Congratulations to all investors. It’s been an astonishing drill campaign for Dr Trice, his team and all investors. It started with above expectations success on the Lancaster licence, moved onto further success with 1 x well on Lincoln prospect and the hatrick finally completed days ago with further success on the Halifax prospect. The significance of the latter is huge as it effectively joins the dots (and several km’s) between Lancaster and Halifax. In fact, the likelihood is that the huge oil discovery extends further than that. It’s been a few years since the north sea has seen a sizable discovery like this. The recoverable oil total is expected to exceed 1 billion barrels. It’s mind blowing. As an example, Premier Oil sanctioned the Solan development project costing around $1.6bln with estimated recoverable reserves of circa 60mmboe. Premier Oil’s upcoming Catcher field is also very similar in spend and size. It’s these kind of fields that the North Sea is used too… not 1 billion barrel fields! Hurricane’s near term plan is to agree funding on their proposed early phase 1 production project on the Lancaster licence. They need approx $400m and are targeting 60mmboe+ recoverable. Wells drilled to date will feature in the development hence some hefty costs are already in there. But that aside, Hurricane are in effect capable of delivering the same sized project as Premier’s Catcher or Solan at just a fraction of the cost. This is very important in a low oil price environment. Hurricane is currently debt free which is another remarkable achievement.
The journey ahead to first oil in 2019 will need to commence very soon. The market will likely take a conservative view until funding plans for the $400m are announced. These could involve a mix of debt/rbl and equity raise or the entire funding could come via a farm out deal. That said, the lack of flow test on the Halifax propect is likley to be a bit of a niggle for some and opens the door a little for any farm in partner to play a slightly harder ball!
In light of the unknown’s regarding PoO it would be wise that HUR avoids any reliance on debt and instead opts for a cashed up partner to deliver the phase 1 production project. As poor old RKH holders have discovered, the importance in finding a ‘cashed’ up partner is vital. There is little point in doing a deal with a mid tier player if they cannot afford to see the project through. HUR should have their eyes set firmly on the likes of Nexen, Shell or BP.
No doubt there will be some fluff about aggressive takeovers coming out of the usual pi investor forums and that should be ignored. Major oil companies will want to see Lancaster producing without operational disruptions for at least 12 months before they would consider putting in a bid. To date, investors should be reminded that Hurricane’s assets have flowed oil over a short time frame and NOT delivered production (higher volumes) over an extended period eg; weeks, months and years. Basement reserviours are not common and the industry (especially in the north sea) will need to see performance expectations PROVEN. This is effectively the next stage for HUR. The plan is to get first oil flowing in 2019 and I would expect 12 months after that period, if all goes well, HUR will be snapped up lock stock and barrel for a price that makes today’s level look very cheap indeed. It’s going to take ‘years’ and some patience but the future is very bright for Dr Trice and team.
Hurricane Energy is part of thesharehub top ten for 2017.