Cairn to explore Morocco oil fields

Group Business Correspondent

Wednesday 29 August 2012

CAIRN Energy is investing $61.5 million (£40m) in a move into deepwater exploration off Morocco and expects to add more areas to a portfolio that has expanded to include the North Sea as well as Greenland.

ENCOURAGED: Cairn Energy boss Simon Thomson says North Sea assets will help fund frontier exploration.

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MARK WILLIAMSON

Edinburgh-based Cairn is acquiring a 50% stake in three blocks in the Atlantic Ocean off Morocco as part of plans to build a balanced portfolio under chief executive Simon Thomson, who succeeded Sir Bill Gammell in July last year.

After making bumper finds in India, Cairn wants to combine potentially transformational exploration in under-explored frontier areas such as Greenland with less risky activity in the North Sea.While the company has spent $1 billion and has been drilling off Greenland without making a commercial find, Mr Thomson said directors were very encouraged by the results of the work Cairn has done.It has identified two prospects on the Pitu block which could contain around 950 million barrels of oil and gas in total and a further 11 leads."Morocco is a very good example of a frontier play," Mr Thomson told The Herald. Only 34 wells have been drilled in the area concerned since 1968."There's more to come from us on that [frontier] side of the equation," added Mr Thomson. Cairn is weighing up a number of bid rounds and new licence opportunities in undisclosed areas.The company sees potential in the Mediterranean where it has interests in Spain. It hopes to win licences off Cyprus and Lebanon.Mr Thomson believes Cairn has made a good start with its attempts to build a North Sea asset base from which it could generate cash to fund future exploration work elsewhere.The company has acquired stakes in several big finds through the takeovers of Agora Oil & Gas and Nautical Petroleum this year, for a total of around £700m. Cairn expects to drill at least seven North Sea wells in the next 16 months. Nautical also has stakes in three exploration blocks near the Foum Draa interests off Morocco, which Cairn is acquiring from Serica Energy and two other independents."I believe we have achieved critical mass ... in the North Sea," said Mr Thomson, adding Cairn does not need to buy relatively costly producing assets.After selling a 3.5% stake in its Indian business for $371m in the first half, Cairn expects to have $500m cash at December 31. Last December it raised $5.5bn by selling a controlling stake in Cairn India to Vedanta Resources, and distributed $3.5bn to shareholders. The company retains an 18.3% stake in Cairn India, valued at around $2.2bn.Mr Thomson said Cairn is entering the next phase of activity off Greenland. The results of seismic survey work indicate the Pitu block may contain three billion barrels of oil and gas.Cairn has farmed out a 30% stake in the block to Statoil, which will bear some of the exploration costs. It hopes to drill a well on Pitu in 2014.While campaigners claim Cairn's activity off Greenland poses risks to the environment, Mr Thomson said the company had completed years of safe and efficient activity in an area where a growing number of firms are active at the invitation of Greenlanders.Mr Thomson believes the company has drawn a line under the furore about plans to pay Sir Bill, who is Cairn's chairman, a big one-off bonus earlier this year. While these were scrapped, Cairn suffered a 67% vote against the directors' remuneration report at its general meeting."We have listened to shareholders," said Mr Thomson. "We are going forward with a very strong approach on corporate governance."In the six months to June, Cairn made a $50m pre-tax loss, compared with a $141m interim loss last time.The company incurred $63m costs drilling two unsuccessful wells in the North Sea, where it made finds with two other wells.Shares closed down 12.6p at 283.7p.

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Cairn to explore Morocco oil fields

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