Hurricane Energy Expects Lancaster Field to Deliver at Upper End of 2021 Output Guidance

September 29, 2021

World Energy Reports LLC.
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Hurricane Energy, the operator of the Lancaster field west of Shetland, has said that the annual output from the field would be at the upper end of the 8,500 - 10,500 bopd guidance.

The company issued output guidance on Wednesday, taking into account additional production and pressure data gathered since the annual maintenance shutdown in July 2021.

On April 30, 2021, Hurricane Energy provided annual production guidance for the full year 2021 of 8,500 - 10,500 bopd. 

"The Company continues to forecast that average production for the year is expected to remain within this range. This annual guidance is based on an FPSO production uptime assumption of 90% and production from the P6 well alone on artificial lift via ESP. The production uptime assumption of 90% includes the impact of the annual maintenance shutdown, evenly spread across the year.

The Lancaster field produces via Bluewater's Aoka Mizu FPSO.

Hurricane Energy's production guidance from the Lancaster field for October 1, 2021, to March 31, 2022 period is 8,500 - 10,000 bopd, which is based on an improved FPSO production uptime assumption of 96.5% and production from the P6 well alone on artificial lift via ESP. 

The increase in the uptime assumption is a combination of there being no planned maintenance shutdowns anticipated in the period, and reflecting the excellent production uptime that has been seen on the FPSO to date, the company said.

"The guidance for the Period is slightly lower than the average for the full year 2021 due to the expected gradual production decline from the reservoir over time, partially offset by the higher FPSO uptime assumption," Hurricane Energy added.

"Based on current trends, management estimates that wellhead flowing pressure in the Lancaster reservoir may reach the bubble point by the end of Q1 2022, consistent with the time range estimation previously announced on 25 May 2021. Whilst this has been factored into the guidance for the period, there will remain a degree of uncertainty regarding the full impact of this, along with the risk that gas liberated from the reservoir could be produced which could result in production either being reduced or ceased altogether," the company said.

Antony Maris, CEO of Hurricane, said: "The company has benefited from higher than expected oil prices and excellent performance to date of the FPSO. As a result of the combined efforts of the Hurricane and Bluewater teams, we anticipate being towards the upper end of our production guidance for 2021 and this is also reflected in our guidance for the next six months to 31 March 2022."

Back in June, Hurricane Energy plc said it would face the business wind-down unless it managed to secure a shorter charter extension for the Aoka Mizu FPSO than originally agreed with the FPSO owner Bluewater.

Hurricane Energy, which started producing from the Lancaster field west of Shetland in 2019 using the FPSO, said it would not extend the charter of the Aoka Mizu FPSO for a period of three years from June 2022 to June 2025 "on current terms."  

Hurricane, which last year significantly downgraded Lancaster reserves estimate, said that it was open to a shorter FPSO extension.

The three-year initial term of the bareboat charter expires in June 2022, "unless, by June 4, 2021, the company has exercised an option to extend for a period of three years, to June 2025."

"Based on the contractual terms for the three-year extension and the current Lancaster production forecasts, the company does not believe it is in the best interests of the Company and its stakeholders to exercise the option in its current form to extend the Aoka Mizu lease to June 2025, given the significant financial obligations this could entail. Accordingly, it has resolved not to do so," Hurricane Energy said Friday, June 4.

Still, the company said it remained in talks with FPSO owner Bluewater Energy Services over an alternative extension to the bareboat charter for a shorter period than three years.

To remind, Hurricane last year said the potential of its Lancaster field was much smaller than originally thought, and could not "support the level of debt in the company which was sized for a much larger Reserves and Contingent Resources base."

Hurricane's unaudited estimate of 2C contingent resources in the Lancaster field was in 2020 reduced to 58 MMbbls remaining from 486 MMbbls in the 2017 CPR.

The estimated remaining Lancaster 2P Reserves were 7.1 MMbbls at December 31, 2020, based on future production from the 205/21a-6 well, the only producing well at the field.

While the talks over the terms of the extension are ongoing, FPSO owner Bluewater is free to market its FPSO Aoka Mizu to other potential clients, with availability as of June 2022. Bluewater may also agree terms with Hurricane Energy for a somewhat longer stay on the Lancaster location.

Late in July, a Bluewater spokesperson told Offshore Engineer that the FPSO contract talks would continue for another month or two.

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