Broker snap: UBS cuts Cairn target after Greenland disappointment

1st Dec 2011 11:35

Following Cairn Energy's "disappointing end to the Greenland programme", UBS has nudged its target price lower.The oil giant said yesterday that it had failed to find a commercial discovery at its exploration drilling campaign offshore Greenland, where drilling operations were extended to complete activities on the last two wells in the Atammik block. After removing the risked value associated with the Atammik wells, UBS has cut its target price from 360p to 355p.Nevertheless, the broker has kept its buy rating on the stock, saying that it still looks cheap on the Cairn India deal valuation:"We think the stock will now trade in a range defined in the near term by the Cairn India deal. Assuming zero value for Greenland, and using the current Cairn India share price, if the deal falls through, the implied value for Cairn is c260p. If the deal goes ahead, the value is c310p, hence we think the shares are trading at a minimum level - the market is implying a c$1bn discount on the company's cash," the broker said.Cairn's shares were down 2.17% at 266.4p by 11:35 on Thursday.BC