Management’s concept selection and contracting strategy appears to deliver the desired result, with Hurricane Energy plc (LON:HUR) reiterating that the Lancaster EPS remains on time and on budget and first-oil scheduled for H119. Market focus is likely to remain on installation items during the 2018 weather window and then to technical data established once production has stabilised. These data are likely to significantly increase our understanding of Greater Lancaster Area (GLA) resource recovery potential and value. Our last published valuation stands at RENAV 78.4p/share, including a Lancaster EPS-only valuation of 32.7p/share based on a long-term (2022) oil price assumption of $70/bbl Brent. We expect little change to our valuation, but will revise our financial forecasts shortly to reflect capex phasing and a change in reporting currency from £ to US$.
HUR highlighted key data expectations from the EPS phase: 1) well connectivity data that will be ascertained by bringing EPS wells online one by one; 2) pressure build-up data, illustrating interconnectivity of the fracture network, obtained during periods of shut-in; 3) GOR measured during the initial months of production helping refine a flaring solution; 4) calibration of flow assurance assumptions during first two months of stabilised production, which will refine operational uptime assumptions; 5) bottom-hole pressure analysis after initial 6-12 months of stable production reducing certainty on EPS phase recoverable reserves; and 6) absence of produced formation water will remove extreme negative reserve cases. Key EPS phase data will likely be used to extrapolate across the wider GLA, with appropriate adjustments, to increase confidence in current contingent resource estimates.
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