Hurricane E’s (LON:HUR) 2016/17 drilling programme has significantly increased understanding of the Greater Lancaster Area (GLA) and Greater Warwick Area (GWA) hydrocarbon accumulations. Initial data analysis suggests that the GLA is one large accumulation including the Halifax and Lancaster basement oil discoveries contained between the Westray Fault Zone and Brynhild Fault Zone. RPS resource estimates for Lancaster alone range from 157-1,166mmbbls recoverable (P50 523mmbbls), making it a giant oil field and one of the largest discoveries on the UKCS over the last decade. Incorporating wider GLA and GWA resource is likely to take this figure to upwards of 1bnbbls, 100% owned by Hurricane. Management expects first oil from a Lancaster early production system (EPS) in 2019, with the company looking at equity and debt funding options. We assume a 60/40 equity to debt split in our latest Lancaster NAV of 102p/share, rising to 134p/share including risked Halifax/Lincoln upside.
2017 CPR significantly upgrades resources
The updated RPS CPR has increased Lancaster P50 reserves and resources by 162% from 200mmbbls to 523mmbbls. This has been possible based on data gathered from the drilling and testing carried out by Hurricane since the 2013 CPR. The pilot well 205/21a-7 has confirmed the presence of oil significantly below closure, while the testing of the 205/21a-6 and 7z horizontal wells has demonstrated that the field can produce at commercial rates (9,800b/d and 15,375b/d respectively), without water ingress and under low pressure drawdowns. Ultimately, this provides Hurricane with confidence to proceed with the EPS phase of field development.
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