Watts, 58, was head of exploration at the Edinburgh-based firm when most of the 28 oil and gas finds, including Mangala and Bhagyam, were made in the Barmer block.
He saw oil in the Thar desert when Royal Dutch Shell could not and bought out the supermajor in block RJ-ON-90-1 for USD 7.25 million.
Michael John Watts has been Deputy Chief Executive of Cairn Energy since March 31, 2009.
Also see: Cairn India Quote Update
"As part of its long-term succession planning, Dr Mike Watts, Deputy CEO, and Jann Brown, Managing Director and CFO, will not seek re-election at the AGM on 15 May 2014 and will stand down as executive directors of the company with effect from that date," Cairn Energy said in a statement.
Watts, who named an oil find in the Rajasthan block after Bollywood actress Aishwariya, will remain an employee of Cairn Energy till December 31.
Cairn Energy hived off the India assets to a new company, Cairn India, which was listed on the stock exchanges in 2006 and later acquired by mining group Vedanta Resources.
However, Cairn Energy faces a potential tax demand on an alleged Rs 24,500 crore of capital gains made in 2006-07 after the India assets were transferred. The company has denied any tax evasion.
"Watts and Brown have agreed, during their notice periods, to continue in senior roles and dedicate their time to seeking to resolve the tax position in India," Cairn said.
Watts began his career in 1980 with Shell International. He joined Burmah Oil Exploration in 1985 and Premier Oil in 1986. He was CEO and Managing Director of Amsterdam-listed Holland Sea Search, which was acquired in 1995 by Cairn, where he was the architect of the South Asia strategy.
Cairn said James Smith will take over as Finance Director and will join the Cairn board next month.
Smith joined Cairn recently from Rothschild, where he was a director in the energy and power team in London. He has 14 years of experience in investment banking, advising oil and gas clients, including Cairn, on M&A transactions and equity and debt market finance.
"Following these changes, Cairn will have two executive directors on its board Simon Thomson, Chief Executive, and James Smith, Finance Director. They will be supported by the Director of Exploration Richard Heaton and Chief Operating Officer Paul Mayland, who have a combined experience at Cairn of more than 30 years," the statement said.