Hurricane Energy PLC (LSE:HUR) confirmed it has dropped the licence for the Greater Warwick Area which neighbours its producing Lancaster oil field.
Warwick is being relinquished because management determined that appraisal and development costs to reach an economic development on the Warwick discovery within the remaining licence term is not feasible for the company.
It follows a similar recent decision to release the Lincoln sub-licence.
In a 2017 competent person's report, Warwick and Lincoln were estimated to contain some 1.5bn barrels of oil resources, with Lincoln holding 604mln barrels of higher confidence contingent resources while Warwick was seen to have 935mln barrels of prospect resources.
Today, Hurricane said Warwick’s carrying value was US$4.1mln and it will now be impaired as an accounting charge. It will not have any cash impact, it noted.
"We have made this decision deploying the rigorous screening criteria we bring to all opportunities in terms of determining the most appropriate allocation of our capital to deliver the best value for shareholders,” said chief executive Antony Maris.
“There is no reasonable expectation that the P2294 licence could generate any near-term cash realisation, thus voluntarily relinquishing the licence at this time allows the company to focus its time and financial resources on alternative and more attractive opportunities.”
Maris, meanwhile, told investors that Hurricane has now lifted its cash forecast and expects to hold more than US$70mln of net free cash after July’s bond repayment, if oil prices remain above US$90 per barrel during the intervening period.
“We are looking to utilise this cash to generate the best return for shareholders at an acceptable level of risk," he added.