Cairn Energy strikes oil again off Senegal

Oil explorer Cairn Energy said on Monday it had struck oil again off the coast of Senegal in west Africa, adding to another nearby discovery announced last month.

The news sent shares in Cairn up by more than a tenth to 175p in early morning trading.

The Edinburgh-based company said it had found "high quality oil" at the SNE-1 well in the Sangomar offshore block which could hold between 150m to 670m barrels of recoverable resources.

The results come just one month after Cairn made another discovery 24km away on the block that, though more modest, pointed to a mid-range estimate of 950m barrels on the broader measure of gross oil in place.

Cairn's drilling programme off Senegal is part of a wider campaign of exploration stretching along Africa's north west coast to Morocco aimed at establishing the region as a new province for oil and gas production.

"This is a significant oil find for Cairn and Senegal and based on preliminary estimates is a commercial discovery and opens a new basin on the Atlantic Margin," said Simon Thomson, Cairn chief executive.

He added that Cairn would undertake further appraisal drilling to assess the potential of the discoveries next year.

Analysts at Deutsche Bank described results from the second well as "a major improvement over Cairn's previous discovery" which should add 25 per cent to the valuation of the company's assets.

The two offshore wells are the first to be drilled off Senegal for over 20 years.

Cairn holds a 40 per cent stake in three blocks off Senegal alongside ConocoPhillips with 35 per cent and Sydney-listed explorer FAR Ltd with 15 per cent. Senegal's national oil company Petrosen holds the remaining 10 per cent interest in the blocks.

Shares in FAR rose by a third to A$0.135 in Sydney, following their suspension on Friday ahead of an update on the SNE-1 well.

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Analysts said the announcement of commercial potential in Senegal was a boost to Cairn, which has suffered from a recent run of lacklustre exploration results and a collapse in the trading price of oil.

Shares in the company have also been hit by a dispute with the government of India which has frozen its ability to selldown its remaining minority stake in former sister company Cairn India amid a historic tax dispute.

Success off Senegal follows Cairn's failure to make commercial discoveries in two wells drilled off Morocco over the past year. Cairn also holds exploration assets off Mauritania and is partnering Kosmos Energy which is committed to exploration drilling off Western Sahara, a country administered by Morocco but whose sovereignty is disputed by the Polisario Front independent movement.

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