Hurricane Energy Says Talks with Bluewater Over FPSO Deal 'Positive'
Hurricane Energy, a UK-based oil firm producing oil from the Lancaster offshore field in the UK, has said it has had positive talks over the Aoka Mizu contract extension with owner Bluewater.
Hurricane Energy, which started producing from the Lancaster field west of Shetland in 2019 using the Aoka Mizu FPSO, said in June it would not the extend 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 than the one originally agreed with the FPSO owner Bluewater.
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."
In a statement on Tuesday, regarding the talks with Bluewater over the shorter FPSO charter extension, Hurricane said: "Hurricane remains in positive negotiations with Bluewater over an extension to the Aoka Mizu charter beyond June 2022.
" An extension of the contract may require Hurricane to ring-fence material additional funds as security. Furthermore, changes to decommissioning estimates may result in the Regulator requesting additional funds be placed into trust and classified as restricted cash. These potential transactions would reduce the amount of free cash available to repay the Convertible Bond principal of $152 million due in July 2022."
Bluewater told Offshore Engineer earlier this year that while the talks over the terms of the extension are still ongoing, Bluewater was free to market its FPSO Aoka Mizu to other potential clients, with availability as of June 2022. The company also said at the time it might agree terms with Hurricane Energy "for a somewhat longer stay on the Lancaster location."
Better than expected output
As for the production levels from the Lancaster field, Hurricane said that due to better than expected uptime on the FPSO, the production for October 2021 was above the company's previous expectations for the month.
As of November 14, 2021, Lancaster was producing c.10,150 bopd from the P6 well alone with an associated water cut of c.37%.
Previously the Hurricane Energy said that it anticipated the well gauge pressure would reach the bubble point by the end of Q1 2022.
"While uncertainty remains, analysis of the most recent trends indicates that this point is now anticipated between late December 2021 and mid-February 2022," the company said Tuesday.
The 25th cargo of Lancaster oil, totaling approximately 530 Mbbls, was lifted on October 9, 2021. The next cargo is expected to be lifted in late November to early December 2021.
As of October 31, 2021, the Company had net free cash of $99 million (including the revenue from the lifting during October 2021), compared to the last reported figure of $73 million as of 30 September 2021.
"The company believes that net free cash provides a useful measure of liquidity after settling all its immediate creditors and accruals and recovering amounts due and accrued from joint operation activities, outstanding amounts from crude oil sales and after settling any other financial trade payables or receivables," Hurricane said.
"It should be noted that the net free cash is calculated as at the balance sheet date and does not take into account future liabilities that the company is already committed to but have not yet been accrued. As such, not all of the net free cash would be available for repayment of the Convertible Bonds at their maturity in July 2022," Hurricane added.
Aoka Mizu FPSO
Bluewater's Aoka Mizu FPSO was constructed at the Hitachi Zosen shipyard in Ariake (Japan) in 1998 and 1999. Following its original layup in the Sembawang yard in Singapore, topsides oil and gas processing and accommodation modules were installed during 2006-2008. Following this, the FPSO sailed under its own power to start work in the North Sea on the Ettrick field for Nexen Petroleum UK Ltd.
The Aoka Mizu is equipped with a Dynamic Positioning (DP) system enabling it to hook up to the disconnectable turret autonomously.
From Q3 2009 through to Q3 2016 the FPSO produced from the Ettrick and then Blackbird fields in the Central North Sea. After cessation of production in 2016 the FPSO came off station and was laid up in Gdansk before starting work for Hurricane Energy in 2019 at the Lancaster field, west of Shetland Islands.
Before starting the Hurricane contract, during 2017/2018 the Aoka Mizu was moved to Dubai for refit and modification in preparation for its new location West of Shetland. According to World Energy Reports, the FPSO has a 30,000 b/d production capacity, and 605,000 bbls storage capacity.