SHARES in Cairn Energy were boosted after the oil and gas company slashed operating costs by reducing its stake in a lucrative development off Norway.

Edinburgh-based Cairn offloaded 10 per cent of its interest in the Nova development, located in the Norwegian North Sea, to ONE-Dyas Norge AS for an initial $59.5 million (£48.8m).

The farm-out agreement leaves Cairn with a non-operated 10% interest in the Nova area, which is operated by Wintershall, while cutting its capital expenditure in the field. It said costs will reduce by $110m to the end of 2021.

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Nova is forecast to deliver 50,000 barrels of oil per day (bopd) at its peak, with Cairn’s net production share now reduced to 5,000 bopd. First oil remains on course to be achieved in 2021.

Analysts at Numis said the deal “clearly improves the liquidity position of the business by reducing forward capex and providing a cash injection.”

And the analyst added that it augurs well for Cairn’s bumper find off Senegal, where the firm is look to begin production in 2022. Numis said: “We have previously forecast Cairn is well funded for its existing share of the Senegal (SNE) development project through to the end of next year, before the capex ramp-up starts to exert pressure on the balance sheet. This transaction provides management with further headroom to decide the best time/price to monetise a stake in SNE.”

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Based on Cairn’s most recent annual report, published on March 12, the gross value of the assets being transferred to ONE-Dyas was $62.5m, while the net value was $28.5m.

The decision by Cairn to cash in on part of its interest in Nova may be seen as a boost to the firm after it experienced some disappointment with the drill bit off Norway.

On Monday the firm said no traces of petroleum were found during drilling on a wildcat well in a licence area where Cairn holds a 40% stake. The well, part of a licence including the Godalen prospect, was located around 13 kilometres north-east of the Norne field and 200km west of Sandnessjoen. The Norwegian Petroleum Directorate said the well was dry.

That disappointment came after the directorate announced the same conclusion following drilling on a wildcat well in the Lynghaug prospect in July. The Lynghaug well was the first Cairn has directed off Norway as the operator in charge of the exercise, with the well also the first to have been drilled on the Norwegian Sea licence concerned. Cairn also took part in a well drilled by Equinor off Norwway earlier this year which was also dry.

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While those results were disappointing, Cairn has scheduled a further drilling campaign for the UK and Norwegian North Sea next year.

The company, which inherited its interest in Nova with the acquisition of Norway’s Agora Oil and Gas AG in 2012, said it would use the proceeds from yesterday’s deal to fund group exploration and development activities.

Last month it revealed it had applied for oil and gas exploration licences off Israel after falling short in a bid for a portfolio containing significant interests in the Mediterranean. The Israeli energy ministry said Cairn had bid for acreage as part of a drive to encourage international firms to help the country make the most of its resources.

The company’s main interests in the UK North Sea are the giant Catcher and Kraken fields. Both projects achieved first oil in 2017. Cairn holds a 20% stake in Catcher and 29.5% in Kraken, both non-operated basis. In March Cairn slashed the valuation of the Kraken field east of Shetland by $166m, after cutting its estimates of reserves. However it signalled the shortfall would be offset by the Catcher field east of Aberdeen.

Shares in Cairn closed up 2% at 149p.