By Scott Wright

CAIRN Energy has suffered fresh disappointment with the drill bit in the Gulf of Mexico.

Edinburgh-based Cairn told investors yesterday that drilling on the last of four wells it has been exploring with Italian oil giant Eni has completed without hydrocarbons being found.

Cairn, which burnished its reputation by making huge finds in India, said the target of its Ehecatl-1 exploration well had been to prove hydrocarbons in the Lower Miocene. But the firm said: “The well did not find reservoired hydrocarbons and it has now been permanently plugged and abandoned.”

The well Ehecatl-1 exploration well is located in Block 7 of the Sureste Basin, where Cairn has a 30 per cent working interest through its wholly-owned subsidiary Capricorn Energy Mexico. It is one of four blocks in the Gulf of Mexico where Cairn has working interests, having first moved into the country in 2017.

READ MORE: Cairn Energy makes oil find off Mexico

The reversal comes shortly after Cairn signalled cuts to its capital expenditure programmes in late March light of the Covid-19 pandemic and collapse in crude oil prices. It said it anticipated capital expenditure on exploration to be reduced from the original forecast of $150million to around $100m, though said the cuts would not affect ongoing operations on the Eni-operated Ehecatl well in Mexico.

Planned expenditure on UK producing assets is now expected to be below $45m, dow n from the $65m originally forecast, with the reduction reflecting cost savings and the deferral of activities planned for the Catcher fields in the North Sea.

Brent crude was trading above $30 per barrel last night, after surging by around 10 per cent, compared with around $70/bbl in January.

Cairn has had big exploration success in countries such as India and Senegal but has had mixed fortunes in the Gulf of Mexico to date.

Cairn and Eni received a big boost in the basin when they announced a big find in the Saasken-1 well in February, with estimates suggesting the discovery could contain up to 300 million barrels. Eni said then that studies suggested that 10,000 barrels oil daily could be produced.

While the find underlined Cairn’s exploration potential in Mexico drilling on three other wells in the basin has proved to be fruitless.

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There are no plans for further drilling activity in the Gulf of Mexico this year, with Cairn saying it will collate and assess data and samples from the well operations before deciding on its next move. Further drilling is on the agenda, but it will not be this year.

On Ehecatl-1 well, Cairn said yesterday: “Logging, sampling and data collection during the well operations will help the joint venture calibrate the seismic data and develop an improved understanding of the Lower Miocene target and the information gathered will be integrated to improve the understanding of the Block and inform the second well decision.”

Cairn moved into Mexico in 2017 after the government opened up the oil and gas sector to international investors in 2014 in a drive to maximise the potential of the country’s resources.

After being awarded exploration licences covering blocks in the southern Gulf of Mexico that year, chief executive Simon Thomson highlighted the potential of building a prolific portfolio in an under-explored area.

While companies such as Premier Oil and Repsol have made big finds in the area, it is understood to still be early days in the development of the industry.

The industry in Mexico was previously dominated by the state-owned Pemex.

Cairn meanwhile is expecting its long-running tax dispute with authorities in India to conclude this summer.An international tribunal has been considering the company’s $1.4 billion claim against the Indian government. The case relates to Cairn’s shareholding in Vedanta, which acquired a majority stake in its Cairn India subsidiary in 2015. Cairn retained a 10% holding in the India business further to the deal.

Cairn sold its Norwegian subsidiary to local player Solveig Gas for a headline $100 million in November after suffering drilling disappointments.

The company will hold its annual meeting next Thursday (May 14) with a minimum quorum of just two shareholders, chief executive Simon Thomson and chief financial officer James Smith.

Shareholders will not be able to attend because of social distancing measures.

Shares in Cairn climbed 4.8% yesterday on a day which saw big increases in oil stocks.