It’s been a pretty bleak year for backers of Cairn Energy, which the stock still battling headwinds from its long-running tax dispute in India and a disappointing run with the drillbit. For the company that made its fortune with a series of giant oil discoveries in India, it has proved difficult to replicate that success.
In 2010-2011 the London-listed company spent more than US$1 billion on a series of dry holes in the challenging waters offshore Greenland and more recent wells in Morocco also came back empty-handed.
But this week may have see the tide turn for the Edinburgh-headquartered company. Cash-rich Cairn has struck oil offshore Senegal with the FAN-1 wildcat in the Sangomar Deep block some 100 km offshore. This was Cairn’s first well in the country and is the the first deepwater well in Senegalese waters and the first offshore wells to be drilled for over 20 years.
The well was drilled by the Cajun Express semi-submersible rig to a TD of 4,927 metres in 1,427 metres of water to target multiple stacked deepwater fans, part of the push by the industry to find an extension of the prolific oil fields found by Tullow and Kosmos offshore Ghana.
Initial results are certainly encouraging: the well found a gross oil-bearing interval of more than 500 metres with 29 metres of net oil-bearing reservoir in Cretaceous sandstones. A number of oil samples have been recovered to surface, with APIs ranging from 28° up to 41°. Significantly, no water contact was encountered.
Initial gross STOIIP estimates range from a P90 of 250 million barrels to a P50 of 950 million barrels, with a P10 of 2.5 billion barrels. Cairn said this was broadly in line with pre-drill STOIIP estimates. Cairn CEO Simon Thomson said the “very substantial” oil-bearing interval may have “significant potential as a standalone discovery”.
There are no plans for an immediate well test; this was announced ahead of the drill but will prove frustrating for investors keen to know more about the potential of this discovery. The company will now calibrate the well with the existing 3D seismic data and then determine next steps for appraisal from 2015 onwards.
The result will certainly whet investor appetites for the next well in the campaign, with the rig now moving to complete the SNE-1 well in the Sangomar Deep block (the top hole has already been drilled). This is a shelf edge prospect targeting a dual objective in 1,100 metres of water, with a gross prospective resource of 600 million barrels.
Cairn has a 40 per cent interest in the block alongside ConocoPhillips (35 per cent), FAR Ltd (15 per cent) and Senegal’s state oil company Petrosen with 10 per cent. The result is something of a coup for ASX-quoted FAR, which identified the potental here and then farmed out earlier this year to bring in Cairn and ConocoPhillips to drill the two wells, FAN-1 and SNE-1, back-to-back.
Shares in FAR have more than doubled over the last month. Shares in Cairn gained eight per cent to 194.5 pence in afternoon trading.
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