CAIRN Energy has underlined its confidence in the prospect of making big finds in the North Sea by acquiring a share in an East of Shetland licence from a relative minnow.
Edinburgh-based Cairn has agreed to farm in to acreage containing a find made by Azinor Catalyst in a deal that represents a coup for its partner.
Azinor Catalyst is one of a small band of exploration-focused oil and gas independents which maintained activity in the North Sea amid the downturn triggered by the sharp fall in the crude price from 2014 to 2016.
A number of exploration firms went under during that period after finding they could not raise the funding needed to keep going.
Backed by a Bermuda private equity firm, Azinor Catalyst has benefited from the opportunities created amid the downturn. These have included falls in the cost of services such as drilling support and in asset prices.
Azinor has continued to acquire North Sea licences.
Cairn has shown confidence in Azinor’s exploration team by farming in to acreage around 250 miles north east of Aberdeen containing the Agar find made by the firm in 2014 and the Plantain prospect it has worked up. Azinor reckons these may contain around 100 million barrels in total.
The companies have agreed to drill a well to appraise the find in the third quarter.
Azinor’s exploration director Henry Morris said the firm was delighted to welcome Cairn on to the acreage.
“As a company with a strong and successful North Sea pedigree, we regard Cairn’s farm-in as further validation of the exciting potential of the Agar Plantain opportunity,” he said.
Cairn made no comment on the farm-in deal yesterday.
However, the transaction provides further evidence that the company sees lots to go for in the North Sea, although it may be best known for making big finds in Asia and Africa.
Led by chief executive Simon Thomson, Cairn has developed a significant North Sea portfolio under a strategy to combine relatively low risk activity off the UK and Norway with potentially transformational work in relatively under-explored areas overseas, such as Senegal.
Cairn’s enthusiasm for the area has remained undiminished amid challenging industry conditions.
This partly reflects the success of the bumper field developments Cairn completed with partners, which cost much less than expected.
Cairn brought the Kraken heavy oil field onstream East of Shetland with EnQuest last year.
The company has also noted the appeal of drilling in the North Sea where there is the potential to develop finds fairly cheaply by utilising the extensive production facilities in place in the area.
In its annual results announcement in March Cairn said it had continued to build an extensive North Sea portfolio primarily focused on oil.
The company said then it planned to drill up to 10 wells off the UK and Norway over two years targeting more than 1.5 billion barrels.
The farm-in to the Agar-Plantain acreage gives Cairn additional exposure to an area it has got to know fairly well.
The fact that Agar and Plantain are only around 10 miles from the producing Beryl and Alvheim fields lends them additional appeal. Azinor had noted the potential to develop them using a subsea tie back to existing production facilities.
Azinor said Cairn will join it for 50 per cent of the sole risk drilling activity on the Agar Plantain opportunity and 25% of the wider P1763 Licence.
Apache, which operates the Beryl field, has an interest in the licence.
Azinor is in the final stages of planning for a well with drilling expected to commence in the third quarter subject to receipt of regulatory approvals.
The company has interests in nine exploration licences. Backed by Seacrest Capital, Azinor bought a licence containing two prospects from the former Trap Oil business and the Norwegian Energy Company in 2016. Trap Oil suffered heavy losses amid the crude price plunge.
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