TIDMHUR
RNS Number : 5936U
Hurricane Energy PLC
07 April 2021
7 April 2021
Hurricane Energy plc
("Hurricane" or the "Company")
Competent Person's Report on West of Shetland Assets
&
Stakeholder Engagement Update
Hurricane Energy plc, the UK based oil and gas company,
announces that a summary of a Competent Person's Report ("CPR") on
the Company's West of Shetland assets by ERC Equipoise Ltd ("ERCE")
has been published on the Company's website at:
https://www.hurricaneenergy.com/assets/reserves-and-resources
The full CPR will be published on the Company's website in due
course, once finalised. ERCE's work has been prepared in accordance
with the June 2018 Petroleum Resources Management System ("PRMS")
as the standard for classification and reporting with an effective
date of 31 December 2020.
Antony Maris, Chief Executive Officer of Hurricane,
commented:
"The summary of the CPR published today is broadly consistent
with the estimates for Lancaster and Lincoln which we presented in
September 2020. We are continuing to work on a financial plan and
are engaging with our key stakeholders to allow us to take the
business forward and provide us with the best chance of targeting
these reserves and resources."
Lancaster Reserves and Resources
Lancaster Reserves (Hurricane 100% working interest) and
associated Net Present Values ("NPVs")
ERCE's estimates of Reserves and NPVs for the Lancaster field
are tabulated below:
(MMstb) Gross Net attributable Operator
----------------- ------------------- --------------------- ----------
1P 2P 3P 1P 2P 3P
----------------- ---- ----- ------ ----- ------ ------ ----------
Developed
reserves
(MMstb)(1) 3.3 7.1 10.8 3.3 7.1 10.8 Hurricane
----------------- ---- ----- ------ ----- ------ ------ ----------
NPV10 (US$m)(2) 7.4 43.5 126.2 7.4 43.5 126.2
Notes:
1. In determining the economic reserves for the Lancaster field,
ERCE has assumed a Brent oil price of US$50/bbl in 2021, US$53/bbl
in 2022, US$55/bbl in 2023 and US$56/bbl in 2024 and thereafter in
real terms. Prices are escalated at 2.0% per annum inflation
2. NPV10 equates to the net present value of cash flows from the
Lancaster field at a 10% discount rate at the effective date of 31
December 2020
ERCE's estimates of Reserves for the Lancaster field assume
production only from the 205/21a-6 well (the "P6 well") and reflect
its natural decline. Hurricane's future development plan requires
the field to be produced below the bubble point of the oil.
Hurricane has submitted an amendment to the Lancaster field
development plan ("FDPA") to the UK upstream regulator, the Oil and
Gas Authority ("OGA"), to allow for production below bubble point.
Hurricane is in constructive discussions with the OGA to obtain the
FDPA to permit ongoing reservoir management on this basis, subject
to quarterly review of operating procedures to ensure gas liberated
in the reservoir is not produced. Hurricane has a reasonable
expectation that an approved FDPA is likely to be forthcoming.
The Company will adopt the ERCE reserves and resources figures
at 31 December 2020 and they will be included in the Company's 2020
Annual Report. The Company has developed a range of production
scenarios for the Lancaster field to assist in financing and
balance sheet recapitalisation discussions. While these scenarios
incorporate different oil price and technical assumptions to those
included in the ERCE Reserves figures tabulated above, they are
within the ranges of Reserves and Contingent Resources estimated by
ERCE.
Lancaster Contingent Resources (Hurricane 100% working
interest)
ERCE's estimates of Contingent Resources for the Lancaster field
are tabulated below:
(MMstb) Gross Net attributable Operator
----------------------------- ------------------- --------------------- ----------
1C 2C 3C 1C 2C 3C
----------------------------- ----- ----- ----- ------ ------ ----- ----------
Contingent Resources,
Development Pending
(P8 well)(1,2) 4.0 3.2 1.9 4.0 3.2 1.9 Hurricane
----------------------------- ----- ----- ----- ------ ------ ----- ----------
Contingent Resources,
Development Unclarified(3) 11.8 34.7 87.1 11.8 34.7 87.1 Hurricane
----------------------------- ----- ----- ----- ------ ------ ----- ----------
Total 15.8 37.9 89.0 15.8 37.9 89.0
Notes:
1. The P8 well is the proposed side-track of the existing
205/21a-7z well, which the Company is considering drilling in
2022
2. Incremental resources are computed by the subtraction of the
Reserves estimates for Lancaster from estimates of future
recoverable volumes from the combined activity of the P6 and P8
wells. As the forecasts for the combined activity of the P6 and P8
wells both accelerate production and add additional resources, the
incremental resources associated with the P8 well decrease as the
Reserves attributed to the Lancaster field increase
3. Contingent Resources, Development Unclarified, assume water
injection is implemented as part of any further development
The Development Unclarified Contingent Resources for the
Lancaster field in the table above are contingent on Hurricane
finalising a commercially viable further development plan if the P8
well is drilled, Hurricane being able to fund and execute this
development plan during the lifetime of the Lancaster field and
obtaining regulatory consents. As such, there can be no certainty
of any further activity in relation to the Lancaster field.
Greater Warwick Area Reserves and Resources
Lincoln discovery (Hurricane 50% working interest)
ERCE's estimates of Contingent Resources for the Lincoln
discovery are tabulated below:
(MMstb) Gross Net attributable Operator
------------------------------- ------------------- --------------------- ----------
1C 2C 3C 1C 2C 3C
------------------------------- ----- ----- ----- ----- ------ ------ ----------
Contingent Resources,
Development Unclarified(1,2) 17.4 36.9 79.8 8.7 18.5 39.9 Hurricane
------------------------------- ----- ----- ----- ----- ------ ------ ----------
Total 17.4 36.9 79.8 8.7 18.5 39.9
Notes:
1. Contingent Resources, Development Unclarified, assume water
injection is implemented as part of any development
2. Net attributable figures are rounded to one decimal point
The Lincoln prospect was originally drilled by Hurricane in 2016
and, although hydrocarbons were encountered, the well was not
successfully tested. The Lincoln discovery was appraised in 2019
and flowed hydrocarbons to surface. Appraisal is at an early stage
and there is currently no development plan for the discovery. ERCE
has attributed Contingent Resources, Development Unclarified, to
the Lincoln discovery, assuming water injection is implemented as
part of any future
development.
The Development Unclarified Contingent Resources for the Lincoln
discovery in the table above are contingent on Hurricane completing
any required appraisal drilling, finalising a commercially viable
development plan, being able to fund and execute this development
plan and obtaining regulatory and partner consents. As such, there
can be no certainty of any further activity in relation to the
Lincoln discovery.
Warwick Crest discovery (Hurricane 50% working interest)
ERCE's estimates of Contingent Resources for the Warwick Crest
discovery are tabulated below:
(MMstb) Gross Net attributable Operator
------------------------------- -------------------- --------------------- ------------
1C 2C 3C 1C 2C 3C
------------------------------- ----- ----- ------ ----- ------ ------ ----------
Contingent Resources,
Development Unclarified(1,2) 19.6 50.9 128.9 9.8 25.5 64.5 Hurricane
------------------------------- ----- ----- ------ ----- ------ ------ ----------
Total 19.6 50.9 128.9 9.8 25.5 64.5
Notes:
1. Contingent Resources, Development Unclarified, assume water
injection is implemented as part of any development
2. Net attributable figures are rounded to one decimal point
The Warwick Crest discovery was drilled in 2019 and hydrocarbons
were successfully flowed to surface. Appraisal is at an early stage
and there is no development plan for the discovery. ERCE has
attributed Contingent Resources, Development Unclarified, to the
Warwick Crest discovery assuming water injection is implemented as
part of any future development.
The Development Unclarified Contingent Resources for the Warwick
Crest discovery in the table above are contingent on Hurricane
completing any required appraisal drilling, finalising a
commercially viable development plan, being able to fund and
execute this development plan and obtaining regulatory and partner
consents. As such, there can be no certainty of any further
activity in relation to the Warwick Crest discovery.
Halifax (Hurricane 100% working interest)
No Contingent Resources are attributed by ERCE to the Halifax
well drilled in 2017. At 31 December 2020, c.$35 million of the
Company's balance sheet intangible exploration and evaluation
assets represented the historical cost incurred at Halifax to date.
The Company now expects that the Halifax carrying value will be
fully written off in its audited accounts for the year ended 31
December 2020.
Review by Qualified Person
The technical information in this release has been reviewed by
Antony Maris, Chief Executive Officer, who is a qualified person
for the purposes of the AIM Guidance Note for Mining, Oil and Gas
Companies. Mr Maris is a petroleum engineer with 35 years'
experience in the oil and gas industry. He has a B.Sc.(Eng.)
Petroleum Engineering (Hons) from the Imperial College of Science
and Technology (University of London) Royal School of Mines
A.R.S.M. and an MBA from Kingston Business School.
Update on Stakeholder Engagement
The Company continues to engage with an ad hoc group of its
convertible noteholders over the Company's forward work programme,
strategy, financing and balance sheet recapitalisation. It should
be noted that there is a risk of significant dilution to existing
shareholders from a possible restructuring and/or partial
equitisation of the convertible bonds and of potentially limited or
no value being returned to shareholders.
If no agreement can be reached with the Company's stakeholders
on additional development activity at Lancaster, the field could
continue to produce from the P6 well before reaching its economic
limit, the timing of which would depend on oil prices, actual
production levels delivered and the level of cost savings
achievable. The field may then be decommissioned, with potentially
limited or no value returned to shareholders.
-ends-
Contacts:
Hurricane Energy plc
Antony Maris, Chief Executive Officer
Philip Corbett, Head of Investor Relations +44 (0)1483 862820
Stifel Nicolaus Europe Limited
Nominated Adviser & Joint Corporate Broker
Callum Stewart / Ashton Clanfield +44 (0)20 7710 7600
Investec Bank plc
Joint Corporate Broker
Chris Sim / Rahul Sharma +44 (0)20 7597 5970
Vigo Communications
Public Relations
Patrick d'Ancona / Ben Simons
hurricane@vigocomms.com +44 (0)20 7390 0230
About Hurricane
Hurricane was established to discover, appraise and develop
hydrocarbon resources associated with naturally fractured basement
reservoirs. The Company's acreage is concentrated on the Rona
Ridge, in the West of Shetland region of the UK Continental
Shelf.
The Lancaster field (100% owned by Hurricane) is the UK's first
producing basement field. Hurricane is pursuing a phased
development of Lancaster, starting with an Early Production System
consisting of two wells tied-back to the Aoka Mizu FPSO.
Hydrocarbons were introduced to the FPSO system on 11 May 2019 and
the first oil milestone was achieved on 4 June 2019.
In September 2018, Spirit Energy farmed-in to 50% of the Lincoln
and Warwick assets, committing to a phased work programme targeting
sanction of an initial stage of full field development.
Visit Hurricane's website at www.hurricaneenergy.com
Glossary
Bbl Barrel
FPSO Floating production storage and offloading
vessel
===========================================
MMstb Million stock tank barrels
===========================================
US$m Millions of US dollars
===========================================
PRMS Definitions
1C Denotes low estimate of Contingent Resources.
2C Denotes best estimate of Contingent Resources.
===================================================
3C Denotes high estimate of Contingent Resources.
===================================================
1P Denotes low estimate of Reserves (i.e., Proved
Reserves). Equal to P1.
===================================================
2P Denotes the best estimate of Reserves. The
sum of Proved plus Probable Reserves.
===================================================
3P Denotes high estimate of reserves. The sum
of Proved plus Probable plus Possible Reserves.
===================================================
Contingent Resources Those quantities of petroleum estimated,
as of a given date, to be
potentially recoverable from known accumulations
by application of
development projects, but which are not currently
considered to be
commercially recoverable owing to one or
more contingencies.
===================================================
Contingent Resources, A discovered accumulation where project activities
Development Pending are ongoing to justify commercial development
in the foreseeable future.
===================================================
Contingent Resources, A discovered accumulation where project activities
Development Unclarified are under evaluation and where justification
as a commercial development is unknown based
on available information.
===================================================
Developed Reserves Reserves that are expected to be recovered
from existing wells and
facilities. Developed Reserves may be further
sub-classified as Producing or Non- Producing.
===================================================
Economic Limit Defined as the time when the maximum cumulative
net cash flow (see Net Entitlement) occurs
for a project.
===================================================
Net Entitlement That portion of future production (and thus
resources) legally accruing to an entity
under the terms of the development and production
contract or license. Under the terms of PSCs,
the producers have an entitlement to a portion
of the production. This entitlement, often
referred to as "net entitlement" or "net
economic interest" is estimated using a formula
based on the contract terms incorporating
costs and profits.
===================================================
Reserves Reserves are those quantities of petroleum
anticipated to be commercially recoverable
by application of development projects to
known accumulations from a given date forward
under defined conditions.
===================================================
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