Cairn slips after surprise departures

Cairn Energy cleared the decks today in readiness for a new era, with the surprise departures of long-serving executives Mike Watts and Jann Brown, who will both stand down at the AGM on 15 May.

Cairn said the two will dedicate their notice periods to helping the company resolve its dispute with the Indian tax authorities over lucrative finds in Rajasthan.

Deputy chief executive Watts, is credited with discovering India's largest onland oil field in Rajasthan as head of exploration when the oil and gas firm made most of its 28 finds, such as Mangala and Bhagyam, in the Barmer block. He is best known for buying out Royal Dutch Shell's interest in Thar desert block RJ-ON-90-1 for $7.25 million (£4.32 million).

Cairn Energy hived off the India assets to a new company, Cairn India, which was listed in 2006 and later acquired by mining group Vedanta Resources.

Tax demand

However, the Edinbugh-based firm faces a potential tax demand on an alleged RS 24,500 crore of capital gains made in the financial year ended 31 March 2007 after the India assets were transferred.

The company has rebutted allegations of tax evasion, and last week said it is refusing to capitulate after receiving two further notices from the India's Income Tax Department. One of these is a request to file a tax return for 2007, and Cairn said it will file a nil return for this period.

It is also refuting a second notice which claims that Cairn UK Holdings should have withheld tax on dividends paid to its parent Cairn Energy.

Cairn said investment banker James Smith will take over as finance director and will join the Cairn board next month. Smith recently joined Cairn after a stint at Rothschild, where as a director in the energy and power team in London, he advised oil companies on merger and acquisition transactions and market finance.

Richard Heaton, director of exploration and new projects, will take on some of the Watts' duties.

The company is widely seen to be unlucky that the issue was high profile shortly before the Indian Election.

Cairn's shares felt the heat and slipped 1.8% to 166.80p.