Cairn Energy was one of the biggest fallers on the FTSE 100 this morning after the oil explorer admitted that one of its wells in Greenland did not result in a commercial discovery and another failed to reach target depth before the end of the Arctic drilling season.
The shares shed nearly 5%, or 20.5p, to 391.5p.
Bank of America Merrill Lynch downgraded Cairn to "neutral" from "buy" and cut its target price to 485p from 530p.
"Given the unexplored nature of Cairn's extensive acreage, this campaign barely scratches the surface of its potential and is just too early to write Greenland off," the broker says in a note.
"That said, with the weather window preventing winter drilling and uncertainties around the timing of the India deal, we now see limited near term catalysts."
Regarding Cairn's India deal with Vedanta Resources, the broker says it see the problems - uncertainty around deal closure timing - potentially emanating from Vedanta rather than Cairn, and "these uncertainties could weigh on Cairn near term as it prevents it from providing clarity on the expected special dividend."
Evolution Securities reduced its price target to 501p from 542p.
Cairn said this morning the Alpha-1S1 well in Baffin Bay, where it had previously found evidence of oil, did not reach the Mesozoic geological depth it was aiming for and as such was suspended. Another well, T4-1, did not find significant hydrocarbons and was plugged and abandoned. Cairn said it could return to the Alpha well at some point in the future to deepen it or drill a sidetrack well.
