Article from the Times29 Nov 2018 11:44
Hurricane Energy
If you are looking for the future of the North Sea oil industry, you could do worse than turn to the waters west of the Shetland Islands (Greig Cameron writes). There are huge untapped resources in the area and an expectation that more large deposits will be found. But it is not an environment for the faint-hearted. Waves can reach 25 metres and wind speeds can top 100 mph.
Alongside the likes of BP, Shell and Total, Hurricane Energy is one of the smaller players, but it has generated a great deal of interest given that it’s yet to produce a drop of oil. The Aim-listed company believes that it is sitting on some of the largest undeveloped oil reserves on the UK continental shelf. Its modelling taps into fractured basements that lie below where oil and gas typically has been found in the North Sea.
An early production system on Hurricane’s Lancaster field, where there are thought to be 523 million barrels of oil, enters operation next year. It is a key test, seen as an indicator of whether the wider acreage that Hurricane holds is as valuable as the company claims. Spirit Energy, which is owned by Centrica, struck a $387 million agreement to join Hurricane’s licences covering the Lincoln and Warwick prospects, which are estimated jointly to contain up to 1.5 billion barrels of oil.
Hurricane has ticked off most of the engineering milestones in the Lancaster project with a minimum of fuss. It was crucial for work to be completed before winter weather in the area makes it impossible to get anything done. A floating, production, storage and offloading vessel is also undergoing sea trials ahead of its arrival next year. The target is for Lancaster to produce 17,000 barrels of oil per day starting in the first half of 2019.
Hurricane was floated on the junior Aim exchange in London during 2014, but has been looking at a move to the main market after seeing its value soar to more than £1 billion. Uncertainty over the oil price has dragged its shares lower in recent weeks, which could present a buying opportunity for investors confident enough in Hurricane’s thesis on the potential of fractured basements.
ADVICE Hold
WHYIf Lancaster works, the company becomes much more attractive
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