TIDMHUR
RNS Number : 2150F
Hurricane Energy PLC
11 July 2019
11 July 2019
Hurricane Energy plc
("Hurricane" or the "Company")
Operational Update:
Capital Markets Day
Hurricane Energy plc, the UK based oil and gas company focused
on hydrocarbon resources in naturally fractured basement
reservoirs, announces that it is hosting a Capital Markets Day
presentation today in London for sell-side analysts and
institutional shareholders.
The event will be hosted by Dr Robert Trice, CEO, and Alistair
Stobie, CFO, and will include presentations on data generated
during both the start-up process of the Lancaster Early Production
System development ("Lancaster EPS") and the drilling and testing
of the 205/26b-13Z well ("Warwick Deep") on the Greater Warwick
Area.
A video recording of the presentation will be made available on
the Company's website at
https://www.hurricaneenergy.com/investors/presentations later
today.
The Company also provides an operational update below with
respect to the Lancaster EPS and the Warwick Deep well, and an
update on future plans.
Lancaster EPS Start-up Phase
Highlights
-- Highly encouraging initial results: in line with, or ahead of, expectations
-- Well productivity above expectations
o World class productivity indices of 205 stb/d/psi and 190
stb/d/psi on the -6 and -7Z wells respectively
o Achieved target aggregate EPS stabilised production rate of
20,000 bopd on natural flow
o ESPs have not been required to date - potential positive
implications for operating efficiency, capex and opex
-- Reservoir data collection objectives achieved and initial indications are positive
o Strong interference observed between the wells
o No pressure barriers identified with shut-in data
-- Production of water and gas within expected ranges
o Water cut behaviour consistent with modelled perched/trapped
water
o Gas oil ratio towards low end of anticipated range (360
scf/bbl)
-- Previous flow assurance assumptions now believed to be conservative
o Currently extending pigging run interval following minimal wax
build-up witnessed initially
o Positive implications for operating efficiency and flowline,
design and operating concepts for future development phases
Hydrocarbons were introduced to the Lancaster EPS on 11 May
2019, marking the commencement of the Lancaster EPS start-up phase
which involved testing each of the two Lancaster EPS wells
individually, with appropriate shut-in periods, before flowing both
wells together to achieve 'First Oil'. During the shut-in periods
the flowlines were circulated (pigged) to diesel, in line with our
flow assurance strategy.
The individual flow tests were carried out without the use of
downhole electrical submersible pumps ("ESPs"), achieving initial
stable flowrates of 16,500 bopd on both the 205/21a-6 and
205/21a-7Z wells. These tests confirmed world class productivity
indices ("PIs") of 205 stb/d/psi and 190 stb/d/psi on the 205/21a-6
well and 205/21a-7Z well respectively. The impact of these
measurements is that very low drawdowns have been shown to be
required to achieve high natural production rates.
Hurricane achieved its desired data collection objectives during
the start-up phase. This included measuring interference between
the wells, which proved to be instant. Whilst a very positive
indicator for fracture network connectivity, the Company believes
this interference risks the two wells acting like a single well
bore. A cautious approach will therefore be taken to manage
increases in flowrates between the two wells, with careful
reference needing to be made to the combined rate.
Shut-in tests identified no pressure barriers and confirmed the
strong dual porosity dip and late time drop indicating contribution
of an extended network of fractures, joints and microfractures.
The 205/21a-6 well produced dry oil at a maximum natural flow
rate of 16,500 bopd. The 205/21a-7Z well produced oil at a maximum
natural flow rate of 16,500 bopd and a water cut of 8%. Whilst the
RPS Energy May 2017 CPR stated that it is not possible to measure
the volume or distribution of water trapped in isolated parts of
the fracture network, a best case of 5-10% was estimated. This
water volume is already factored into Hurricane's published
volumetrics. The water cut does not change with drawdown,
indicating that it is perched water and not early breakthrough of
aquifer water. Consequently, it is not considered detrimental to
the expected production performance of the Lancaster field or the
currently held 2P reserve of 37 mmstb.
Initial pigging runs indicated minimal wax build-up and pigging
intervals of longer duration are now being tested. It is expected
that the Company's initial flow assurance assumptions may prove to
be conservative.
Warwick Deep Well
Highlights
-- Demonstrated the presence of oil on the Warwick structure
-- Well unsuitable as a production well and has consequently been plugged and abandoned
-- Well drilled to a total depth of 1,964m TVDSS
-- 712m horizontal section of fractured basement reservoir, below local structural closure
-- Achieved the majority of data objectives including logs,
testing productivity, bringing reservoir fluids to surface, and
acquiring a reservoir pressure
-- Initial analysis supports pre-drill estimates of porosity,
oil type and oil water contact ranges
-- Initial analysis suggests the well intersected a poorly
connected section of the fracture network within the oil column -
further analysis to take place
The Warwick Deep well was drilled to a total depth of 1,964m
TVDSS and included a 712m horizontal section of fractured basement
reservoir. The horizontal section was 50m deeper and 288m shorter
than planned but nevertheless penetrated the target volume of the
reservoir.
Hurricane's initial analysis indicates that the well intersected
a poorly connected section of the fracture network within the oil
column. The well did not flow at commercial rates producing a
mixture of drilling brine, water, oil and gas. The decision was
therefore made to plug and abandon the well.
The Company and its contractors have been evaluating the drill
stem test data, well pressures and fluid samples which indicate
that Warwick Deep has penetrated a light oil column. Further
analysis is required to be able to understand the background to
this result and its implications.
The rig has now completed the work to permanently plug and
abandon the Warwick Deep well and has moved to the 205/26b-B
'Lincoln Crestal' well, the second well of a three-well programme
on the Greater Warwick Area.
Guidance
Production
-- Production guidance unchanged for 2019, increased from 2020
o Q3'19: 9,000 bopd (45% operating efficiency); Q4'19: 13,000
bopd (65% operating efficiency)
o From 2020, target production guidance envelope is increased
from 17,000 bopd, which remains the base case, to an upper target
of 20,000 bopd
o Increase is based on world-class productivity and positive
flow assurance assumptions which may allow the wells to 'catch-up'
lost production during downtime
-- GWA tie-back and gas export expected to start production Q4'20 - Q1'21
o GWA tie-back to deliver a further 4,250 bopd production net to
Hurricane (base case, 5,000 bopd upside case)
o Gas export of 5-10 mmscf/day with minimal cash flow impact
-- Excess throughput unlocked by debottlenecking
o 6-12 months of Lancaster EPS production will determine whether
Lancaster EPS wells can be taken above an aggregate of 20,000 bopd
to use this excess capacity
o Otherwise a second GLA tie-back to be pursued in 2021
-- Sanction of GWA tie-back dependent upon joint venture partner and regulatory approval
Financial Outlook
-- Opex per barrel expected to be below $20/bbl from 2020
o GWA tie-back and gas tie-in reduce to $15/bbl in upside
case
-- Significant operating cash flow forecasted at $60/bbl Brent
o $60 million in 2019 following first oil in June
o $200-240 million in 2020
-- H1 Results preview (unaudited)
o Expected revenue of $22 million from one cargo of approx.
350,000 bbl
o Expected unrestricted cash at 30 June 2019 of $81 million
Dr Robert Trice, Chief Executive of Hurricane, commented:
"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.
"The Lancaster EPS start-up phase went smoothly and achieved its
data objectives. The world class productivity of these wells means
that we were able to achieve the desired rates with small chokes
and without ESP-support. This bodes very well for future production
efficiency and costs.
"We've always said that it would take 6-12 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.
"We are encouraged by the Warwick Deep well, despite the
penetrated fracture system not supporting a commercial oil flow
rate. Hurricane's assessment of data acquired during drilling and
testing indicates that the well encountered a significant oil
column on the Warwick structure. Our initial analysis indicates an
OWC consistent with pre-drill predictions. 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 that
the result at Warwick Deep does not have negative read-across to
Lancaster or Lincoln.
"We are about to spud Lincoln Crestal which, in the case of
demonstrating successful flow rates, will be a tie-back candidate
to the Aoka Mizu.
"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."
Contacts:
Hurricane Energy plc
Dr Robert Trice, Chief Executive Officer +44 (0)1483 862
Alistair Stobie, Chief Financial Officer 820
Stifel Nicolaus Europe Limited
Nominated Adviser & Joint Corporate Broker
Callum Stewart / Nicholas Rhodes / Ashton
Clanfield +44 (0)20 7710 7600
Morgan Stanley & Co. International plc
Joint Corporate Broker
Andrew Foster / Tom Perry / Alex Smart +44 (0)20 7425 8000
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%) 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. This development is initially
expected to produce an average of 17,000 bopd (gross production of
20,000 bopd with assumed operating efficiency of 85%, following a
period of ramp-up). First oil was achieved on 4 June 2019.
Hurricane's other assets include Lincoln (50%), Warwick (50%),
Halifax (100%), Whirlwind (100%), and Strathmore (100%). Together
with Lancaster, these assets have total combined 2P reserves and 2C
contingent resources of 2.6 billion barrels of oil equivalent (2.3
billion barrels of oil equivalent net to Hurricane).
In September 2018, Spirit Energy farmed-in to 50% of the Lincoln
and Warwick assets, committing to a five-phase work programme
starting with three wells in 2019 and targeting sanction of full
field development in 2021.
Glossary
2P Reserves Proved plus probable reserves under the Society
of Petroleum Engineers' Petroleum Resources
Management System
2C Contingent resources Best case contingent resources under the
Society of Petroleum Engineers' Petroleum
Resources Management System
================================================
bbl barrels
================================================
bopd Barrels of oil per day
================================================
CPR Competent Persons Report
================================================
EPS Early Production System
================================================
ESP Electrical Submersible Pumps
================================================
FPSO Floating Production Storage and Offloading
vessel
================================================
GLA Greater Lancaster Area
================================================
GWA Greater Warwick Area
================================================
Lancaster EPS Lancaster Early Production System development
================================================
OWC Oil Water Contact
================================================
PI Productivity Index
================================================
scf Standard cubic foot
================================================
Spirit Energy Spirit Energy Limited
================================================
TVDSS True Vertical Distance Subsea
================================================
Warwick Deep 205/26b-13Z
================================================
Inside Information
This announcement contains inside information as stipulated
under the market abuse regulation (EU no. 596/2014). Upon the
publication of this announcement via regulatory information service
this inside information is now considered to be in the public
domain.
Competent Person
The technical information in this release has been reviewed by
Dr Robert Trice, who is a qualified person for the purposes of the
AIM Guidance Note for Mining, Oil and Gas Companies. Dr Robert
Trice, Chief Executive Officer of Hurricane Energy plc, is a
geologist and geoscientist with a PhD in geology and has over 30
years' experience in the oil and gas industry.
Standard
Resource estimates contained in this announcement have been
prepared in accordance with the Petroleum Resource Management
System guidelines endorsed by the Society of Petroleum Engineers,
World Petroleum Congress, American Association of Petroleum
Geologists and Society of Petroleum Evaluation Engineers.
This information is provided by RNS, the news service of the
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contact rns@lseg.com or visit www.rns.com.
END
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