22nd Sep 2016 10:05
LONDON (Alliance News) - Hurricane Energy PLC on Thursday said its loss was narrower in the first half of the year after it reduced costs and benefited from a large foreign exchange gain as it awaits results from its drill programme before looking for a partner later this year.
Hurricane's pretax loss in the first six months of the year amounted to GBP1.8 million compared to the GBP3.2 million loss a year ago after operating costs fell to GBP2.9 million from GBP3.1 million and it booked a foreign exchange gain of GBP1.1 million rather than a GBP55,000 loss.
The company was looking to introduce a partner to the Lancaster block west of Shetland earlier this year but then suspended farm-out talks as it opted to drill two wells in July, which is still ongoing, with the view of reopening the data room to interested parties later this year.
Initial results from the pilot well confirmed there was a significant oil column that was deeper than the estimates made in the competent persons report and Hurricane believes the field is "likely to be significantly greater than the 200.0 million barrel 2C Case currently estimated".
The maximum natural flow rate so far achieved is 6,600 barrels per day and a maximum rate of 11,000 barrels per day when using artificial lift with an electrical submersible pump.
"The company is now updating its resource model prior to producing an updated CPR and, as such, we are delighted that wireline and well test data indicated that no pressure barriers were detected in the reservoir, and that wireline samples of oil have been recovered to surface from deeper than our minimum oil down to case. Once these data are fully evaluated we anticipate a significant resource upgrade of the Lancaster reservoir," said the company.
The horizontal side track well is now being drilled and further updates will be made later this year.
Hurricane is also planning on using ann early production system for the field to bring oil and gas extraction forward. The systems allow producers to begin producing from a field before full development is undertaken and the option is popular with smaller firms looking to generate some cash before investing more material sums to get their projects up to more significant production levels.
Estimates for the system have improved. The original estimates were to use the two Lancaster wells with 53.0 million barrels of oil at an average operating price of USD35 per barrel but that now stands at 62.0 million barrels at a cost of USD26 per barrel.
"During the second half of the year we will continue to work with floating production, storage, offloading and subsea production facility providers to refine our development in order to meet final investment decision during the first half of 2017. We believe that the early production system has been materially de-risked by the results of the pilot well," said Hurricane.
Importantly, Hurricane said it will need to either raise more capital or farm-down the Lancaster assets in order to fund the early production system.
Hurricane shares were down 2.5% to 39.72 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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