Cairn Energy Plc, the explorer selling its Indian operations to Vedanta Resources Plc, will write off the $185 million cost of two wells drilled off Greenland after they failed to make commercial discovery.
The T8-1 and T4-1 exploration wells have been plugged and abandoned, Edinburgh-based Cairn said in a statement in London today. The Alpha-1S1 well, where the company announced a discovery of oil and gas last month, has been suspended to allow possible re-entry as the summer drilling season ended Sept. 30.
Deputy Chief Executive Officer Mike Watts said Oct. 6 that Cairn is prepared to invest $1.2 billion in Greenland to drill 10 to 12 wells over the next few years. The Danish island territory may hold 50 billion barrels of crude and gas, the U.S. Geological Survey estimates, and Exxon Mobil Corp. and Chevron Corp. also own rights there.
“Exploration in Greenland is at a very early stage” and to have found gas and oil already is “extremely encouraging,” Watts said in a statement today. “Plans for the forward exploration program in 2011 are already underway and will be announced in the first quarter.”
Richard Rose of Oriel Securities Ltd. in London maintained his “hold” rating on the stock.
“Whilst the program failed to yield a commercial success, the evidence of working hydrocarbon system generating both oil and gas is positive, especially given the frontier nature of the acreage,” Rose wrote in a note today.
Cairn this year sold its operations in India to Vedanta.
“The shares are underpinned assuming the Vedanta deal completes,” Rose said.
To contact the editor responsible for this story: Will Kennedy at email@example.com