Oil price, Hurricane, Savannah – And finally...

Friday, 13th December 2019 13:58 - by Malcy

WTI $59.18 +42c, Brent $64.20 +48c, Diff -$5.02 +6c, NG $2.33 +9c

Oil price

Crude will probably end up on the week, Brent is up almost a dollar at the moment despite the usual poppycock from the IEA yesterday, the market is feeling slightly more bullish probably down to the optimism that the trade talks just may be coming to a denouement.

Hurricane Energy

A trading and operational update from Hurricane who also update on the P1368 licence. The Lancaster EPS is benefiting from high vessel uptime and good well productivity and production since 20th September has averaged 12,500 b/d exceeding guidance of 11,000 b/d. Indications are that the two wells act as a single well and that only approximately 50-60 metres of each 1 kilometre wellbore is contributing to production and thus only drawing from a small section of the reservoir. The company also report that it is confident that the water cut observed is related to perched or stranded water based on temperature data, lack of rate-dependency, and water production behaviour after shut-in periods.

Total production for the year is expected to be approximately 3.1m barrels of oil , an average of 13,300 b/d since start-up on 11th May 2019. The company is targeting a seventh lifting from the Aoka Mizu FPSO on or around the 22nd of December taking oil sales for the year to 2.8m bbls when at current oil prices this will result in revenue for the year of approximately $165m and year-end unrestricted cash of approximately $150m. Finally, the company has reiterated 2020 guidance of 20,000 b/d before operational downtime, shareholders should be delighted that at this time of first oil from the fractured basement at Lancaster the ultimately transformational work is being successful and that ‘the results of the individual well tests have surpassed our expectations’ according to CEO Dr Robert Trice.

Finally, licence P1368 has been extended by 5 years covering the Lancaster and Lincoln sub-areas with a commitment well on Lincoln by 22/12/20 and Lancaster by 22/12/21. As part of this process the company has relinquished the Whirlwind (at the OGA’s requirement) and Strathmore sub-areas, the carrying value of Whirlwind of approximately $67m will be fully impaired in the Company’s 2019 results and the Strathmore carrying value has been already fully impaired. Finally the Company will no longer recognise resources in relation to Whirlwind (2C contingent resources of 179-205 mmboe) or Strathmore (2C contingent resources of 32 mmboe).

All in all this has been a very good year for Hurricane, nay transformational,  and whilst there will be some changes to the work programme they will be necessary as the company comes to grips with a number of key FID and FDP decisions including those at Lancaster and Lincoln. We look forward to the first quarter of 2020 when on March 25th the company will hold a Capital Markets Day.

Savannah Petroleum

SAVP has announced the renewal of its €11.4m unsecured revolving loan facility with ORA Group SA for a further 3 years, the terms remain unchanged at 7.5%. Yesterday I had the opportunity to sit down with Andrew Knott, CEO of Savannah and the link is below.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.