CAIRN Energy has won a big vote of confidence from a US industry giant over its decision to expand its hunt for oil and gas to Senegal.
Edinburgh-based Cairn Energy said ConocoPhillips has agreed to buy a 25% stake in the exploration acreage off the west African country that the company acquired in March.
The value of the deal was not disclosed.
However, Cairn said ConocoPhillips will pay it a share of the costs already incurred on the blocks concerned and cover a share of future exploration expenditure.
With Cairn some months away from starting drilling its first well off Senegal, ConocoPhillips' decision to farm into the acreage signals faith in its potential.
Analysts at UBS told clients of the securities business: "Attracting Conoco is a significant coup for Cairn in our opinion.
"One of the industry's major players, it seems, has given a 'thumbs-up' to Cairn's geological model and determined Senegal a worthy risk-adjusted investment."
They said the involvement of ConocoPhillips would allow the venture partners to accelerate work in a relatively under-explored area in which Cairn believes there is the potential to make huge finds.
The partners will be able to firm up plans to drill two wells.
Only one had been confirmed previously.
Cairn Energy's chief executive Simon Thomson said: "This strategic farm-out means Cairn is able to intensify its plans to explore its acreage offshore Senegal, where the gross prospective block wide resource potential is estimated to be in excess of 1.5 billion barrels."
He said the transaction fitted Cairn's strategy of maintaining a big exposure to areas it believes have big exploration potential while limiting financial commitment to sustainable levels.
Renowned for making huge finds in India, Cairn moved into Senegal as part of Mr Thomson's efforts to build a balanced portfolio.
This combines potentially transformational exploration in areas in which there has been little activity, such as Greenland, with lower risk assets in the North Sea.
Exploration experts at Cairn believe the Atlantic Margin area running from Greenland to West Africa could contain huge amounts of oil and gas.
In March Cairn agreed to acquire a 65% stake in three blocks off Senegal from Australia's Far Limited in exchange for funding a well and paying $10m associated costs.
The deal with ConocoPhillips is subject to Government of Senegal approval.
Cairn will retain operatorship and 40% interest in the exploration blocks. Petrosen of Senegal will retain a 10% interest.
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