CAIRN Energy has sold its main New Zealand oilfield interests for

#1.7m to the local companies which originally developed the area.

Its 13.5% share in the Ngatoro field, which produces a total of 800

barrels of oil per day, was sold in a purely cash deal to Petrocorp

Exploration and Southern Petroleum (Ohanga).

''Basically we were made an offer that was too high to refuse,

ironically by the people who made the first drilling in the area but

then decided that there was no enough oil for viable production,'' Cairn

chief executive Bill Gammell said yesterday.

He also pointed out that expansion elsewhere has meant that the assets

involved are far less material than previously as the Edinburgh-based

company's market capitalisation has soared from #6m last year to almost

#40m currently.

''The money will be used to develop our new Teredo business,'' Mr

Gammell said, adding that Cairn will retain a small presence in the

onshore New Zealand oilfield at Taranaki.

Higher gas prices and the stronger dollar pushed Cairn firmly back

into half-year profit -- #641,000 -- after reporting #161,000 in losses

last time.

The #8.5m purchase in March of Teredo Petroleum, which has a strong

presence in the UK and Spain, fits well with Cairn's aim of increasing

its production base in Europe.

Its pioneering use of horizontal drainhole techniques onshore has also

raised the potential production of a number of fields, and the success

of the Marismas exploration wells in southern Spain has increased

expectations of the eventual reserves estimate.