Cairn up 5% after Carnaby oil well discovery

Greig Cameron

Deputy Business Editor

Thursday 7 June 2012

CAIRN Energy's share price soared 5% to 289.7 pence after positive news from a well in a major UK North Sea oil field.

ENCOURAGING: Cairn boss Simon Thomson, centre, has overseen exploration at the Carnaby well.

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Greig Cameron deputy business editor

The Carnaby exploration well, around 110 miles south-east of Aberdeen, reached a depth of 4695 feet, with the initial analysis suggesting the oil is of a similar quality to that of the nearby Catcher field.

Catcher is one of the largest fields discovered in the North Sea in recent years with an estimated 300 million barrels of oil in the area. The news added £83 million to Cairn's value giving it a market capitalisation of £1.745 billion. It was also a positive sign for Cairn's £281m acquisition of Norwegian firm Agora Oil and Gas, which holds a 15% stake in the licence, following a disappointing update on the Tybalt well last month.Analysts said Cairn, headed by Simon Thomson, would see a small gain from Carnaby although Premier Oil, the biggest stakeholder at 50%, would receive a more material benefit.In a note Deutsche Bank said: "The result de-risks a number of other prospects in close proximity, which may be future drilling candidates, but perhaps more importantly, should start to address the bearish sentiment we currently see in the market on Premier's exploration delivery. "Not a game-changer for Cairn, although a small positive nonetheless, given the shares continue to trade at a discount to the Cairn India stake and cash."Oriel maintained its add recommendation and said it was still "good news" for Cairn, even though the "discovery appears to be materially smaller than the company's pre-drill expectation".Carnaby is now being plugged and abandoned as planned. The data from it will be used to determine what contribution the overall site can make to the Catcher block.Premier said the rig used to drill at Carnaby was being moved east, to the high-risk Coaster prospect. Simon Lockett, chief executive of Premier, said: "The discovery of good quality oil in the western part of the block is encouraging and the results from the Carnaby well will be used to calibrate the remaining exploration potential in this part of the block."Nautical Petroleum owns a 15% stake in the North Sea block 28/9a.It chief executive, Steve Jenkins, said: "The quality and widespread distribution of these sands augurs well for further success and efficient oil production from current and future discoveries in this prolific block."

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Cairn up 5% after Carnaby oil well discovery

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