Cairn Energy sees 50% lower rig cost sustaining Senegal drilling



EDINBURGH, Scotland (Bloomberg) -- Cairn Energy expects a slump by half in the cost of oil rigs to sustain the UK producer’s exploration in Senegal even after crude prices sank in previous months.

“From an exploration operative perspective it is a good time to be contracting rigs,” said CEO Simon Thomson.

Cairn and its venture partners last year found oil in two blocks off Senegal, West Africa. The company expects to generate cash in the country by 2020 or 2021, Thomson said, adding that there’s “still a lot of work to do” on appraising the finds.

“This project is attractive at current oil price levels,” he said. “And an added benefit is we will be able to explore at much lower costs,” increasing its profitability, the CEO said.

The oilfield-services industry is bracing for slow business this year after the value of Brent crude sank by about half in 2014. The crash in prices has forced some oil producers to delay or cancel projects, sapping demand for drilling companies and allowing their remaining customers to negotiate cheaper rates.

“In terms of deepwater rigs over the last few months you’ve seen an approximate halving of rates,” Thomson said, declining to elaborate on the specifics of final-stage talks. “There’s also been a significant reduction in service costs for the other activities related to the rig operations.”

Cairn operates three blocks off Senegal with a 40% working interest. ConocoPhillips has 35%, FAR Ltd. of Australia 15% and the rest is owned by Petrosen, the national oil company.

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