Cairn to Resume Drilling Ops Offshore Greenland

- Cairn to Resume Drilling Ops Offshore Greenland

Tuesday, May 24, 2011
Cairn Energy

Following Cairn's three-well drilling operations in 2010; the Company's exploration campaign is to continue in 2011 with the drilling of up to four further exploration wells. The Government of Greenland has recently approved the location of seven exploration drill sites which allows some flexibility in program planning and possible options for follow up appraisal wells in the event of a discovery.

The main elements of the primary 2011 exploration program are:

• The drilling of up to four exploration wells, with one in each of the Atammik and Lady Franklin blocks offshore to the west of the capital Nuuk, and one in each of the Napariaq and Eqqua blocks in the southern Baffin Bay west Disko area;
• The acquisition of up to three 3D seismic surveys (combined total ~ 4,500km2), one in the north of Baffin Bay, one in the south of Greenland and one contingent location to be decided dependent on operational results.
• The four well campaign will test prospects with different structural styles and play types and is targeting a gross unrisked mean prospective resource potential of 3.2 billion barrels of oil equivalent at target subsurface depths between 2,500 and 4,750 meters.
• In each case the principal target is oil but evidence of both oil and gas generation is found regionally. In view of the frontier nature of the exploration and paucity of offset well information the individual prospects are estimated to have chances of success ranging from around 10% to 20%. The wells will be drilled in water depths ranging between 288 meters and 1,530 meters.

As was the case in 2010, the program will be carried out with a focus on safety, including the deployment of two drilling vessels.

The total cost of the drilling campaign is estimated to be in the region of $600MM, in line with previous guidance.

Atammik and Lady Franklin Blocks

Cairn increased its equity and acquired the operatorship of these blocks with effect from 1 January 2011.

The final selection of prospects for the 2011 exploration campaign is the LF-7 prospect in the Lady Franklin block and the AT-7 prospect in the Atammik block. Both prospects contain multiple structural targets in the Tertiary and Cretaceous sections, with expected mean prospective resources of 480 and 350 mmbbls respectively, with the probability of success estimated to range from around 10% to 20% dependent on the individual target horizons. The planned TD of the AT-7 prospect well is 3600m and 4,500 meters for the LF-7 prospect well.

Follow-up prospects are present in both blocks with an estimated combined gross mean in-place resource of more than eight billion barrels or 14 Tcf.

Napariaq

This block was awarded to Cairn in the Baffin Bay Bid round the results of which were announced by the Government of Greenland in December 2010.

The exploration well in this block will target the Delta prospect, which is a large structural culmination in the Cretaceous section where the overlying Tertiary volcanics are prognosed to be thin or possibly even absent. The Delta Prospect has an expected mean prospective resource of 530 mmbbls and probability of success estimated at around 10%. The potential for stacked pay could add further volumes to these estimates. The well is scheduled to be drilled to a depth of 4,750 meters and targets the potential reservoirs of Cretaceous age not reached in the Alpha-S1 well drilled in 2010. The Alpha-S1 well encountered oil shows in the thick (>1 km) Tertiary volcanic section. Geochemical analysis of the oil samples confirm three types of oil one of which comes from a pre-Tertiary source rock which is presumed Cretaceous in age as it has similarities with known Cretaceous oil seeps seen onshore in the Disko area. The Delta well is important for understanding the potential of a regional Cretaceous play in the offshore Disko area.

Eqqua

The Eqqua block lies to the south of the Sigguk block where the 2010 activities were focused and it was acquired by Cairn in the Disko West license round in late 2007.

The Gamma prospect in the Eqqua block is a combination structural-stratigraphic trap in an interpreted Tertiary basin floor fan at 2,500 meters overlying a deeper Mesozoic structural culmination at around 4,500 meters. The fan targets potentially thicker reservoir sands 100 km from the T-8 well but at the same stratigraphic level as the gas seen in thin sands in the T-8 well drilled in 2010. The Tertiary Gamma Prospect has a mean prospective resources of 1,840 mmbbls or 7 Tcf and probability of success of around 10%. The planned Gamma well is not designed to drill to the deeper Mesozoic target this year as this prospect will require proof of offshore Cretaceous reservoirs from the Napariaq Delta prospect well.

Pitu and Southern Greenland blocks

The Pitu block was acquired in the December 2010 Baffin Bay Bid round, the southern Greenland blocks were acquired in 2008.

Two 1,500km2 3D seismic surveys are planned to be acquired in each of these areas over structural complexes where leads and prospects with material potential have been identified.

The location of a third and contingent 3D seismic survey is yet to be decided and is dependent on operational results.

Mike Watts, Deputy Chief Executive, Cairn Energy, said, "The Group's strong financial position and entrepreneurial exploration focus has allowed it to build a strategic and leading early entry position in the frontier offshore basins of Greenland, which Cairn believes has the necessary geological ingredients for exploration success."

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