Greenland Offshore Drilling Comes Up Dry (XOM, CVX, ECA, STO)

By Paul Ausick Published Nov 30, 8:02AM EST

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In the summer of 2010, Scottish oil company Cairn Energy announced an ambitious program to explore the waters of the west coast of Greenland. The US Geological Survey estimates that Greenland holds oil reserves of some 50 billion barrels, but so far no one has been able to find a commercially viable drop. Other licensees of offshore blocks include Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), and Encana Corp. (NYSE: ECA). Norway’s Statoil ASA (NYSE: STO) drilled a dry hole more than 10 years ago.

Cairn announced this morning that it had plugged and abandoned a second dry hole in Greenland. Last fall the company plugged and abandoned a well in the same area as this latest dry hole.

In its announcement, Cairn’s CEO had this to say:

The first phase of Cairn’s exploration programme in Greenland has encountered oil and gas shows across multiple basins and now reservoir-quality sands in the Atammik block. Whilst we have yet to make a commercial discovery we remain encouraged that all of the ingredients for success are in evidence.

Cairn wrote off $84.2 million for the dry hole it drilled last fall. This one should probably cost about the same amount. Continuing to pour money into a dry hole is not an ingredients of success.

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.