Cairn Energy Plc, a U.K. oil explorer, bought rights to search for crude in the waters off Senegal, expanding its operations in Africa.
Cairn bought a 65 percent working interest in three offshore blocks from FAR Ltd. and will become the operator, the company said today in a statement. Cairn will drill at least one well in the next 18 months in the area that has prospects of more than 1.5 billion barrels of oil.
The deal gives Cairn more frontier exploration after selling off most of its Indian unit in 2011 and then spending $1 billion on a campaign in Greenland that failed to make a discovery. The company has also expanded in the North Sea, where it’s taking part in four wells this year.
“Cairn’s exploration strategy is becoming clearer and is focused on the Atlantic Margin,” said Laura Loppacher, an analyst at Jefferies & Co. in London. “We continue to like Cairn for its strong portfolio of development assets, growing suite of exploration acreage, strong balance sheet and attractive valuation.”
Cairn dropped 3.7 percent to 278.4 pence in London trading, paring its gain this year to 5.1 percent.
The company will drill two to four wells in Morocco this year, in addition to its plans for Senegal. It is targeting resources in excess of 3.5 billion barrels of oil equivalent with its west Africa campaign.
It will also make a decision this year about whether to drill more wells in Greenland after analyzing data from an earlier campaign. The company estimates there are about 6 billion barrels yet to find in Greenland.
Profit dropped to $72.6 million last year from $4.1 billion in 2011 after Cairn sold off most of the Indian business, returned cash to shareholders, and wrote off costs from unsuccessful exploration.
The company had net cash of about $1.6 billion at the end of last year. It still holds 10 percent of Cairn India Ltd., valued at about $1.1 billion on Dec. 31.
“We’re very happy with the balance we’ve created in the portfolio,” Chief Executive Officer Simon Thomson said. “We’re well positioned to continue our strategy in 2013 and beyond.”