Canaccord lifts target price on Cairn Energy

Canaccord Genuity on Tuesday raised its target price on Cairn Energy to 185p from 170p after the company announced the successful testing of the SNE-2 appraisal well offshore Senegal with positive results.

The oil and gas exploration and production company on Monday said operations have been safely and successfully completed following drilling, coring, logging and drill-stem testing and the well is now being plugged and abandoned.

Cairn said drill-stem testing was carried over a 12 metre interval which produced a stabilised but constrained oil flow rate of 8,000 barrels per day of high quality pay.

“This is an excellent result for Cairn (40%, operator) and partners ConocoPhillips, FAR Ltd, and Petrosen (state oil company),” Canaccord analyst Charlie Sharp said.

“Cairn has not provided any updated resource figures (currently 150-670 mmbbls) with 2C of 330 mmbbls, but we would expect an uplift to the base and mid case estimates following the SNE-3 well.”

Cannacord reiterated its ‘speculative buy’ rating on the stock.

Sharp said despite the difficult market for exploration and production firms, there is “sufficient relatively low-risk newsflow coming up to continue our positive view on Cairn Energy”.

“Catalysts include the SNE-3 well result in mid/late February with a resource update then or shortly after, the Bellatrix exploration result late Q1 which could de-risk the potential of additional exploration targets, the possibility of committing to the full six-well programme to include additional exploration targets based on new 3D seismic, and even a resolution to the Indian tax dispute.”