CAIRN Energy has struck a deal to expand its north-west African exploration acreage as it kicked off drilling operations in offshore Morocco.
Edinburgh-based Cairn has reached a farm-in agreement with Kosmos Energy and the Moroccan National Oil Company for a 20% non-operated interest in an exploration block said to offer "transformational" potential.
The company said the area has a range of exploration play types and "significant" follow-up potential. Drilling in an exploration well is due to take place in the second half of 2014.
The farm-in builds on the position the company has built along the Atlantic Margin since its last drilling campaign in Greenland came to an end two years ago.
As well as Morocco, Cairn has developed positions in Mauritania and Senegal, with operations in all three countries due to take place within the next 12 months.
Last week, Cairn said it will decide before the end of the year whether to start a controversial drilling project offshore Greenland in partnership with Statoil.
The firm declined to say how much it paid to farm in to the Cap Boujdour permit, located 50 kilometres (31 miles) off the coast of Morocco and covering 27,700 square km in the Aaiun Basin.
However, it is understood that under the deal it will pay a promoted 25% share of future exploration costs, including towards a 3D seismic survey and an exploration well planned for 2014.
Analysts at GMP Securities and Royal Bank of Canada (RBC) stated these commitments will be subject to a maximum spend of $125 million (£77m) for all partners.
If the initial drilling is successful, Cairn will then cover 25% of cost of two appraisal wells, which the analysts noted would be capped at $100m per well in total, and contribute $12m to future activity on the block.
Cairn's total exploration costs are expected to be in the region of $60m to $70m.
GMP Securities said the farm-in was "another positive for Cairn", adding: "We think Cairn can move beyond its 'value trap' status and return to a growth rating as it drills its firm upcoming wells in Morocco and Senegal."
Cairn chief executive Simon Thomson said: "This farm-in builds on our existing Atlantic Margin portfolio where we have a strategic presence across three countries in Morocco, Senegal and Mauritania.
"The new acreage offers transformational exploration potential in a frontier region where Cairn is already well established.
"We are delighted to be working with Kosmos who are a proven and valuable operating partner with a track record of exploration success in similar play types along the west African margin. Cairn's 12-month, multi-well high impact frontier exploration programme along the Atlantic Margin has started and offers shareholders material growth potential."
Cairn began drilling on the FD-1 wildcat exploration well, which is located 120km offshore Morocco in the Foum Draa block, last weekend.
Next on the agenda will be frontier drilling in the Cap Juby Maritime III block in Morocco early next year, with two further wells to follow in the country in 2014.
Once operations in Morocco are complete, Cairn plans exploration work in Senegal in the first quarter of next year, followed by appraisal activity off Ireland.
Meanwhile, Gulfsands Petroleum has started drilling operations in the Rharb Centre Permit in northern Morocco.
It is the first of nine wells to be drilled by the company in Rharb in two back-to-back programmes.
Shares in Cairn closed down 2.10p (0.75%) at 278.9p.
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