Shares in Scottish oil and gas explorer Cairn Energy rose today after the firm said it had found 164ft of reservoir-quality sands off Greenland.
The news on Cairn’s fourth Greenland well, AT7-1, was welcome to shareholders following three dry wells drilled in Cairn’s 2011 campaign in the Arctic region.
The firm said the well, in the South Ungava area of the Atamik Block, had “potential interest because of oil and gas shows”.
However, Cairn now has to work against the clock to assess the find as it battles a December 1 regulatory drilling deadline and also poor conditions down hole.
It said: “Mud losses and poor hole conditions have hampered the full evaluation of this interval.”
Drilling on the well, by the Leiv Eiriksson rig in about 2,980ft of water some 125 miles offshore Nuuk, is to continue to its total depth and work carried out to see if oil can be brought to the surface, said Cairn.
Analysts at Bernstein Research said the update was “highly significant” as the age of the reservoir rock Cairn had drilled was the source of most global deepwater discoveries over the last 25 years.
It said the information also made Cairn more attractive to larger firms who would potentially farm-in to its Greenland activities, a policy the firm has said it would follow to carry out further drilling.
Bank of America Merrill Lynch said the discovery was “encouraging” and “testament to Cairn’s improving understanding of Greenland.
However, it said testing would not be without challenges and that current regulations meant the firm would have to cease drilling by the end of November.
It predicted new 3D seismic acquisition on the area next year before further drilling.
Cairn also said today that a second well, AT2-1, also in the South Ungava Area, had encountered “minor hydrocarbon shows”, having reached total depth at nearly 16,000ft.
It is the fifth well of Cairn’s 2011 campaign and is being drilled by the Ocean Rig Corcovado.
Cairn said a further update on the well results and the exploration implications of its 2011 operations would be provided at the end of the programme.
Last year, Cairn became the first company to drill offshore Greenland in 10 years and the first in the Greenland Arctic for 35 years.
This has attracted opposition from environmental groups, especially Greenpeace.
The firm is close to finalising a deal to sell a majority of its Indian subsidiary, Cairn India, to Vedanta Resources.
It also has exploration prospects off Spain and bids to explore off Cyprus and Lebanon.