Fresh Indian discovery pumps Cairn to £1.3bn

Cairn Energy, the UK oil exploration company, grew in value to £1.3bn yesterday after news of a second significant onshore discovery in India propelled its shares almost 20 per cent higher.

Cairn Energy, the UK oil exploration company, grew in value to £1.3bn yesterday after news of a second significant onshore discovery in India propelled its shares almost 20 per cent higher.

The Edinburgh-based group said an exploration well drilled in the Mangala field in the Rajasthan region of north-west India had discovered oil reserves of 130 million to 470 million barrels, of which 20 million to 80 million were likely to be booked as recoverable.

The latest find is 8km from another well drilled in late January, which discovered 450 million to 1.1bn barrels, of which 50 million to 200 million are likely to be added to reserves.

Shares in Cairn rose from 723.5p to 874p, increasing its value by £214m and making it by far the biggest of Britain's independent exploration companies by market capitalisation. Since the beginning of the year Cairn has doubled in value.

The upbeat news helped lift the sector generally. Tullow Oil, the London-quoted and Dublin-based exploration group which has interests in the North Sea, West Africa and Bangladesh, hit a five-year high of 113p, valuing it at £430m.

Tullow was helped by a buy note from the US brokerage Bernstein, which said it was well positioned to benefit from strong UK gas prices. There are also hopes that Tullow will produce similarly positive news to Cairn from a series of six exploration wells being drilled over the next few months in Gabon and the North Sea.

Bill Gammell, the chief executive of Cairn, said the Mangala field, together with other fields it was now drilling in Rajasthan's northern basin, could produce up to 150,000 barrels a day.

Cairn's profits rose 58 per cent last year to a record £46m on the back of higher oil prices and a big increase in output. It says it has enough funds to meet all its development plans without having to return to shareholders for cash.