So how good is Hurricane Energy Plc’s (LON:HUR) Lancaster oil field? One measure taken from the most recent well suggests it is potentially one of the best on the planet.
When it comes to reviewing the results of this year’s wells on the Lancaster the news flow has been very positive.
Indeed if there’s any grey area remaining it is quite simply comes down to quantifying just how big the field is.
Results from the most recent well show that the wells now in place at Lancaster can comfortably satisfy an early production system (EPS), planned to deliver a maximum of 20,000 bopd.
Flow testing hit an equipment constrained maximum of 14,500 bopd from one of two wells intended for the EPS, quite how much more can be flowed can at the moment only be speculated upon.
It is that reason that investors in the North Sea oil firm are suddenly conversant in technical terminology normally reserved for oil field engineers.
Specifically, the attention is on the well’s ‘productivity index’ or PI which in the most recent well had a read out of 147 b/d per psi (that’s barrels per day, per pound per square inch of pressure).
Simplifying that somewhat, WH Ireland analyst Brendan Long last week explained that it essentially meant that the well could deliver an additional 10,000 bopd through increasing drawn-down pressure by 68 psi – an amount he described as “almost nothing”.
Hurricane Energy chief executive Dr Robert Trice, speaking during an interview on Tip TV, put the PI into an even more investor friendly context.
“It [the PI] is extremely good … It is up there with the most efficient reservoirs on the planet,” Trice said.
WATCH the full interview with Robert Trice on Tip TV here
“So it demonstrates yet again, we’ve got a highly connected fractured system with a very high oil column height.
“It should be fantastic producer when we get it on production.”
In analyst Long’s note last week he pointed out that, on these terms, Lancaster could be comparable with the operations such as the Ghawar, in Saudi Arabia, the largest oil field in the world.
Now, admittedly taking this one measure in isolation is something of top-trumps approach to judging an oil project.
Nonetheless it quite plainly underlines why there has been so much excitement about Lancaster.
It is perhaps no wonder that Hurricane has been able to find friends in the City.
It has raised some £120mln of new capital this year, with the most recent funding, a £70mln placing, being heavily oversubscribed around two weeks ago.
“We’ve got some fantastic new shareholders and existing shareholders,” Trice said. “It was a fantastic win.”
Cash raised in the new share placing will be spent on long-lead items needed for Lancaster’s EPS, which is targeted to flow ‘first oil’ by 2019.
Crucially, the cash also covers the drilling of two new additions to the 2016 drill programme.
The Transocean Spitsbergen rig is being kept on to drill the Lincoln well and one other exploration well nearby, in what is now being referred to as the Greater Lancaster Area.
This next phase of drilling has the potential to add further scale to the ultimate long term development, over and above the current 300mln barrel estimate for the initial Lancaster field.
Trice also discussed Hurricane’s plans to secure the project financing to delivering the Lancaster EPS, which may or may not involve a farm-out partner, as well as the long term development of the project.
The Lincoln well will spud in early November and a new independent assessment of the project is also anticipated, so Hurricane will no doubt remain one for oil investors to watch over the coming months.