Scottish oil explorer Cairn Energy said yesterday it was still optimistic of finding oil off Greenland despite its first well this year – part of a £369million campaign – having to be abandoned.
The Edinburgh-based firm said its LF7-1 exploration well, one in a four-well drilling programme during 2011, was being plugged.
Shares in Cairn fell more than 5% to their lowest price in more than a year at 334.8p compared with more than 490p a year ago, following the announcement.
The firm said its focus would now shift north to two wells inside the Arctic Circle, made accessible because of a weather window opening in the region.
Simon Thomson, chief executive, remained upbeat about Cairn’s Greenland prospects.
He said: “Although no reservoir has been found in the LF7-1 well, the first in the basin, we are encouraged by further indications of pre-tertiary oil-prone source rocks across our Greenland acreage. The exploration challenge remains to find the reservoir sands. We continue to be optimistic about the remainder of our 2011 four-well, multi-basin exploration programme offshore Greenland.”
Analysts said yesterday the lack of success off Greenland was being reflected in the company’s share price, but that it was still early days for Cairn in the area.
Angus McPhail, at Investec, said up to 20 wells could be needed to find oil.
Earlier this year Cairn itself said that, because of the frontier nature of the exploration, individual prospects were estimated to have chances of success ranging from about 10% to 20%.
A second well in the campaign has been temporarily suspended to enable the rig Leiv Eriksson to move farther north into the Arctic Circle to drill the Delta-1 well. A fourth well, the Gamma prospect, also in the Arctic, is scheduled to be drilled once the rig Corcovado has completed the abandonment of LF7-1.
Cairn decided to shift focus to offshore Greenland and sell a 51% stake in its Cairn India business to Vedanta last year, although the deal was only recently ratified, subject to conditions, by the Indian government.
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LAST year, Cairn became the first company to drill offshore Greenland in 10 years and the first in the Greenland Arctic for 35 years.
It failed to find commercial discoveries but said at the time it had found encouraging traces of oil and gas.
News of the LF7-1 well being abandoned sparked comment from Greenpeace, which has staged protests at Cairn’s Edinburgh headquarters. Campaigner Ben Ayliffe said: “Cairn Energy took a multimillion-dollar gamble with the fragile Arctic environment and came up with nothing.
“This should be a lesson to other oil companies like Shell who are eyeing up new ventures among the icebergs in the far north. What was already an unattractive investment, now looks even riskier.”