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Last updated: August 24, 2010 10:42 pm
Cairn Energy set its sights firmly on Greenland as it mapped out the region’s growth potential following the planned disposal of a majority stake in its Indian operation.
Sir Bill Gammell, chief executive, used the interim results to highlight growth opportunities, including offshore sites in Greenland and a balance sheet that would allow Cairn to “fast-track” exploration. “For the foreseeable future, it’s Greenland, Greenland.”
The group is operating two rigs in the Baffin Bay Basin, off the west coast of Greenland about 400km north of the Arctic Circle. It said that one drill had met with thermogenic gas, which can be an indicator of hydrocarbons. However, the well should be completed within a week and has yet to strike oil. The gas is in sands too thin to merit development.
The news was greeted with dismay by environmental groups. Offshore drilling has come under intense scrutiny since the rupture of BP’s Macondo well in the Gulf of Mexico. Greenpeace’s ship Esperanza is already in Greenland close to Cairn’s operations.
The group insisted on Tuesday it had been subject to close regulatory scrutiny. It also moved two floating rigs to the area so if one well had a blow-out, the second rig could drill a relief well to allow it to be plugged.
Cairn plans to drill four wells at a cost of $100m (£65m) each over the next few weeks and expects to be able to provide an update towards the end of October.
Arctic oil would fill a potential gap left by a deal announced last week for Vedanta, India’s largest miner, to buy a 51 per cent stake in Cairn India for as much as $9.6bn. Cairn has promised to return a substantial portion of the proceeds to shareholders.
However, recent speculation in India has focused on whether ONGC, India’s state-owned oil and gas company, has pre-emption rights. Sir Bill said: “This is a corporate transaction at the PLC level.” But he also admitted: “The government needs to endorse the overall transaction.”
In the six months to June 30 turnover rose from $17.1m to $332.6m, which helped the company swing to a $58.4m pre-tax profit, compared with a $117.6m loss in the same period last year. Losses per share were 0.93 cents (4.61 cents).
The shares closed down 18.9p at 445.5p.
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