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Discovery verified by report

Hurricane confirms Shetland field reserves

Hurricane EnergyHurricane Energy has confirmed that its Lancaster field in the West of Shetland holds more than half a billion barrels of oil.

A new report by RPS Energy has outlined a ‘best estimate’ for the field’s recoverable resources amounting to 523 million barrels, up 162% from the last study in 2013. RPS put Lancaster’s total volume at 2.3 billion barrels.

The company announced the discovery at the end of March and a study in April indicated an uplift in recoverable resource from 200m to 591m barrels.  It expects to extract 37.3m barrels over six years.

Robert Trice, Hurricane Energy chief executive, said: “We are delighted to now have independent verification of the highly material uplift in the resources we have at Lancaster.”

It is still smaller than the Forties field, which contains about five billion barrels – of which approximately two billion have been recovered.

Despite the upgrade, shares in Aim-quoted Hurricane fell 3.25p to 60.75p after a strong rise in recent months, up 378% over the year. They fell a further 3.7% in early trade today.

Hurricane’s recent drilling results have made it clear that a significant increase to the company’s resource base was likely. So the latest news was already reflected in the firm’s share price, according to analysts.

Analyst Malcolm Graham-Wood of Interactive Investor was barely moved by the announcement.

“The long-awaited Hurricane Energy Competent Person’s Report (CPR) has arrived, but is little more than a damp squib in my view,” he said.

“To make life more confusing both reserve replacement ratios are calculated on a different basis.”

However, he added that “with plenty of work to keep them busy for the foreseeable future [the shares] are still incredibly cheap.”

Motley Fool was equally unmoved, saying the value is “already reflected in the group’s market cap of £742m”.

Hurricane Energy expects to publish reports relating to the neighbouring Halifax and Lincoln fields later this year.

* Following the announcement today by Repsol Sinopec Resources UK that first oil has begun to flow from the Shaw field, Deirdre Michie, chief executive of Oil & Gas UK, said: “This is a tremendous achievement by Repsol Sinopec Resources UK and their commitment to the North Sea is very welcome indeed. 

“This is a major redevelopment in an area of the North Sea that has been producing for many years. It combines new and mature field activities that will extend the Montrose Area’s productive life and demonstrates the potential that can still flow from the UK Continental Shelf with the right investment. 

“At the project’s inception, HM Treasury worked closely with the industry to begin to make the tax regime more competitive. Since then, the tax regime for this basin has improved substantially and is now one of the most fiscally competitive in the world.

“We look forward to more investment of the kind announced today in order to unlock the billions of barrels of oil and gas that we believe this basin still holds.”

 

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