Cairn Energy Files Red Herring Prospectus

Cairn Energy says that, in preparation for the flotation of its Indian business on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited, its Indian subsidiary, Cairn India Limited ('Cairn India') expects to file shortly with The Registrar of Companies in Maharashtra, India, an offering document (the 'Red Herring Prospectus') in relation to the proposed flotation, in accordance with regulatory requirements.

In line with regulatory requirements and market practice in India, the Red Herring Prospectus includes a price range. Cairn has agreed and Cairn India has set a price range of Rs 160 - Rs 190 per Cairn India share. This implies a Cairn India market capitalization of approximately Rs 282.45 billion - Rs 335.41 billion (or approximately US$ 6.32 billion - US$7.50 billion*) excluding any exercise of an over-allotment option. The consequent implied valuation for Cairn's current interest in Cairn India is US$5.72 billion at the bottom of the range and US$6.90 billion at the top of the range, in each case after taking into account the proportion of the gross proceeds to be retained by Cairn India (expected to be approximately US$ 600 million).

The flotation will involve the issue of approximately 538.47 million Cairn India shares, excluding any exercise of the over-allotment option. Approximately 209.67 million Cairn India shares have been placed in the pre-flotation private placing announced by Cairn on 23 November 2006 resulting in a net offer to the public of approximately 328.80 million Cairn India shares. Cairn India may also grant an over-allotment option in accordance with The Securities Exchange Board of India guidelines. Cairn will own a 69.5% holding in Cairn India following the flotation (excluding any exercise of the over-allotment option).

Based on the price range above, illustrative gross proceeds of the flotation (including the proceeds of the pre-IPO private placing but excluding any exercise of the over-allotment option) would be Rs 86.16 billion (US$ 1.93 billion*) at the bottom of the range and Rs 99.47 billion (US$ 2.23 billion*) at the top of the range. After taking into account the proportion of the gross proceeds to be retained by Cairn India, expected to be approximately Rs 26.82 billion (US$ 600 million*), the gross proceeds expected to be received by Cairn (excluding any exercise of the over-allotment option) would be approximately Rs 59.34 billion (US$ 1.33 billion*) at the bottom of the range and Rs 72.65 billion (US$ 1.63 billion*) at the top of the range.

The final offer price for the flotation will be determined following a book building exercise expected to complete in mid December 2006. A further announcement confirming the final offer price will be made as soon as possible thereafter.

ABN AMRO Rothschild, Merrill Lynch and Morgan Stanley are acting as book running lead managers in relation to the initial public offering.

*(Based on a US dollar to Rupee exchange rate of 1:44.70 (source: Financial Times closing mid rate of exchange on November 24, 2006)

Sir Bill Gammell, Chief Executive of Cairn Energy PLC, commented:

'Following last week's successful private placing we are now commencing the next stage of the proposed flotation of the Cairn India business. The price range for the flotation reflects not only the current Cairn share price, but also our belief in the long term potential value of the Indian business which we have now seen positively supported by our private placing.'

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