Cairn's shares take off again as it discovers yet more oil in Rajasthan

Cairn Energy unveiled a new discovery in India and said that it had now found enough oil and gas in the country to produce for 25 years. The news eased concerns it was losing its knack for finding oil and Cairn shares reacted by closing up 6 per cent at 1,130p yesterday.

Cairn Energy unveiled a new discovery in India and said that it had now found enough oil and gas in the country to produce for 25 years. The news eased concerns it was losing its knack for finding oil and Cairn shares reacted by closing up 6 per cent at 1,130p yesterday.

Bill Gammell, the chief executive, said: "2004 was an excellent year of discovery and growth for Cairn. The more we progress Rajasthan the better we feel about it. We are continuing to focus on a very active seismic and drilling campaign while exploring the development opportunities to maximise the value of Mangala, Aishwariya [fields] and other discoveries."

Cairn's share price rose 300 per cent last year on the back of massive oil finds in Rajasthan. However, disappointing drilling results in December hit the stock sharply and raised concerns over its ability to sustain its run of success.

Yesterday the company said latest drilling showed its N-V field in Rajasthan extended into a new area, raising analysts' expectations of the amount of oil in place. "The first appraisal well on N-V is very strong and we obviously hope we have additional potential in the area," Mr Gammell said.

He would not comment on whether Cairn's earlier estimate of 80 to 220 million barrels of oil in the ground at N-V still applied, adding he would update the market in April. Cairn also forecast higher oil production in 2005 over 2004, and said 2004 average production was 22,800 barrels of oil equivalent per day.

Richard Slape, an analyst at Seymour Pierce, said: "Given the size of the oil column they've announced you'd start thinking it's more likely to be at the top end of the range."

But Numis Securities cut its target price on the stock, citing the potential for second-half 2004 profit falling short of that achieved in the first half.