Hurricane Energy Plc (LON:HUR) has more or less doubled its estimation of the Lancaster field’s size, now seeing some 593mln barrels in the ‘base case’.
The new estimates, revealed in a new power point presentation, put the field’s oil-initially-in-place in a range of 1.29bn to 3.03bn barrels and estimates recoverable resources between 255mln and 1.07bn barrels.
The estimates assume a recovery factor of 25%, though Hurricane says it should be noted that higher rates are seen in several basement oilfields elsewhere in the world.
Friday’s estimates come ahead of a capital markets event, and also precede a new competent persons’ report (CPR) which in recent interviews was described as being ‘imminent’.
As well as doubling Hurricane’s prior in-house estimates, which at 300mln barrels that admitted as being ‘conservative’, the latest resource figure are around three times higher that than the last CPR which in 2013 set the bar at 200mln barrels.
Hurricane also lifted the lid on some economic assumptions about the proposed early production system (EPS) for the Lancaster field.
The EPS is intended to cover just a small portion of the Lancaster discovery, with two wells set to recover 62mln barrels in the base case – the ‘breakeven’ recovery would be just 16mln barrels.
Production is expected to peak 17,000 bopd in this EPS phase, and ‘first oil’ is targeted for the first half of 2019.
Hurricane has already contracted Bluewater, TechnipFMC and Petrofac for the project.
Lancaster field economics estimates
The company estimates the project’s capital cost at US$360mln, with some US$322mln needed as a lump sum. The development capital boils down to US$8 per barrel, which is low for the industry (Hurricane sees the project in the bottom quartile for costs in both the UK and global context).
Operating costs are forecast at US$20 per barrel, and it is modelled that the project would need a Brent crude price of US$37 per barrel to breakeven with operating cashflows estimated at US$168mln per year based on ‘forward curve’ crude forecasts.
Meanwhile, at a flat US$40 per barrel the project generates US$96 each year and at a flat US$50 per barrel it makes US$156mln.
A higher oil price, US$60 per barrel flat, the project’s base case would bring in US$192mln of operating cash flow per year.
The final slide of Hurricane’s presentation displays a possible timetable highlighting what it sees as catalysts to the company’s value – with the EPS development outlined at the top of the list – ahead of a full field development starting in the second half of 2020.
The ongoing farm-out process is seen as another potential catalyst, with the schedule running to early 2018 for that particular item, before a potential appraisal programme spanning 2018-19 and even some of 2020.
Plainly, Hurricane has been busy recently and it doesn’t intend to stop anytime soon.