CAIRN Energy is ramping up its exposure to West Africa by acquiring a stake in exploration acreage off Mauritania in a multi-million dollar deal.
The Edinburgh-based oil and gas firm has agreed to buy a 35% stake in a huge block off Mauritania from Chariot Oil & Gas for an initial payment of $26m (£17m).
Cairn has also agreed to pay a 39% share of future exploration costs on the block. This lies close to an area where discoveries have been made.
The deal will allow Cairn to continue a quick-fire campaign to amass exploration interests in relatively under-explored areas off West Africa, where it believes there is the potential to make bumper finds. Cairn has already acquired acreage off Senegal and Morocco in the region.
"The opportunity in Mauritania presents an attractive new country entry, building on our existing Atlantic Margin portfolio in Senegal and Morocco," said chief executive Simon Thomson.
Renowned for its success with the drill bit in India, Cairn has moved into West Africa under Mr Thomson's plan to operate a balanced portfolio.
The company has interests in frontier areas where its exploration staff believe it could make transformational finds and lower risk investments in the North Sea.
The frontier exploration programme is focused on the Atlantic Margin. This runs from Greenland, where Cairn has drilled without making a commercial find, to West Africa.
Last week, the company won a vote of confidence in its approach in Senegal from a US major. ConocoPhillips agreed to acquire a 25% stake in three blocks off Senegal from Cairn, five months after the Scottish firm bought into the acreage.
Cairn's move on Mauritania takes it into a country which has also attracted attention from Tom Cross, one of Scotland's most successful oil and gas entrepreneurs.
Mr Cross developed the Dana Petroleum business, which combined pioneering exploration in countries such as Mauritania with a big North Sea production business. Acquired by Korea National Oil Corporation for £1.9bn in 2010, Dana retains interests in three blocks off Mauritania.
Four of the six wells drilled on the blocks have found oil or gas.
Mr Thomson said by increasing its strategic presence in "under-explored and highly prospective new plays" in the Atlantic Margin area, Cairn could build up its understanding of the geology of the area and generate operating efficiencies.
The block it has agreed to farm into off Mauritania covers 12,175 km2 in water depths ranging from shallow shelf to more than two kilometres.
Cairn said two wells previously drilled in shallow water areas of the block contained reservoirs with oil shows. These may indicate the presence of oil deposits below the seabed.
Chariot Oil & Gas, which operates the block, recently acquired detailed 3d seismic images of what is reckoned to be the most promising part of the block.
"The seismic will be interpreted with the objective of identifying a high grade drillable prospect by the end of Q1 2014," said Cairn.
Subject to Mauritanian Government approval, Cairn will acquire a 35% stake in block C19. State-owned SMH will retain 10% and Chariot's working interest will reduce to 55% from 90%.
Cairn said it has contracted a rig for a multi-well campaign off Morocco, Senegal and "potentially other areas". It plans to start drilling its first well offshore Morocco later in 2013. It expects to start drilling off Senegal next year.
Shares in Cairn Energy closed up 7.7p at 274.6p.
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