Cairn powers on after Bangladesh well failure

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Alistair Gray, FT Syndication Service
Cairn Energy has brushed aside the disappointment of its failure to hit commercial gas reserves from a well off the coast of Bangladesh as it disclosed it was to begin drilling another in the country within the next week.
The Scotland-based oil explorer has plugged and abandoned the well it began drilling in October, in which its partners Santos and Halliburton also had an interest, as part of a $117m (£59.3m) project exploring the Magnama structure in the Bay of Bengal.
Cairn is to begin drilling another well at Sangu, about 12km from the one it operates at Hatia. It is expected to be completed within seven weeks.
Stuart Thomson, commercial director, said: "The southern market of Bangladesh is undersupplied so we'd have a ready market to supply into."
The Bangladesh government leaked the "disappointing" news of the Magnama well on new year's eve. Holidays in Scotland and the need to consult its business partners were responsible for the delay in Cairn's confirmation, Mr Thomson said.
Investors had been hoping for success at the well. Explorations in Bangladesh typically have a success rate of about one in four, above the global average of about one in 10.
The shares, which last month rejoined the FTSE 100 index, had risen to a record high of £30.90 last week, but have since fallen 7.6 per cent in spite of the price of oil hitting $100 a barrel. They closed down 92p on Friday to £28.55.
Richard Rose, analyst at Oriel Securities, said: "It was one of the few high-impact exploration wells and was closely watched."
Yet he put most of the share price reaction down to profit-taking. Bid speculation from the likes of BP and Eni had driven up the price in recent weeks.
"You could come out with 20 or 30 names that could be interested," he said. "The asset base is attractive ... but it comes down to the price. Bidders could pay up to £30 a share but will struggle to pay a premium."
Mr Thomson maintained the takeover rumours had not been distracting. "We're getting on with business."