Hurricane Energy (LSE:HUR) tumbled 17.1pc to 43.5p on Monday morning following the release of disappointing results from one of its UK wells.
The £867.3m oil & gas business announced that its Warwick Deep well had been plugged and abandoned after drill stem testing encountered a poorly-connected section of fracture network within its targeted oil column. Hurricane added that the well, which was drilled to a total depth of 1,964m, did not flow at commercial rates, and instead produced a mixture of drilling brine, water, oil and gas.
Alongside its contractors, the organisation is now completing additional analysis of Warwick Deep’s drilling data to provide an update at its capital markets day later this month.
Once permanent plugging is complete, the rig used to drill Warwick Deep will move on to Lincoln Crestal. This marks the second target in an ongoing three-well programme on the Greater Warwick Area (GWA) where Hurricane holds a 50pc interest alongside Spirit Energy.
The firm’s chief executive Robert Trice called Monday’s results ‘disappointing’, adding: ‘We were initially encouraged by hydrocarbon shows and gas ratio analysis indicative of light oil, however drill stem testing has clearly demonstrated that Warwick Deep cannot be considered suitable as a future production well and therefore the well will be plugged and abandoned.’
Trice said Hurricane is now looking forward to beginning work at Lincoln Crestal, which is now the preferred candidate to be tied back to the Aoka Mizu floating production storage and offloading (FPSO).
Monday’s update follows considerable progress this year across Hurricane’s licences in the Greater Lancaster Area (GLA). The GLA, which, like the GWA, is based on Shetland’s Rona Ridge, consists of two 100pc-owned fields called Lancaster and Halifax.
Lancaster is the company’s most advanced asset and contains 2P reserves of 37.3MMtsb over six years and 63.1MMtsb over an extended 10-year period. It also holds a 2C contingent resource of 523 million stock tank barrels of oil. Meanwhile, Halifax contains a 2C contingent resource of 1,235 million stock tank barrels of oil.
Hurricane is currently working towards the delivery of an early production scheme for the GLA. This involves a two well tie-back to the Aoka Mizu FPSO unit and targets 17,000bopd production. At an operating cost of $22/bbl, this is expected to generate more than $200m of operating cash flow p.a. based on $60/bbl brent.
In June, Hurricane announced that Lancaster had become the UK’s first producing fractured basement field after the FPSO’s start-up phase completed with a 72-hour production test. The combined flow from both wells during this test period reached and maintained the planned production rate of 20,000bopd. Shortly afterwards, the business revealed that it had generated its first revenues from the sale of this oil to BP.