CAIRN Energy plans to more than double its bet on the North Sea to around £700 million after agreeing its second unexpected acquisition in the area in two months.

The Edinburgh-based oil and gas firm announced that it has made a recommended £414m cash offer to buy Nautical Petroleum, which has stakes in several big finds off Shetland.

Cairn, which has spent more than $1bn (£650m) drilling off Greenland without making a commercial find, is paying a big premium to acquire Nautical.

The 450p per share offer represents a premium of around 51% to the closing price of 297.8p per Nautical share on Tuesday.

The bid represents a stunning endorsement of the potential of the North Sea, which will trigger windfalls of £4m each for Nautical's founders.

Eight weeks ago, Cairn Energy agreed to acquire North Sea- focused Agora Oil and Gas for $450m (£280m).

The deals may fuel speculation that Cairn's directors are losing enthusiasm for the under-explored waters off Greenland.

The company has funded costly drilling work off Greenland using some of the $6bn proceeds of the sale of the bulk of its hugely successful Indian business to Vedanta Resources last year.

However, Cairn's chief executive, Simon Thomson, told The Herald: "We are not cool on Greenland – we are very hot on Greenland."

Mr Thomson, who succeeded Sir Bill Gammell as chief executive last July, noted Norway's Statoil acquired a stake in the Pitu block off Greenland in January.

The companies hope to drill on the block in 2014. Cairn is continuing with work in other areas.

Mr Thomson said the acquisition of Nautical was part of a strategy to build a balanced portfolio that combines lower-risk exploration and near-term development opportunities in areas such as the North Sea, with potentially transformational exploration off Greenland and elsewhere.

He said Nautical and Agora would give Cairn an attractive portfolio of North Sea assets which could be the "engine room of growth".

These include fields that the company hopes will be brought into production relatively quickly. The cash they generate could be used to fund exploration.

The acquisition will allow Cairn to double the stake in the Catcher field it bought with Agora to 30%. Made in 2010, Catcher is one of the biggest finds in the North Sea in

recent decades. Nautical also has a 25% stake in the Kraken heavy oil field. In January, it sold a 25% stake in Kraken to Enquest for $240m.

Asked if Cairn might be at risk of overpaying for Nautical, Mr Thomson said: "The feedback we have had (from analysts) is that it's a fair price we are paying."

Mr Thomson said Cairn's balance sheet strength meant it could develop projects that Nautical might be challenged to fund. He added that while Cairn is not a North Sea- focused business, it has not ruled out making further acquisitions in the area.

Analysts at Cannacord Genuity told clients: "Nautical is a good strategic fit for Cairn... We view this as a good deal for Cairn, increasing exposure to a core asset and adding a further development project. This, with the recent Agora deal, goes a long way to rebalancing the company's portfolio towards lower-risk opportunities."

Werner Riding at Peel Hunt, wrote: "Given the quality of Nautical's core assets ... we believe there is a reasonable possibility of a counter-offer in the coming weeks."

However, Mr Thomson noted that Cairn has irrevocable acceptances or letters of intent regarding 27% of Nautical's shares and the bid has been recommended by Nautical's board.

Based in Mayfair, Nautical was founded by chief executive Stephen Jenkins and commercial director Paul Jennings. The industry veterans own 1.03% and 1.02% of its shares respectively. Institutions own much of the remainder. it won its first licence covering the area of the undeveloped Kraken find in 2003.

Nautical listed in 2005, when it paid £14m for the Alba Resources business founded by Aberdeen-based Sevi Guatelli who was one of the first to spot the long-term potential of heavy oil finds.

Shares in Nautical Petroleum closed up 55%, 164.25p at 462p. Shares in Cairn Energy closed down 3.2p at 288.7p.