UPDATE: Cairn Energy notifies of a drilling disappointment

3rd Aug 2011 10:27

Oil exploration group Cairn Energy has today informed investors on progress in its drilling campaign offshore Greenland. Thus, and most noteworthy, despite the initial promising analysis in the South Ungavva area, the LF7-1 exploration well has not met its target. This analysis indicates the presence of pre-Tertiary "oil prone" source rocks in the basin. The well, however, failed to find the anticipated stratigraphically deeper reservoir section at that location. LF7-1 is to now be abandoned. It is the first of 4 wells to have reached its target depth. As for the other wells, drilling at AT7-1, offshore Nuuk, has been temporarily suspended so as to maximize drilling resources given the current seasonal weather window. The Leiv Eriksson has been redeployed to the Delta -1 site at the Napariaq block. The Delta-1 well has already spudded on the Delta prospect.Lastly, the Gamma prospect in the Eqqua block is scheduled to be drilled using the Ocean Rig Corcovado after operations on LF7-1 are complete. A further update will be provided whenever a well is at target depth and operations are complete. Despite the above news the company's chief executive, Simon Thomson, had indicated that, "Although no reservoir has been found in the LF7-1 well, the first in the basin, we are encouraged by further indications of pre-Tertiary oil-prone source rocks across our Greenland acreage. The exploration challenge remains to find the reservoir sands. We continue to be optimistic about the remainder of our 2011 four-well, multi-basin exploration programme offshore Greenland."Commenting on the results after they came out analysts at Royal Bank of Scotland have indicated that: "The LF7-1 well offshore Greenland has been unsuccessful, although the result does provide further evidence of an oil-prone source rock offshore Greenland. Removing the risked 25p upside we were carrying for this well and incorporating recent updates, we revise our TP to 440p (from 510p) but remain at Buy."As of 10:27AM shares of Cairn Energy are falling 3.9% to 339p, in London trading. AB