(Alliance News) - Hurricane Energy PLC on Friday said it has decided against extending its bareboat charter of the Aoka Mizu floating production storage and offloading vessel for a further three years to June 2025.
Friday was the deadline for Hurricane to request a three-year extension the charter, currently due to expire in June 2022. Aoka Mizu is located in the company's Lancaster oil and gas field in Scottish territorial waters, 100 kilometres west of Shetland.
Poor production forecasts turned the Surrey-based oil exploration company against extending the charter. Continuing to operate the vessel for this period would incur "significant financial obligations" to Hurricane. The company concluded that it would not be in its shareholders interest to extend the lease to 2025.
The decision comes after news in May that Hurricane incurred a heavy pretax loss of USD571.1 million for 2020, widening dramatically from USD1.8 million in 2019. The sizeable loss was primarily due to impairment charges of USD567.1 million related to the Lancaster field and the company's exploration assets.
In its May results, Chief Executive of Hurricane, Anthony Maris said that: "This has been a profoundly difficult period for Hurricane and its stakeholders. The understanding of the West of Shetland fractured basement play has changed significantly. As a result, the potential of the Lancaster field is much smaller than originally thought and cannot support the level of debt in the company which was sized for a much larger reserves and contingent resources base."
The drop in profit meant Hurricane was unable to repay USD230 million of converible bond debt maturing in July 2022 and initiated financial restructuring of this debt on April 30. However, the company admitted that the implementation of the restructuring was beyond it's control.
Hurricane will continue to negotiate with the owner of Aoka Mizu FPSO, Bluewater Energy Services BV, and believes there is a "reasonable prospect" that an extension of less than three years could be negotiated.
If the company cannot come to an acceptable agreement with Bluewater, Hurricane may be required to initiate "a controlled wind-down of its business and cease operations at the Lancaster field upon the expiry of the Bareboat Charter in 2022, at which point the field would be decommissioned."
Hurricane shares were trading marginally lower at 1.18 pence each in London on Friday morning. The stock is down 53% so far in 2021.
By Scarlett Butler; scarlettbutler@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
