6th Mar 2020 09:09
(Alliance News) - Hurricane Energy PLC said Friday it has agreed on a new cost allocation agreement within the Greater Warwick Area joint venture due to the delay in implementing phase two in the phased work programme for the area.
As part of the farm-in agreement secured in September 2018, Hurricane and Spirit Energy Ltd agreed to a phased work programme, which included the tie-back of a GWA well to the Aoka Mizu floating production storage and offloading unit, and a gas export tie-in to the West of Shetland pipeline system.
The work was split into two phases, with the second phase to start after a final investment decision on a GWA tie-back to the Aoka Mizu. For the first phase, Hurricane fully carried up to a cost of USD180.6 million, and USD187.5 million for the second phase.
As phase two has not started due to the lack of an FID, Hurricane and Spirit have signed a cost allocation agreement for the farm-in deal.
Under its terms, the joint venture will build out the equipment and materials needed to tie back a single well from the area to the Aoka Mizu on a 50:50 basis, with a net cost to Hurricane of USD20.5 million.
Hurricane will reserve the right to continue building-out long lead items related to the gas export tie-in on a sole basis, at a cost of USD28.0 million.
Although Hurricane has no plans as of now to proceed with the West of Shetland pipeline system installation, should a decision be made to proceed, the company will bear all associated costs, which are expected to be USD62.0 million, it said.
Hurricane also would reimburse Spirit for related gas export costs up to the end of January, which comes up to USD18.0 million.
If phase two is approved at any time and a tie-back to the FPSO proceeds, Hurricane said it will benefit from the original terms of the farm-in agreement, through a retrospective application of the carry in the proportions initially agreed.
"These amendments to our arrangements with Spirit give us greater optionality relating to gas export, whilst preserving the carry value of the Spirit farm-in in the event that the GWA joint venture partners proceed with a GWA tie-back in the future," said Chief Executive Robert Trice.
"In addition, the Lancaster EPS is currently producing at 20,000 barrels of oil per day, and I look forward to providing an update at the Capital Markets Day on March 25," Trice added.
Shares in Hurricane Energy were up 5.7% at 15.75 pence on Friday in London.
By Dayo Laniyan; [email protected]
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