Hurricane Energy beefs up Lancaster estimate

13 April 2017, Week 14, Issue 395

Hurricane Energy has trebled its recoverable resource estimate for the basement Lancaster discovery West of Shetland (WoS) following a successful 2016 drilling campaign.

It unveiled a new Lancaster estimate of 591 million barrels of oil, compared with the 207 million barrels forecast under a competent person’s report (CPR) published in 2014.

The estimate is based on a 25% recovery rate, but Hurricane argued the figure could trend higher given better extraction results seen in other basement fields in Southeast Asia.

It comes after Hurricane announced that its Halifax appraisal probe had indicated the Lancaster reservoir extended beyond its own structural enclosure.

The well also produced evidence of a pervasive fracturing network, a key sign of prospectivity for basement drillers.

Panmure Gordon, a London-based investment bank, said the upgraded resource base for Lancaster was broadly in line with suggestions that Hurricane’s total discovered resource could top 1 billion barrels.

Hurricane will now search for funding to build Lancaster’s US$467 million early production system (EPS), which aims to achieve early cash flow by extracting 17,000 bpd from two horizontal wells.

The EPS budget includes US$299 million earmarked for upgrading Bluewater Energy Services’ Aoka Mizu FPSO, which previously operated at Nexen’s Ettrick field in the UK North Sea.

Hurricane said Aoka Mizu’s overhaul would ensure it could operate for up to 10 years by installing a new mooring system while also conducting "limited" vessel, marine and topside upgrades.

The Lancaster pilot is designed to extract 62 million barrels of reserves at a Brent break-even price of US$37 per barrel. Based on Hurricane’s forward curve, the Lancaster EPS should generate US$168 million in annual cash flow.

Hurricane expects the pilot to plateau at 17,000 bpd between 2019 and 2028, but this assumes that electrical submersible pumps (ESP) installed at Lancaster work according to plan.

Yields could fall to 12,000 bpd if problems with the ESPs force Hurricane to use natural extraction instead.

Elsewhere, Hurricane also owns a 100% interest in the nearby Lincoln and Warwick basement prospects, which could be tied into Lancaster’s infrastructure at a later date.

Last week, the firm said an appraisal well spudded at Lincoln in November suggested Lincoln had "the potential" to form a single field with Warwick.

Edited by

Ryan Stevenson

Managing Editor

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