Hurricane Energy Plc (LON:HUR) shares advanced 10% on Monday after a new assessment of the group’s oil discoveries massively increased the volume of oil on its books.
The new competent persons report assessed all Hurricane’s assets except for its most advanced, the Lancaster field, and it confirmed what many in the market had hoped for - that Hurricane’s successful drill campaign unearthed an awful lot of oil.
New discoveries Halifax and Lincoln have been estimated to host 1.23bn and 604mln barrels of crude respectively, whereas the untested (but substantially de-risked) Warwick prospect is estimated to contain a potential 935mln barrels.
Including Lancaster, which was in May estimated to have 523mln barrels of recoverable resources, the new assessment take the group’s total inventory increasing 231% to 2.6bn barrels oil equivalent.
Independent validation of the Rona Ridge play
"We are pleased to now have independent validation of our geological model for the Rona Ridge basement play,” said Dr Robert Trice, Hurricane chief executive.
“The Lancaster EPS will go a long way, together with other appraisal work, to narrowing reservoir resource ranges on our assets on the Rona Ridge, following target first production in H1 2019.
“In addition to providing significant cash flow, the company believes that a successful EPS will provide a read-across to the production potential of all our basement assets, materially de-risking Lancaster and the surrounding fields at Lincoln, Halifax, Warwick and Whirlwind."
Lancaster field advancing towards production
The Lancaster field was assessed earlier this year, with particular attention paid to the area that will host the early production system (EPS).
Production is expected to start in 2019, with the EPS due to yield up to 17,000 bopd from two wells.
This initial field start-up is fully funded by Hurricane’s US$530mln raise, arranged in June, and the development will not only deliver lucrative cash flow, but, also valuable production data which will further de-risk the portfolio.
It is expected that the validation provided by the EPS can help narrow and upgrade the estimates for all the Rona Ridge assets, as drill results showed Halifax and Lincoln are both similar to Lancaster.
EPS expected to support farm-out deal
Significantly, the proof-of-concept provided by the EPS is expected to bring forward Hurricane’s partnering process to a close.
This morning, Hurricane told investors that whilst its data room process has been positive it expects a farm-out transaction would not be likely before the Lancaster EPS.
The schedule for the EPS sees production coming online in the first half of 2019, there’ll be a number of catalysts between now and then - in the meantime, Hurricane Energy remains a stock to watch for investors.
Hurricane shares were up around 12% on Monday afternoon, changing hands at 30.24p.