In what will no doubt be welcome news for environmentalists, Cairn Energy has announced another dry well in its controversial drilling programme in Greenland.
Cairn said the Delta-1 exploration well had failed to find hydrocarbons and would be plugged and abandoned, the third dry hole it has drilled in the area this year. Earlier this month, when it abandoned the Gamma-1 well, it hinted Delta-1 could be a disappointment, and so it has proved. It is spending around $600m in the hopes of discovering a new oil bonanza offshore Greenland, but has only two more chances before the drilling season ends.
If Greenpeace - which has been opposed to the drilling - will be pleased, shareholders will not. Cairn - which is close to finally completing the sale of the bulk of its Indian business to Vedanta Resources - has dropped 11.6p to 284p, a near 4% decline. Evolution Securites said:
Cairn still has two wells to complete the 2011 programme – AT2-1 and AT2-7 – both in the South Ungava area. Valuation suggest Cairn is not carrying any upside for Greenland and indeed is discounting the current Cairn India price, but we believe investors should follow the successful explorers rather than buying value.
Will Arnstein at FinnCap said:
We remove the prospect from our net asset value, which had been included at 13.2p a share.
