Cairn on a high after sale of 10% Greenland stake

Published on Wednesday 14 October 2009 21:18

CAIRN Energy, Scotland's largest oil explorer, surged to its highest level in more than a year yesterday, after it sold part of its Greenland business.

Petronas, the Malaysian oil and gas giant, has agreed to acquire a 10 per cent stake in Cairn's six exploration blocks around Greenland for $70 million (43.8m).

While Cairn's executive team has been talking up its excitement at acquiring a leading exploration position around the massive island, the market has struggled to put a value on the assets. Greenland is expected to hold billions of barrels of oil, but none has been found there. No wells have been drilled since the 1970s.

The deal implies Cairn's exploration blocks are worth at least $700m, despite no drilling yet being undertaken.

It is also a surprise. Last week, Cairn deputy chief executive Mike Watts told an oil and gas conference that one of the group's largest shareholders had told it not to do a deal on its Greenland assets simply to prove their value to analysts.

The sale of part of its Greenland business came as Petronas also increased its stake in Cairn India, acquiring a further 2.3 per cent stake in that business for $240m. Meanwhile, Cairn India announced it had completed a $1.6bn refinancing.

Shares in Cairn Energy closed up 242p, or 8.6 per cent, at 3,050p.