11th Jul 2019 11:21
(Alliance News) - Hurricane Energy PLC on Thursday upgraded its 2020 production guidance due to encouraging performance from Lancaster early production system, with "significant" cash flow also forecast.
Shares were 17% higher in morning trade at a price of 51.92 pence each.
Hurricane sold its first cargo from the early production system at Lancaster in June, after first oil earlier in the month. Lancaster is located in the UK North Sea.
Initial results have been "highly encouraging", Hurricane said, either in line with or ahead of expectations and no electric submersible pumps have yet been required, which the firm said is positive.
Hurricane has achieved initial stable flowrates of around 16,500 barrels of oil a day, confirmed "world class" productivity.
Hurricane has held 2019 production guidance, but for 2020, it has upgraded forecasts to 20,000 barrels of oil a day from 17,000 barrels a day. The latter figure is now the upper target, and the 17,000 barrels the minimum target.
The company will know after six to 12 months of early production system operations whether the wells on Lancaster currently in operation can go above 20,000 barrels a day.
On the financial front, Hurricane expects operational expenditure per barrel to fall below USD20 in 2020. Operating cash flow in 2019 is seen at USD60 million, but this will soar to USD200 million to USD240 million in 2020.
For the first six months of 2019, Hurricane has guided for revenue of USD22 million from one cargo of 350,000 barrels, with cash at June 30 of USD81 million.
"I am delighted to be providing an update to the market today. As expected, 2019 is proving to be a transformational year for Hurricane, as we significantly progress the technical and operational platform on which to grow the business further," said Chief Executive Robert Trice.
"The Lancaster early production system start-up phase went smoothly and achieved its data objectives. The world-class productivity of these wells means we were able to achieve the desired rates with small chokes and without electric submersible-support. This bodes very well for future production efficiency and costs."
"We've always said it would take six to 12 months of stable production before we can establish whether the Lancaster EPS is performing as we predict in our base case model. This continues to be the case," he continued.
"Looking ahead, we've updated our Lancaster EPS production guidance by adding an upside scenario from 2020 onwards, based on the many positive indications we've seen to date. We are tracking in line with production guidance for 2019 and are generating significant cash for reinvestment in future activity. Our phased Rona Ridge development continues with strong momentum."
Hurricane recently reported a disappointing well result at Warwick Deep, which has now been plugged and abandoned.
"We are encouraged by the Warwick Deep well, despite the penetrated fracture system not supporting a commercial oil flow rate," said Trice.
"Hurricane's assessment of data acquired during drilling and testing indicates the well encountered a significant oil column on the Warwick structure. Our initial analysis indicates an oil water contact consistent with pre-drill predictions," he continued.
"Confirmation of our provisional analysis will require data from the remaining 2019 drilling campaign, as well as fluid sample analysis from Warwick Deep. Importantly, we have evidence that suggests to Hurricane the result at Warwick Deep does not have negative read-across to Lancaster or Lincoln."
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