Cairn Energy said yesterday it had agreed a farm-out deal with PICL, the overseas arm of Malaysian state oil company Petronas, on acreage offshore Greenland.
The Edinburgh-based oil and gas operator said it had agreed to sell to PICL a 10% interest in its six operated blocks and that the Malaysian group would also have an option to increase its interest to 20% in any development in these blocks, in return for further payment.
Cairn also said it was selling a 2.3% stake in subsidiary Cairn India to PICL. The Cairn India share transaction takes PICL’s holding in the company to 14.94%, with Cairn retaining 62.75%.
Shares in the Scottish company jumped to finish the day 8.6% stronger at £30.50.
Cairn said PICL would pay about £196million in total: about £152million for the Cairn India stake and £44million to farm into the Greenland blocks.
It added that the funds would be used for additional investment in Greenland exploration.
Cairn chief executive Sir Bill Gammell said: “We are delighted Petronas is joining us in Greenland as we take forward our leading exploration position.
“The acquisition of additional Cairn India shares by Petronas reflects our shared belief in the continuing growth potential of Rajas-than while giving Cairn increased financial and operational flexibility in line with our growing confidence in Greenland.”
In August, Cairn said it planned to drill several wells off Greenland in a drilling campaign starting in 2011.
The company is initially looking at a potential three to five-well programme which could cost more than £300million.
There are hopes that Greenland’s waters could hold billions of barrels of oil, but a single find of about 400million barrels could be a commercial proposition at a price of just $40 a barrel.
The Scottish group also said yesterday that Cairn India had completed a £1billion financing to support its activities in Rajasthan where production from the large Mangala field started on August 29.
It said the financing had been arranged through a combination of US dollar and Indian rupee borrowing.
Cairn’s Mangala, Bhagyam and Aishwariya fields, which are among more than 20 discoveries in the north-west Indian state, are together expected to produce at least 175,000 barrels of oil per day when all three are in production.
Oil prices rose for a fifth successive session yesterday, lifted by a weak US dollar, which encourages investors to move into commodities, and optimism that a global economic recovery will lead to higher energy demand.
In New York, US crude settled up $1.03 at $75.18 a barrel, the highest settlement since October 14 last year. Brent crude added 70 cents in London at $73.10.
A recent rally in equities has also boosted hopes for improving global demand.
Oil has more than doubled from below $33 in December amid hopes of economic recovery, a rally many say has run ahead of weak oil demand, high inventories and abundant supply.