Hurricane Energy Plc (LON:HUR) shares traded positively in Wednesday’s early deals despite cautions flagged in the UK offshore oiler’s latest update.
The producer and field developer is presently undertaking a technical review of its assets in the West of Shetland region, following problematic well performance at the Lancaster field’s early production system.
Today, Hurricane flagged to investors that the findings of the technical review will be reflected in a new competent persons report, due in Q1 2021, and may result in a material downgrade to contingent resource estimates.
Lancaster’s EPS, which temporarily produced from only one of its two wells, accesses only a small portion (about 3%) of the estimated field resources. Back in 2017, the EPS area was estimated to have 37.3mln barrels of crude resources and overall the larger area was said to host some 486mln barrels (with the estimate range set at 129mln to 1.116bn barrels).
Hurricane today also told investors that decisions on future work at Lancaster will be informed by findings of the technical review, anticipated no later than mid-September.
Given equipment lead times and the weather-window for operating West of Shetland, it now does not expect any well operations at Lancaster until “late in the first quarter of 2021 at the earliest”.
The review comes as Hurricane undergoes a management transition following Dr Robert Trice’s resignation as chief executive last month. The transition was this week impacted by the death of chief operating officer Neil Platt earlier this week.
Beverley Smith, formerly of BG Group, is running the company as interim chief executive and the company’s production operations director Steve Holmes was appointed acting chief operating officer.
OGA gives notice for Lincoln decisions
Hurricane today also noted that the Oil and Gas Authority requires action in regard to the neighbouring ‘Greater Warwick Area’ assets – comprising the Lincoln and Warwick discoveries - which were host to 2019’s mostly unsuccessful drill campaign.
The OGA has given notice to Hurricane and Centrica-backed partner Spirit Energy for a proposal of the field determination area for the Lincoln discovery. Hurricane said it is committed to working with Spirit on the best route forward for the Lincoln discovery.
Production, pumps and hedges
The company this morning confirmed reduced output from the Lancaster EPS which yielded an average of 12,000 bopd – versus the prior 17,000 bopd and 20,000 bopd targets, when both well’s were operating.
It noted that in early June it increased the output rate from the 205/21a-6 and, as expected, the rise in oil production was accompanied by higher water volumes with water cut rising to 11% from 8%.
Production stats for the second quarter, including time where both wells were online, was reported at 1.3mln barrels aggregate, with the average rate marked at 14,300 bopd and the water cut measured at 21%.
Since the relaxation of COVID-19 restrictions, the company on July 3 began the commissioning of electric submersible pumps (ESPs) into both Lancaster EPS wells.
Both wells are presently flowing with ESPs under test conditions, for up to two weeks, before a near-term production strategy is confirmed.
The company said the two wells are producing a combined 15,000 bopd but details of the water volumes were not provided – it added that the stabilised water production rate will be announced in due course.
Meanwhile, it noted that the Aoka Mizu floating production, storage, offloading vessel had maintained a high level of operational uptime and a planned week long maintenance shut-down is provisionally scheduled for September.
The most recent crude oil cargo was lifted in late June and the next is slated for late July.
In June, the company took a hedge position on its production for the second half of 2020, with 1.8mln barrels (10,000 bopd) covered with put option with an average strike price of US$35 per barrel. The options cost US$3.4mln.
The arrangement sets a floor price of US$35 per barrel for 1.8mln barrels and the company said it retains upside in oil prices above that level.
In London, Hurricane shares rose by 7.22% to trade at 6.46p.