Shares in Scottish oil and gas explorer Cairn Energy jumped to a two-year high yesterday after it said it was “delighted” with the results from its latest test well off the coast of west Africa.
In an update described as a “solid step forward” by one analyst, the Edinburgh-based firm said two drill stems showed flow rates of up to 5,400 barrels of oil a day ahead of its appraisal well being plugged and abandoned.
Cairn, which has been locked in a $1.6 billion (£1.1bn) dispute with India’s tax authorities for two years, is now revising its resource estimates for the SNE field, about 60 miles off the Senegal coast. An update will be provided alongside the firm’s annual results next Tuesday.
Chief executive Simon Thomson said: “Cairn is delighted with the flow rates from the latest well in the Senegal appraisal programme, which validate the scale and growth potential of the SNE field.
“The results have demonstrated the ability of the upper reservoirs to flow at commercially viable rates and we eagerly look forward to the results of the BEL-1 well which will commence operations shortly.”
Cairn has a 40 per cent working interest in three blocks off Senegal. Its partners, ConocoPhillips and FAR, have 35 per cent and 15 per cent respectively, while Petrosen, the national oil company of Senegal, has 10 per cent.
Mike van Dulken, head of research at Accendo Markets, said the latest news followed an upgraded assessment of the SNE field by partners in early February and endorsed its “scale and growth potential”
“The company is now moving a drill rig towards the Bellatrix prospect (BEL-1) in order to test the northern extent of the exciting SNE field meaning updates from BEL-1 will be eagerly anticipated,” he said.
“Cairn is a busy explorer with multiple projects having potential to deliver good news.”
Analysts at SP Angel said the update was a further step forward for the company although more work would need to be done to establish the development costs involved with the field.
“All in all, we believe that investors should be pleased with the way the company has progressed since is ceased its ‘wildcatting’ in Greenland, and the only dark cloud on its horizon, as far as we are concerned, is the spurious and questionable retrospective tax claim from the Indian government,” they commented.
In January, Cairn said proceedings against the Indian government under a UK-India investment treaty had begun in a bid to resolve the tax dispute over the group’s remaining 10 per cent stake in Cairn India, which it cannot sell while the case is ongoing. Its shareholding in the business was valued at $1bn at the end of 2013, but has since slumped in value to $384m.
Shares in Cairn rose 22.5p, or 13.3 per cent, to close at 192.1p. They have risen by more than 50 per cent in six weeks.