Cairn Energy enters farm-in agreement offshore North West Africa

28th Oct 2013 11:20

Cairn Energy has begun drilling operations offshore Morocco and added further frontier exploration acreage to its Atlantic Margin portfolio, it announced Monday. The new drilling operations are the result of the company entering into a farm-in agreement with Kosmos Energy and the Moroccan National Oil Company (ONHYM) for a 20% non-operated interest in an exploration block offshore North West Africa, which is scheduled for drilling in the second half of 2014. In the event of success, the area has significant follow-up potential, Cairn said. Under the terms of the farm-in agreement, which is subject to Morocco government approval, Cairn will pay a promoted share of future exploration costs towards a 3D seismic survey, an exploration well planned for 2014 and, if successful, two appraisal wells, all subject to a maximum expenditure cap, it explained. "The farm-in to the Cap Boujdour exploration permit gives Cairn access frontier acreage with transformational potential and containing a range of exploration play types," analysts at Jefferies explained. Cairn also announced that it had begun drilling operations on the FD-I wildcat exploration well on the F prospect offshore Morocco using the Cajun Express drilling unit. The FD-I exploration well is located in 1,500m of water approximately 120km offshore Morocco in the Foum Draa block, in which it has a 50% operating working interest. Operations are anticipated to take approximately 60 days. Cairn's partners in the project include San Leon Energy and Serica Energy. Simon Thomson, Chief Executive of Cairn, said: "This farm-in builds on our existing Atlantic Margin portfolio where we have a strategic presence across three countries in Morocco, Senegal and Mauritania. The new acreage offers transformational exploration potential in a frontier region where Cairn is already well established. "Cairn's 12 month multi-well high impact frontier exploration programme along the Atlantic Margin has started and offers shareholders material growth potential.""Our (unchanged) 385p price target is based on a small discount to our total risked Sum-of-Parts valuation of 416p. The shares' current 33% discount to our overall Cairn valuation offers an appealing entry point, in our view, just ahead of an active 12-month multi-well high-impact exploration programme", Jefferies added. NR