Cairn’s unsuccessful Greenland campaign to cost US$185 million

Cairn Energy (LON:CNE) confirmed disappointing exploration results in Greenland, with none of the three wells finding viable hydrocarbon resources.
The unsuccessful exploration program is set to cost around US$185 million.
The company stopped drilling on the 30 September, as mandated by the Greenland Bureau of Minerals and Petroleum (BMP).

Two wells have been plugged and abandoned, while the other has been suspended for possible re-entry at a later date.

The Alpha-1S1 well encountered oil shows in the ‘volcanic’ section before drilling was halted. The well did not reach the anticipated Mesozoic section before 30 September.
It has now been suspended. Cairn said the well may by re-entered at a later date to either side-track or drill deeper.
Cairn reported that the T4-1 well failed to encounter any significant hydrocarbons and found only thin reservoir sands.
Previously in August, Cairn revealed that the T8-1 well encountered gas in thin sands. However the well did not result in a commercial discovery.
Both T4-1 and T8-1 were plugged and abandoned.
The company said it is planning another exploration program for 2011.
Broker finnCap commented on the news in its 'Morning Note', saying the confirmation that drilling ceased at the end of September and that no commercial discovery had been made will be of limited surprise to the market - the biggest surprise being that the company took 3 weeks to update the market - with the shares off 10-15 percent in recent weeks in anticipation.

"With most of the downside now priced in we retain our 'hold' rating, with a lower target price, but maintain a negative stance given: 1) limited news flow potential; 2) significant reinvestment risk; and 3) the risk, albeit low, that the partial sale of Cairn India to Vedanta collapses," finnCap added.

Cairn stock was trading 5 percent lower in early deals today.