategic partnerships through various farm-ins and farm-outs of its acreage, including one with ConocoPhillips in Senegal, and said the continued process acts as a positive endorsement for Cairn's prospects.RBC added that although the tax dispute with Cairn India is ongoing, it doesn't expect any material developments to take place until after the outcome of the drilling campaign.In March, Cairn Energy was hit with a $1.6bn bill for unpaid taxes in India.Shares in Cairn were up 1.8% at 172.60p at 1230 BST.