Oil and gas explorer Cairn Energy is to acquire a half-share in the Foum Draa block in Morocco, diluting the stakes of San Leon Energy, Serica Energy, Longreach Oil and Gas Ventures.
Cairn will pay its equity interest share of past costs and the first $60m towards the costs of an exploration well, which will be drilled in the fourth quarter of 2013 at the earliest. Two key prospects on the block have been identified.
The block is located offshore southern Morocco in water depths of 500-2,000 metres and covers an area of around 5,000 square kilometres.
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Cairn now becomes the biggest stake-holder in the block, with San Leon holding 14.17%, Serica 8.33% and Longreach 2.5%. ONYHM, Morocco's National Bureau of Petroleum and Mines, continues to hold a 25% interest.
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"San Leon committed itself to carrying out extensive work offshore Morocco over the past two and a half years and this farm-in agreement concludes the farm-out of our two offshore blocks," said Oisin Fanning, Executive Chairman of San Leon.
Meanwhile, Tony Craven Walker, Serica's Chairman and interim Chief Executive, welcomed Cairn to the consortium, noting that the Scottish company's deep water drilling expertise should speed up the drilling programme.
"The transaction with Cairn is the third successful farm-out by Serica since the start of the year," the Serica boss noted.
Cair's farm-in agreement coincided with the announcement of its interim results, which revealed sharply reduced pre-tax losses and a post-tax profit.
Pre-tax loss for the half year ended June 30th declined significantly from $141.3m to $50.0m, with current and deferred tax credits resulting in a profit after tax of $37m, down from $642.8m last year when the group trousered $784.1m in profits from the Cairn India Limited (CIL) operations it has now sold off.
Cash and equivalents at the end of the period totalled $932.8m compared to $573.9m at the same date the previous year, despite the return of around $3.5bn to shareholders following the sale of the CIL stake.
Chief Executive Simon Thomson said: "With a strong balance sheet and the foundations for sustainable revenue generation in the coming years principally set, management attention and operational effort is focused on building a series of material exploration positions in prospective and fiscally attractive areas in order to offer investors exposure to capital growth potential through future transformational exploration."
Regionally, the Kraken oil sands in the North Sea are, according to Cairn, "very high quality reservoirs" and recent tests at the 5Z well confirm the mobility and high deliverability potential of this heavy oil. Further appraisal drilling is now required to define better the field size.
Mariner, one of the largest undeveloped fields in the UK North Sea, is a heavy oil field with what Cairn called "high well deliverability" and the operator (Statoil) is working towards Project Sanction in 2012/13. Cairn's interest in block 9/11 is 6%, however the company has an 80% operated interest in block 9/11c to the south into which Mariner may extend.
Cairn now holds interests in 27 offshore licences in the UK and Norway. During the year-to-date, six wells have so far been drilled on this acreage and of these two were successful, three were unsuccessful and one was temporarily suspended before reaching its planned target.
Over the next 16 months, Cairn is expecting to participate in seven firm and eight contingent North Sea exploration and appraisal wells.
In Greenland Cairn has confirmed that the necessary geological elements for success are present across the basins. While no commercial quantities of hydrocarbons were found during 2010/11, a very considerable body of data has been gathered for future evaluation, which is what oil companies usually say when they have spent a heap of money drilling wells that are commercial duds.
The Mediterranean is one of Cairn's key areas of focus and the firm is currently in the early stages of carrying out frontier exploration in the Valencia Basin offshore Spain where there is "significant" potential for hydrocarbons.
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