Hurricane Energy Plc (LON:HUR) has warned it will likely take a material downgrade on its estimated resources across its West of Shetland projects, sending shares down more than 33% in early deals.
A technical review (which is ongoing) was launched in parallel with management changes following performance problems at the Lancaster field’s early production system (EPS).
In an update, Hurricane told investors that whilst final conclusions have yet to be made findings to date mean there’s reasonable probability that the oil water contact in the Lancaster field is shallower than previously envisaged in a 2017 competent persons report.
“Consequently, the company believes there is a risk of a material downgrade to estimated reserves attributable to the Lancaster Early Production System, and that there will also be a material downgrade to estimated contingent resources across the West of Shetland portfolio,” Hurricane said in a statement.
Hurricane noted that the assessment does not take into account any production enhancement options for the Lancaster field which are currently under evaluation.
In July, the company reported that the 205/21a-7z well, one of two wells plugged into the EPS, was brought back online after the installation of pumps and it was producing 5,000 barrels of oil per day but water cut was measured at 53%.
Today, Hurrincane added that the technical review is due to be completed in time for its interim results statement, slated for September 11, and at that time it expects to be in a position to provide new in-house estimates of resources and reserves for Lancaster.
Additionally, the company noted that on August 2 the Lancaster EPS’s Aoka Mizu FPSO underwent a controlled shutdown to undertake an inspection which has found a need for repairs, which have been undertaken and production is expected to resume imminently.
Prior to the shutdown the field was producing at a rate of 17,000 bopd.
Hurricane shares fell 2.14p or 34.8% to trade at 4.01p in Thursday’s early deals.