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

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.