OIL explorer Cairn said yesterday it has found “encouraging” gas and oil bearing sands in the Arctic, and remains confident it can produce fuel in the region despite the failure of its first well.
Shares dipped four per cent to 445.50p as investors hoping for a major oil find at the well near Greenland were disappointed.
“If explorations are ultimately successful Cairn can unlock a lot of value and materially change the company over the next few months. But Greenland represents a frontier for oil exploration, so it’s a higher risk than is standard,” said one analyst who covers the firm.
The T8-1 well is only the seventh to be drilled in the Arctic, though rivals Exxon Mobil and Chevron have recently piled into the area by snapping up a slew of offshore licences.
The company said underlying revenue for the first half of the year grew 311 per cent to $333m (£215.2m), thanks to strong performance in India.
Cairn swung into pre-tax profit for the period, posting gains of $88m compared to a $22m loss last year.
Chief executive Bill Gammell said he was not troubled by reports of a challenge from state-owned firms to take control of Cairn’s Indian unit. Vedanta Resources has offered up to $8.5bn for a majority stake in Cairn India.
“The government needs to endorse the overall transaction, I’m very conscious of that,” he said in a conference call.
He added that Cairn had a strong track record of achieving government approvals in the past.