DCSIMG

Cairn signs £100m StatOil deal to confirm optimism in Greenland

Cairn's Sir Bill Gammell faced criticism for his pay packet last week

Cairn's Sir Bill Gammell faced criticism for his pay packet last week

  • by PETER RANSCOMBE
 

CAIRN Energy, the Edinburgh-based oil explorer, is in talks to sell further stakes in its Greenland exploration fields after yesterday signing an estimated $160 million (£103m) deal with StatOil, Norway’s state energy firm.

Analysts said the deal showed that oil majors remain interested in exploring Arctic waters despite Cairn failing to find any oil during the past two summers of its controversial $1.2 billion drilling campaign, which has been criticised by environmentalists.

Under yesterday’s agreement, StatOil will buy a 31 per cent stake in the Pitu field. Cairn will remain as operator but a spokeswoman told The Scotsman it will draw on StatOil’s experience of drilling in Norway’s harsh Arctic waters.

Financial terms of the deal were not disclosed, but Cairn said the Norwegian firm “will pay a signature bonus, back costs on the block and promoted terms of future exploration expenditure”.

Alejandro Demichelis, an analyst at Bank of America Merrill Lynch, believed that – based on similar contracts in other frontier areas such as East Africa, Guyana and Namibia – the deal was worth $100m-$180m to Cairn.

He added: “Statoil’s harsh environment expertise and recent Barents Sea exploration success should reduce the perceived Greenland risk.

“This is just the beginning of Cairn’s de-risking of its Greenland acreage and we expect additional farm downs. We note that Shell and Maersk, among others, are active in north Greenland.”

Oriel Securities analyst Nick Copeman added: “This is good news and confirms that the industry remains interested in Greenland exploration.” Cairn has gathered geological data about the Pitu block – in an area of sea known as “iceberg alley” – but has yet to start drilling.

If oil is found at the site – in which Nunaoil, Greenland’s state energy company, also holds a 12.5 per cent stake – then StatOil will take over the development of the field. The Norwegian firm already has interests in two neighbouring blocks, which are operated by Shell.

News of the “farm-out” deal in Greenland comes just days after Cairn India, the company’s subsidiary, was given the go-ahead by the Delhi government to expand production in Rajasthan.

Cairn last month completed the sale of 40 per cent stake in its Indian arm to FTSE 100 miner Vedanta Resources for $5.4bn after the long-delayed deal was finally signed off by Delhi. About $3.5bn – or £2.3bn – from the sale will be returned to shareholders next month, while the remainder will be used to fund the ongoing exploration programme in Greenland.

The firm last week defended the payment of a £4m bonus package to founder and chairman Sir Bill Gammell. The payments drew criticism from the Association of British Insurers, which issued a “red top” alert ahead of a vote by shareholders next week.

The firm is also looking at other investment options, such as buying stakes in peers’ exploration wells or funding drilling in other frontier areas.

But the company last week played down suggestions it would buy a stake in Rockhopper Petroleum, which is exploring for oil off the Falkland Islands.

Cairn’s shares edged up 1.6p to close at 292.2p last night.

l Shares in Ithaca Energy, the North Sea focused oil and gas explorer, jumped by more than 26 per cent yesterday after it said it was in talks over a possible offer for the company, writes Perry Gourley.

The Canadian-headquartered firm, which has its operations base in Aberdeen, saw its shares rise 37p to 180.12p.

 

Comments

 
 

Back to the top of the page