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Cairn to drill off coast of Morocco

CAIRN Energy has said it plans to start exploration drilling off Morocco this year, in spite of the attack on an oil and gas installation in neighbouring Algeria in which six Britons are thought to have died.

STRATEGY: Cairn chief executive Simon Thomson, centre, seeks to balance exploration with lower-risk activity in UK and Norwegian waters.
STRATEGY: Cairn chief executive Simon Thomson, centre, seeks to balance exploration with lower-risk activity in UK and Norwegian waters.

The Edinburgh-based company also expects to resume drilling off Greenland, with a well targeted for next year.

In an update – in which it held out the prospect of big investment in the North Sea – Cairn said it is preparing to start work in what could be a long drilling campaign off Morocco.

Renowned for its success in India, Cairn believes it could make big finds in the relatively under-explored waters off north-west Morocco. The company is planning a multi-well, multi-year exploration programme offshore, to the west of Algeria. It said drilling is "targeted to commence in Q4 2013".

The update was issued three days after the hostage crisis at a plant in eastern Algeria reached its bloody conclusion. The incident could leave Algeria struggling to regain the confidence of oil and gas firms.

On Sunday, PM David Cameron said the terror threat in North Africa had grown.

Asked if Cairn thought it safe to operate in Morocco, a company spokesman said: "Cairn plans to explore [subject to Government approval and securing a suitable rig] in the Atlantic Ocean, 60-120km offshore north-west Morocco. The safety of Cairn's people is of the utmost importance anywhere the company operates."

Cairn highlighted its continued interest in Greenland, where the company has invested more than $1bn (£630m) drilling without making a commercial find.

Experts are studying seismic data covering the Pitu block off western Greenland.

"Both Cairn and partners Statoil and Nunaoil continue to be encouraged by the opportunity in Pitu and are targeting exploration drilling in 2014, subject to Government approval," Cairn said.

Meanwhile, Cairn reiterated its enthusiasm for the North Sea where it has built a big position recently through acquisitions. These gave the company stakes in the giant Catcher and Kraken finds, which the company expects to generate lots of cash when they come onstream.

Cairn expects to spend $1.5bn to $2bn on such assets over the next five years plus around $1.25bn to $1.5bn on exploration and appraisal work. "Over the coming 12 months, Cairn expects to participate in multiple exploration and appraisal wells in the North Sea," it said.

The company re-entered the North Sea under chief executive Simon Thomson's plans to balance exploration in areas like Morocco with lower risk activity off the UK and Norway. Mr Thomson said: "We look forward to creating further shareholder value as we enter a period of sustained exploration activity."

The company retains a 10% stake in the Cairn India business, valued at around $1.1bn. It sold a 40% holding in Cairn India for $5.5bn in 2011.

Analysts at Jefferies International told clients they like Cairn for its balanced portfolio.

Shares in Cairn Energy closed up 1.7p at 285.7p.

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