CAIRN Energy has seen £110 million added to its market capitalisation after striking oil for the second time in a month as part of its drilling programme off the coast of Senegal.

The Edinburgh-based oil and gas explorer saw its shares rise more than 13 per cent in early trading before falling back slightly. The stock still closed the day up 12.1 per cent by rising 19.1p to 177p. That gave the business a market cap of almost £1.02 billion, up from £909m.

The latest discovery in Senegal came from the SNE-1 well, which is located about 100 kilometres (62 miles) offshore from the West African country in the Sangomar block. The well is 24km from the FAN-1 site where Cairn also found hydrocarbons last month. However the SNE-1 find is potentially of even greater value with early data giving estimates of between 150 million and 670 million barrels of recoverable oil.

Further drilling is still ongoing to assess the formations deeper in the earth and Cairn said further updates on this will be provided.

Cairn chief executive Simon Thomson was bullish on the results from the well and said: "This is a significant oil find for Cairn and Senegal and based on preliminary estimates is a commercial discovery and opens a new basin on the Atlantic Margin."

Cairn has a 40 per cent interest in three blocks off Senegal - Sangomar Deep, Sangomar Offshore and Rufisque - which cover 7,490 square kilometres. The other partners are ConocoPhillips with 35 per cent, FAR at 15 per cent and the national oil company of Senegal which holds 10 per cent.

Mr Thomson struck the deal with FAR to give Cairn a 65 per cent stake in the blocks in March last year. In exchange Cairn agreed to fund one well and pay about £7m of associated costs. Just a few months later Cairn sold 25 per cent of its interest in the blocks to ConoccoPhillips which reduced its share of any exploration and development costs.

Yesterday Mr Thomson said once the SNE-1 well has finished drilling all parties will assess the data before deciding how to proceed. Further drilling in the area during 2015 is likely with Cairn expected to give an update on its schedule in the early part of next year.

Mr Thomson said: "Cairn has additional prospects and leads that offer further exploration potential across this large acreage position in West Africa."

Some analysts suggested the finds could give Cairn the option to sell down part of its stake in order to raise cash for exploration activities in Europe and Morocco.

At the moment Cairn is unable to tap into its 10 per cent stake in Cairn India, worth more than £650m, as a result of a tax investigation by the Indian authorities.

Separately Mark Wilson, from Cairn's joint broker Jefferies, raised the target price on the Cairn shares by six per cent to 282p. He said: "It may be considered unfashionable, given all that we have seen in the sector lately, to consider raising a company target price, but here is a company doing the principal thing the independent E&P sector is there to do ... find commercial hydrocarbon discoveries."