Current HUR:LN Stock Info

Recent drilling successes indicate 591 MMBOE recoverable

Hurricane Energy (ticker: HUR) announced the results of its 2016/17 drilling campaign today, tripling estimated recoverable reserves from the Lancaster field.

The Lancaster field is an oil play in the North Sea, just north of the UK. Hurricane first drilled appraisal wells into the Lancaster in 2014. At the time the field was deemed economic, but was not well delineated. Early results indicated a recoverable resource of about 200 MMBOE. The successful results of several delineation wells have led the company to increase its estimates of recoverable resource from the Lancaster field to 591 MMBOE, an increase of 197%.

Hurricane Energy Triples Recoverable Resource from Lancaster Field

Source: Hurricane Energy

Multiple nearby structures may also be developed

According to Hurricane, the Lancaster play is a fractured basement field, with pervasive naturally occurring micro and macro fractures. Several other potential target zones are near, including the Halifax, Lincoln and Warwick. In late 2016 the company drilled an exploration well targeting the Lincoln area, showing a possible hydrocarbon column of 2,000’.

Another well was drilled into the Halifax zone. This zone is part of the same structure as the Lancaster area, meaning it may be connected, indicating a larger total hydrocarbon accumulation. Preliminary results from the exploration well indicate an oil-water contact (OWC) that is several hundred feet deeper than the contact seen at the Lancaster. This could indicate a fault between the two zones, or it could indicate a tilted OWC, a phenomenon which has been observed in other nearby fields.

Hurricane Energy Triples Recoverable Resource from Lancaster Field

Source: Hurricane Energy

However, the well encountered a significant problem while it was being drilled. Hurricane reports that large amounts of granite fines compromised the drilling mud used, turning it into a heavy, viscous fluid that the company could not clean out of the hole. If the company develops the Halifax area, this problem absolutely must be overcome.

First oil from Lancaster expected for Q1 2019

Hurricane plans to develop the first phase of the Lancaster field using a FPSO vessel. A sustained production rate of 17 MBOEPD is expected, with total producible volume from this phase of 62 MMBOE. FID will be made before July, with first oil expected in Q1 2019.

Hurricane Energy Triples Recoverable Resource from Lancaster Field

Source: Hurricane Energy

Hurricane expects to spend about $467 million in the first phase of development, primarily on upgrading the FPSO that will be used. Hurricane reports that it will likely fund this project with a mix of debt and equity. The company estimates a breakeven oil price of $37/bbl Brent. For reference, at time of writing Brent was trading at $55.30/bbl.

 


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