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Hurricane Energy set to generate US$165mln of 2019 revenue from Lancaster EPS

The Lancaster EPS will achieve around 13,300 bopd for 2019 (since the May start-up), ahead of next year's ramp-up to 20,000 bopd.

Hurricane Energy PLC - Hurricane Energy set to generate US$165mln of 2019 revenue from Lancaster EPS

Hurricane Energy Plc (LON:HUR) expects it will have brought in some US$165mln of revenue by the end of 2019, thanks to the continuing successes of the Lancaster field early production system (EPS).

The Lancaster EPS is seen performing strongly which, for investors, is in contrast to the disappointing end to the 2019 drill campaign at Hurricane’s 50% owned Greater Warwick Area.

Lancaster is set to have produced around 3.1mln barrels of crude for the year (after the May start-up) with the rate averaging 13,300 barrels of oil per day since coming online  – the rate has been constrained whilst Hurricane gathers valuable production data.

A seventh crude lifting is anticipated from the Aoka Mizu floating production vessel at Lancaster on 22 December.

The EPS comprises two horizontal wells which are both performing ahead of initial pre-start-up expectations.

Production rates are expected to ramp up in 2020 as continuous production can be optimised without the current obligations for data collection. Guidance for the Lancaster EPS next year is presently pitched at 20,000 bopd.

READ: Hurricane shares suffer Warwick backlash despite landmark successes

Hurricane also guided that certain drilling commitments will be met in 2020, with at least one well required to confirm the extent of the Lincoln field though bringing forward drilling obligations for 2021 could have economic benefits.

The company noted that a new Lancaster well is needed in 2021, to confirm the extent of that field, but, it has the opportunity to drill this commitment earlier in order to utilise rig availability and save money.

Presently, it is anticipated that next drilling on the Greater Warwick Area (comprises Warwick and Lincoln assets) won’t take place before June 2020, due to planning and permitting. This means that there would be a US$10mln cost for the contracted rig to stand idle between February and June, Hurricane explained.

Instead the oiler said it will look at options to use the rig during that time. With the third Lancaster horizontal well a possibility.

Also in 2020, it is planned that the Lincoln field will be tied into the Aoka Mizu facilities albeit timing is subject to permitting and the timeline could move out to 2021. Following subsequent de-bottlenecking work it is anticipated that the production facility will yield around 40,000 bopd in 2022.

"2019 has been a transformational year for Hurricane, as we saw first oil from the first fractured basement development on the UKCS,” said Dr Robert Trice, Hurricane chief executive.

“I am delighted with the performance of the Lancaster EPS and look forward to presenting what we have learnt and what we expect from this reservoir.”

Trice added: “The results of the individual well tests have surpassed our expectations. We are pleased to have extended the licence over the Lancaster and Lincoln sub-areas for a further five years.

“We anticipate having taken a final investment decision on full field development plans for both fields by the end of that period. The deep wells that now form part of our programme will target the delineation of the maximum extent of both the Lancaster and Lincoln oil columns to a more definitive level.”

Hurricane is due to hold a capital markets day for investors in March.

Greater Warwick Area weighed on share price

The company’s share price has failed to properly credit Hurricane for its production success at Lancaster since May as, instead, mixed results from a three well drill campaign have been the main driver for investor sentiments.

Earlier this month, Hurricane revealed that the Warwick West well was confirmed as a discovery, measuring oil flows of around 1,300 bopd, which is weak compared to most of Hurricane’s previous wells.

The scorecard for the 2019 campaign was mixed.

  • Warwick Deep well (in July) failed to flow oil at commercial rates
  • Lincoln Crestal well (September) achieved rate of 9,800 bopd
  • Warwick West well (December) flowed at 1,300 bopd

Hurricane owns 50% of the GWA asset alongside partner Spirit Energy which funded the 2019 programme.

Trading at around 30.20p, the AIM-quoted share is down around 30% since the start of 2019.

Quick facts: Hurricane Energy PLC

Price: 25.48 GBX

LSE:HUR
Market: LSE
Market Cap: £507.11 m
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