LONDON (Dow Jones)–Cairn Energy PLC (CNE.LN) Tuesday shrugged off the disappointment of a $1.19 billion full-year loss, insisting that there were sufficient “transformational” opportunities in its oil exploration and development portfolio to support future profitability, even though the Edinburgh-based firm doesn’t plan to drill another Greenland well this year.
“We do have that exposure to transformational exploration currently in the portfolio,” said Chief Executive Simon Thomson, who was speaking to journalists after presenting Cairn’s 2011 earnings. The results were weighed down by the mammoth $600 million cost of its unsuccessful Arctic drilling program last year.
Cairn, which successfully concluded the $5.4 billion sale of its Indian unit toVedanta Resources PLC (VED.LN) at the end of last year, remains focused on seeking out lucrative crude deposits off the coast of Greenland. However, any future drilling activity will almost certainly be done in partnership with larger firms like Norway’s Statoil ASA (STO) in a bid to defray some of the expense, said Cairn.
The company has already used some of the proceeds of the Vedanta deal to return some $3.5 billion to shareholders as an extraordinary dividend. Thomson said its remaining $1.2 billion cash pile would be used to buy some producing assets to compliment its riskier exploration efforts in areas like the eastern Mediterranean.
Cairn hopes to begin another drilling campaign offshore Greenland in 2014–this time partnering with Statoil–focusing its efforts on the “multi-billion barrel potential” of the Pitu prospect in the Baffin Bay Basin.
“We will be drilling again in Greenland but not at current equity levels. We’re very focused on the Pitu block with Statoil,” said Thomson, adding that the company had no other partnership deals in the pipeline. “We have a whole lot of other acreage, we’re busy working on that, there will come a logical time when it’s right to bring partners in,” he said.
Although Cairn has conducted two high-profile drilling campaigns in the freezing Arctic waters around Greenland, it hasn’t yet managed to find commercial quantities of hydrocarbons. The exploration work, which has raised the heckles of environmental campaigners concerned by the effects an oil spill like BP PLC‘s (BP.LN) Macondo well blowout would have on the fragile local environment.
It is also expensive, with a final bill for two summer drilling campaigns in 2010 and 2011 coming to some $1.2 billion.
Thomson declined to comment on whether Cairn was looking at opportunities in the Falkland Islands, the tiny U.K.-controlled archipelego in the South Atlantic. Reports earlier this year suggested that Cairn might be interested in partnering smaller prospector Rockhopper Exploration PLC (RKH.LN), which is seeking a larger firm to help it shoulder some of the costs of developing an oil field it has discovered there.
However, tensions around the Falklands–which Argentina claims as sovereignty territory– would expose Cairn to a new type of controversy. Argentina said last week it intends to go after companies involved in oil exploration off the disputed islands that are called Las Malvinas in Spanish.
Thomson said any new opportunities would have to “have a balance of political, commercial and technical risk that satisfies us.”
Analysts said Tuesday’s results contained little operational or financial news and served to highlight what steps Cairn plans to take to develop new acreage positions.
Cairn’s shares rose in morning trade Tuesday. At 1240 GMT, they were up 10 pence, or 2.9%, at 341p. The divestment of Cairn India and the company’s subsequent cash return led to a reduction in its market capitalization, resulting in Cairn being demoted from the FTSE 100 index in its quarterly reshuffle earlier this month.
-By Alexis Flynn, Dow Jones Newswires
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