Hurricane Energy recognises first revenue as it continues drilling programme

Oil and gas company Hurricane Energy has recognised revenue for the first time relating to a single cargo of crude oil that was sold in its first half, it announced in its interim results on Friday.

The AIM-traded firm said that resulted in its recording an operating profit of $1.2m for the six months ended 30 June, swinging from an operating loss $4.7m year-on-year.

It said it recorded a loss after tax for the first half of $21.2m, narrowing from $75.1m, which included a non-cash fair value loss on the embedded derivative element of its convertible bond of $23.5m.

As at period end, the group said it had an unrestricted cash position of $81.4m, compared to $83m at the end of 2018.

On the operational front at the Greater Lancaster Area, Hurricane said the first oil on the Lancaster Early Production System was achieved on 4 June, following the introduction of hydrocarbons on 11 May.

It said Lancaster had been producing at an average of around 14,100 barrels of oil per day from first oil to latest lifting, which was completed on 17 September.

Hurricane had sold more than 1.6 million barrels of oil across four cargoes to date, and said overall system availability on the Lancaster Early Production System had exceeded its long-term guidance of 85%.

At the Greater Warwick Area, Hurricane reported that a three well 2019 drilling campaign was being carried out in partnership with Spirit Energy, using the Transocean Leader semi submersible rig.

The 'Lincoln Crestal' well had been drilled to a total depth of 1,780 metres TVDSS, including a 720 metre horizontal section of fractured basement reservoir, and had been successfully flow tested.

It reported that the maximum stable flow rate of around 9,800 stock tank barrels per day on electrical submersible pumps, and 4,682 stock tank barrels per day under natural conditions.

Lincoln was confirmed to contain light, 43° API oil.

The 'Warwick Deep' well, meanwhile, was drilled to a total depth of 1,964 metres TVDSS, including a 712 metre horizontal section of fractured basement reservoir.

Hurricane said its initial analysis indicated that the well intersected a poorly connected section of the fracture network, adding that it did not flow at commercial rates, producing a mixture of drilling brine, water, oil and gas, and so was plugged and abandoned.

Encountered oil showed, with gas chromatography reportedly indicating light oil, and a DST oil sample was measured be a light oil of 40°.

Looking ahead, the company said Lancaster Early Production System 2019 full-year production guidance stood at more than 2.8 million barrels, or approximately 12,500 barrels of oil per day from first oil.

Warwick West - the third well in the 2019 Greater Warwick Area programme - was due to be spudded shortly.

The board said long lead items for the Greater Warwick Area 2020 well programme had been ordered, with a rig contract expected to be signed shortly.

“I am delighted to announce our half year results for 2019, Hurricane's first financials to include revenue,” said Hurricane Energy chief executive officer Robert Trice.

“The Lancaster Early Production System is the first phase of development of our significant Rona Ridge assets.

“Achieving first oil on schedule and on budget is a remarkable achievement and a huge credit to our operating team, our partners and contractors.”

Dr Trice said that since first oil, Hurricane had sold more than 1.6 million barrels of oil across four cargoes, and Lancaster had been producing at an average of 14,100 barrels of oil per day.

He said the operating cash flow that the early production system was delivering provided the firm with “greater control” of its future, as it seeked to deliver growth in reserves and production across all of its Rona Ridge assets.

“Whilst the financial security gained from production is crucial, the ultimate goal of the Lancaster Early Production System is to improve our understanding of the reservoir to aid planning of future phases of development of Hurricane's significant Rona Ridge resource.

“Throughout the start-up phase and following first oil, the reservoir has performed at the higher end of expectations.

“However, we remain cognisant that it will take at least six months of steady state production before we are able to evaluate the validity of our reservoir model.”

Following the successful Lincoln Crestal well, Dr Trice added that the board was “looking forward” to continuing with its Greater Warwick Area work programme with its partner Spirit Energy.

“This programme is designed to enable us to obtain the necessary reservoir data from across the Greater Warwick Area in order to allow the partnership to work towards an initial phase of full field development on the area.”