The Financial Times
By Guy Chazan
Cairn Energy said it had expanded its interests off the coast of Morocco – part of the oil explorer’s strategy of rebuilding its portfolio after the sale of the majority of its stake in its sister company Cairn India last year.
Cairn recently completed a $1bn two-year drilling campaign off the coast of Greenland that failed to find any commercial quantities of oil. Since then, it has been expanding its presence in the North Sea and the Mediterranean.
Simon Thomson, chief executive, said Morocco was a “nice combination of an under-explored, frontier area with high prospectivity and attractive fiscal terms”.
Cairn said it bought 50 per cent of the Foum Draa blocks off Morocco from three small explorers – San Leon Energy,Serica Energy and Longreach Oil and Gas. It will pay a share of past costs and $60m towards the costs of an exploration well.
The blocks are close to interests Cairn picked up earlier this year when it bought Nautical Petroleum, and brings its total acreage off Morocco to more than 10,000 square kilometres.
The acquisition of Nautical and of privately-held Norwegian explorer Agora in May also expanded Cairn’s presence in the North Sea, which has seen a big revival in investment in recent years.
The deals were part of an effort to reorganise the company after it completed the sale of a 40 per cent stake in Cairn India at the end of last year and returned $3.5bn to shareholders in February.
Cairn said it was targeting seven wells in the North Sea over the next 16 months and had also identified two prospects in Pitu Block, in Greenland’s Baffin Bay, for drilling in 2014. Cairn sold a stake in Pitu to Norwegian oil majorStatoil in January.
The company said it made a pre-tax loss of $50m in the first half of the year, compared to a loss of $141.3m a year ago. It says it expects to have $500m in cash by year-end, down from $927m at the half-year.
The company’s share price was down 3.2 per cent at 286.9p in afternoon trading. Stuart Joyner of Investec said the drop was in response to the lack of catalysts, with little news on exploration expected in the coming months.
“Since Greenland there’s been a natural hiatus, though 2013 looks to be shaping up well,” he said.
FT Comment
Cairn made its name in India, where it had a series of huge oil discoveries, but it has so far failed to replicate that success in Greenland.
The company trades 20-25 per cent lower than a sum-of-its parts valuation – though other similar-sized exploration and production companies such as Premier Oil trade at an even bigger discount.
The fact that this discount is smaller than its peers is only to be expected, considering it has an 18 per cent stake in Cairn India worth $2bn and will have a cash pile of $500m by the end of this year.
