Shares soar after Hurricane oil find
Discovery off Shetland of at least 250 million barrels brings North Sea boost
SHARES in Shetland-focused Hurricane Energy have surged 12 per cent after the firm said it had made a significant discovery, which will provide a welcome boost for the beleaguered North Sea oil and gas industry.
Surrey-based Hurricane said a well on the Lincoln prospect west of Shetland had struck a hydrocarbon column which initial estimates suggest may contain more than 250 million barrels of oil.
Chief executive Robert Trice said the find capped an extraordinary year for Hurricane. The company has bucked the gloomy trend by achieving significant exploration success amid the downturn triggered by the crude price plunge.
Hurricane made the Lincoln find three months after drilling on the company’s Lancaster discovery increased directors’ confidence it may contain more than 200 million barrels oil.
As Lincoln lies just seven kilometres from Lancaster, the latest success underlines the potential of a relatively under-explored area which some hope may become a significant resource.
Hurricane made both finds in what it terms a basement area of granite, beneath the sandstone on which exploration activity has focused in the North Sea. The company’s acreage off Shetland contains four other basement prospects.
It may be able to produce oil from Lincoln using facilities developed for Lancaster, increasing the chances of making good returns from both finds in spite of the fall in oil prices since 2014.
Hurricane’s success suggests there are still big finds to be made in the North Sea.
It may provide much-needed encouragement for other firms to explore in the area. Drilling levels have plunged to record lows in the area following deep cuts in spending by oil and gas companies during the downturn.
Developments at Hurricane may also spark renewed interest in the oil and gas sector among investors.
The company’s success with the drill bit has been accompanied by an increase in Hurricane’s share price which has left some backers sitting on hefty gains on investments made in recent months.
Shares in the company closed up 5p at 47p yesterday, leaving it with a market capitalisation of £565 million.
In May Hurricane raised £52.1m from the Kerogen Capital private equity business and other institutional investors at 15p per share, to fund drilling on Lancaster. In October Hurricane secured £70m backing from investors through a placing completed at 34p per share.
Mr Trice said: “I am delighted that, at the end of an extraordinary year for Hurricane, the Lincoln Well has discovered a significant oil column.”
He said initial analysis of the well data indicates previous estimates Lincoln may contain 250 million barrels of recoverable oil may be conservative.
The estimates were based on a well drilled near Lincoln by Arco in 1995.
Mr Trice added he looked forward to Hurricane drilling on the Halifax prospect, in coming weeks.
The company expects to finalise plans for the initial phase of the Lancaster development early next year.
A geologist by training, Mr Trice worked for Enterprise Oil and Shell before founding Hurricane in 2005 to focus on what are known as fractured basement areas.
Hurricane expects to produce oil from basement reservoirs by tapping into natural fractures in the rock through which it could flow. The company’s acreage lies close to the Solan find, which Premier Oil brought onstream in April.
Hurricane floated on the Aim market in February 2014.
Brent crude peaked at $115 per barrel in June of that year before the price tanked as growth in supplies ran well ahead of demand. It sold for around $55/bbl yesterday.
The price has increased by 20 per cent, from around $45/bbl, since last month when Opec countries agreed a long-awaited deal to curb production to support the market.
David Round, analyst at BMO Capital Markets, said of the Lincoln well: “Another notable success for Hurricane, capping off a strong year for the company.”
He added: “The Hurricane story continues to gather momentum ahead of the defining sanction of the Lancaster Early Production System.”