Cairn hit by Greenland exploration failures

City A.M. Reporter
British oil explorer Cairn Energy said it will spend some of its $1.2bn (£756.2m) of cash on deals in oil development and production as it seeks new projects to offset its exposure to exploration in Greenland.

"We do have that exposure to transformational exploration currently in the portfolio," chief executive Simon Thomson said. "So naturally, what we're also looking at for the new growth opportunities are potential appraisal, development and potentially even also producing properties."

"That balance will give us the sustainable cash flow to continue to be able to fund our transformational exploration," he told reporters on a call on Tuesday.

Cairn, whose main exploration assets are in Greenland and which earlier this year returned $3.5 billion to shareholders from the proceeds of a disposal of a stake in its Indian business, said it has $1.2bn to spend on new opportunities.

Analysts said that Cairn could access further funds of up to $2.9bn by selling its remaining 22 per cent stake in its Indian business, Cairn India.

Thomson said that the company regarded the Mediterranean region as core to its future, but added that the company was not "geographically constrained".

He declined comment on whether Cairn was interested in opportunities in the British-governed Falkland Islands, where Rockhopper is seeking a partner to help fund the development of an oil field it has found there. Any deal in the Falklands will be controversial as Argentina claims sovereignty over the South Atlantic territory.

"It's got to have a balance of political, commercial and technical risk that satisfies us," Thomson said of the new opportunities the firm would consider.

In January, Cairn was named by industry sources as a firm that had spoken to Rockhopper.

Cairn, which said last year it was lining up exploration opportunities in Lebanon and Cyprus, also said on Tuesday that it would seek further exploration opportunities in Spain, where it already has licences.

A $1.2bn drilling campaign in Greenland has dominated Cairn's activities over the past two years but the company has failed to find oil.

Thomson said Cairn would narrow its focus in Greenland, where it has extensive acreage and will seek to bring in more partners in future, following a deal with Statoil in January.

"We will be drilling again in Greenland but not at current equity levels. We're very focused on the Pitu block with Statoil. We have a whole lot of other acreage, we're busy working on that, there will come a logical time when it's right to bring partners in," he said.