RBC downgrades Cairn until 2017 drilling plans are confirmed

The Canadian bank said drilling success at the SNE field offshore Senegal has provided a welcome exception to recent drilling disappointments across the sector.

RBC said the results demonstrated unequivocally that SNE has the potential to be a major oil field with reservoirs capable of delivering commercial flow rates.

However, with limited news flow until drilling restarts in 2017, there is the potential for the stock to drift compared to leveraged peers, particularly in an improving oil price environment.

In the medium term, RBC reckons Cairn remains well placed to become the “go to” UK main list E&P stock given a strong balance sheet, production base and stated strategy to return value created by the drill bit to shareholders.

“However, establishing this, more fully formed, business will require time and production start-up from the Catcher (Cairn 20%, Premier Oil operated) and Kraken (Cairn 29.5%, EnQuest operated) fields H2/17,” it said.

At 1040 BST, Cairn shares were down 0.5% to 195p.