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Shares in Hurricane plummet at

Lancaster downgrade

UK SHARES in Hurricane Energy took a dive on Hurricane had hoped Lancaster would
September 11 after the London-listed junior sig- become a front-opening field. But there is long-
Hurricane now expects nificantly marked down its reserve estimates at held scepticism in the industry about the ability
to recover less than half its flagship Lancaster oilfield. of fractured basement reservoirs like those found
as much as it previously The company said it now expected to recover at Lancaster to produce at a stable level, because
did. a total of only 16mn barrels of oil from the of their complex and unpredictable nature.
West of Shetlands field, of which 9.4mn barrels “2020 is proving to be a hugely challenging
remain. Earlier it had said it expected to retrieve year for Hurricane,” its chairman Steven McTier-
37.3mn barrels from the discovery. nan said. “We have had to contend with not only
Hurricane has slashed its estimates after a a significant fall in oil prices and the effects of
technical review showed that the contact point the [coronavirus] COVID-19 pandemic but also
between oil and water, key to assessing how poorer than expected reservoir performance
much crude there is, was found to be shallower from the Lancaster early production system.”
than thought. It has also seen a rapid decline in Hurricane swung to an after-tax loss of
reservoir pressure. $307.7mn in the first half of the year, after incur-
2C contingent resources at Lancaster have ring a $239mn impairment charge at Lancaster.
been revised to 58mn barrels from a 486mn bar- Revenues surged to $81.9mn from $22.9mn,
rel assessment made in a 2017 competent per- however, thanks to the field’s initial ramp-up
son’s report (CPR). 2C reserves at the adjacent after commissioning.
Lincoln field have also been marked down to “The reserves and resources downgrade is
45mn barrels from 565mn barrels. likely to be at the higher end of market fears, with
Shares in Hurricane closed at GBP0.0296 very material changes to the interpretations pre-
($0.038) apiece on September 11 as a result of viously provided to the market,” oil analyst Colin
its announcement, down from GBP0.0642 a day Smith at Panmure Gordon commented.
earlier. After re-assessing oil water contact, Hurri-
Hurricane’s wholly owned Lancaster field cane has relinquished rights to the area of the
was discovered in 2009 and was understood to P1368 Central licence surrounding Lancas-
contain over 500mn barrels of recoverable oil. ter, freeing it of a commitment to drill another
First oil was achieved in June last year, after Hur- well. It also said it would consider injecting
ricane invested some $475mn in an early pro- water into Lancaster to raise pressure and boost
duction phase involving two wells connected to production.
the Aoka Mizu floating production storage and “Our near-term priority is further technical
offloading (FPSO) vessel. Production at Lincoln work to refine an activity plan for Lancaster,
is yet to start. which we expect to be finalised by the end of
Hurricane suffered a major setback in May, this year and executed in 2021, with an overar-
when it was forced to shut in one of the Lancaster ching focus on capital discipline,” CEO Antony
wells because of flow instability. It had targeted Maris said. “We will be engaging with all our
a plateau output rate of 20,000 barrels per day key stakeholders regarding our forward work
(bpd), but has confirmed this level will no longer programme and financing arrangements and
be possible. updating the market on these efforts in due
Production at Lancaster is expected to aver- course.”
age 12,000-14,000 bpd between September and Former CEO Robert Trice resigned by
December, Hurricane said, versus 14,600 bpd in “mutual agreement” on June 8, ending his 16
January-August. years at the company’s helm. ™

Week 37 17•September•2020 www. NEWSBASE .com P15