Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Howard,Bhoddhisatva,penym,Anonymous,Rhyd6, for Donating to support the site

Hurricane Energy (HUR)

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#292235

Postby dspp » March 19th, 2020, 9:41 am

PeterGray wrote:'Lincoln Crestal' well (205/26b-14)
o Well to be plugged and abandoned by 22 June 2020, since the GWA partners have been unable to obtain an extension to the terms of the suspension consent or to obtain the other consents required to tie the well back to the Aoka Mizu FPSO


There's probably more to this story than what's being told here.


I agree, that's one of the issues that stuck out to me. Why are they having difficulty getting consents for the tie back? Surely they would have looked into what was likely required before they started planning for a tie back a year or more ago?

I'm not clear what the OGA looks at in these cases, but could it be that they reckoned it was only marginally commercial, and didn't want a tie back that wouldn't get much use. They want more proof of the field before agreeing? As you say, it certainly suits Spirit and HUR to be able postpone that capex for now at least.

Overall, I'm happy that they seem to be convinced they do have a viable model to explain the water, and they have certainly been able to produce at 20k. I look forward to more detail at the CMD shortly


A tieback such as this is in essence a (limited) field development authorization. The words / terminology will vary from country to country, but national authorities typical ask for all of the following to be demonstrated:
1 - maintenance of technical integrity through life, plus;
2 - maintenance of flow assurance through life, plus;
3 - capital adequacy & provision to properly retrieve the flowlines etc & plug & abandon the well at end of life (aka tidy up neatly), plus;
4 - demonstration that this is a reasonable commercial risk that it would be in the national interest to take over the field life.

Personally I can see potential issues with all of those, it is a very low PI for such a long tie back, and the commercial case is weak, and the combination (plus perhaps Spirits reluctance) is what tipped the decision against the tie back. Which straw broke the camel's back is not necessarily important.

On your other point they had to plan ahead for a tie back in order to be ready, and they were taking the view that at least one of the three 2019 horizontals drilled in LinWar would be suitable for tie back so that was a reasonable risk back then, with the fallback of using the tieback kit on a Lancaster producer. It turns out that the fallback is being brought into play. Let's hope that works as intended !

I will read the rest later, day job now. It is obvious that they are very delicately trying to stay out of the bondholders' hands .........

regards, dspp

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#292385

Postby dspp » March 19th, 2020, 2:47 pm

My notes on HUR 2019 full year results. Overall much as I expected and we have all discussed:

- Confirmation of not tieing back Lincoln Crestal. Perhaps flowing it at a significant & economic rate, and still arriving at the AM at a compatible pressure to enter the AM’s production system, for the anticipated economic life, without considerable topsides expense & complexity (& space & weight) might have been the final straw. Maybe we will find out one day.
- Confirmation that LinWar reservoir properties poorer than Lancaster, i.e. it was not drilling issues or poor target selection, it was the overall LinWar quality.
- Confirmation that so far our estimates of production are about right (over 2.9 mln bbls sold over 7 lifts, vs 2.84 mln in our estimates) (specifically proceeds of $170.3m / $59.3 realised = 2.87m bbls by my sums, so I am not quite sure that their “over” is correct). Good IPS uptime, 90%, that aspect now largely derisked.
- Now at 20k bopd (presumably bopd, maybe bpd, ambiguous)
- Confirmation that after delivering on regulatory commitments they cannot at present be certain of meeting bond repayments. Hence going concern statement and the running of all the sensitivities.
- So they will be doing their absolute best to push right anything that is non-regulatory in nature unless they can clear the bond financing hurdle. That is key. This means they will really struggle with the Lancaster #8 and the WOSPS gas tie in, and therefore the 40k bopd target. Unless either oil price gives better news, or bond finance is raised/rolled, or M&A / farmin occurs. Bootstrapping is hard !
- Very little new news about watercut in Lancaster beyond a very minimalistic “A 10-metre water zone in the 205/21a-7Z well has been identified which is interpreted as perched water. Whilst water cut has increased over time, such behaviour is consistent with the perched water model.“. Wait until 25 March for more info. Remains a very big risk item.
- LSE Main Board governance provisions satisfied
- It was OGA that requested Whirlwind & Strathmore relinquishment. The OGA must be showing teeth these days.
- No note re AM lease extension from 6yrs to 10yrs, so we watch with interest.
- No hedging strategy (which I agree with btw)
- My guess is AS went due to disagreements over how/if to manage the bod refinancing risk. The number of “subject to’s” is notable.

Now we wait until 25 March to see what we will be allowed to know.

regards, dspp

FabianBjornseth
Lemon Pip
Posts: 59
Joined: July 6th, 2018, 10:41 pm
Has thanked: 68 times
Been thanked: 67 times

Re: Hurricane Energy (HUR)

#292461

Postby FabianBjornseth » March 19th, 2020, 5:34 pm

dspp wrote:- No hedging strategy (which I agree with btw)


Just a question - why wouldn't a company like HUR hedge a significant amount of their production? With all the operational and subsurface risks associated with the EPS, wouldn't it be attractive to limit the exposure to fluctuations in the oil price?

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#292471

Postby dspp » March 19th, 2020, 6:20 pm

FabianBjornseth wrote:
dspp wrote:- No hedging strategy (which I agree with btw)


Just a question - why wouldn't a company like HUR hedge a significant amount of their production? With all the operational and subsurface risks associated with the EPS, wouldn't it be attractive to limit the exposure to fluctuations in the oil price?


Earlier on they couldn't be sure of the actual production volume or timings. That would have been the main problem in the early months.

Now there are still concerns about volume (ie watercut) but they are lessening. However there is not a concern about short term cashflow as they do have plenty of cash in the bank (just not enough for the bonds in 2yrs time). Therefore, given that the oil price is at a very low point, there is very little upside in hedging now, but there is considerable downside in hedging now. So on balance I still wouldn't hedge the oilprice if I was in their shoes.

regards, dspp

dealtn
Lemon Slice
Posts: 509
Joined: November 21st, 2016, 4:26 pm
Has thanked: 19 times
Been thanked: 218 times

Re: Hurricane Energy (HUR)

#292606

Postby dealtn » March 20th, 2020, 9:51 am

FabianBjornseth wrote:
dspp wrote:- No hedging strategy (which I agree with btw)


Just a question - why wouldn't a company like HUR hedge a significant amount of their production? With all the operational and subsurface risks associated with the EPS, wouldn't it be attractive to limit the exposure to fluctuations in the oil price?


From a finance theory perspective they don't need to. As long as they are open about their policy (and this applies to all such companies) then investors know where they stand. The decision to hedge, or not, can be taken at investor level.

Obviously this isn't practical at "retail investor" level, but applies to more substantial professional investors. It's not hugely different to decisions whether to hedge interest rates, fx rates etc. as long as investors are aware they can "adjust" accordingly, which in some cases will mean taking an "opposite" hedge to the one the underlying company may have taken.

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#293858

Postby dspp » March 24th, 2020, 10:59 pm

CMD postponed
==
RNS Number : 4629H Hurricane Energy PLC 24 March 2020

Hurricane Energy plc

Operational Update

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, provides an operational update following recent developments in the UK government response to COVID-19.

Capital Markets Day 2020 Postponement
The Company had been due to host a Capital Markets Day ("CMD") on 25 March 2020, to be conducted as a filmed webcast. Owing to the recent intensification of restrictions on movement implemented in the UK in response to COVID-19, it is no longer possible to host the event as planned. A further update will be provided to the market once a new date and format for this event has been confirmed, taking into account government guidance on the nature and duration of these restrictions as they evolve.

Oil and Gas Authority Statement Re: COVID-19
We have been reviewing government restrictions and industry measures emplaced to combat the spread of COVID-19. We therefore welcome today's announcement from the Oil and Gas Authority, the regulator for the UK oil and gas industry, that it plans to take a flexible approach and we have engaged with them on this basis.

Market Environment
The impact of COVID-19 is unprecedented and, as we previously announced on 19 March 2020, we expect the oil industry to be increasingly affected. Since then, operators on the UK Continental Shelf have faced increasing challenges from travel restrictions on the offshore workforce and a significantly depressed oil price. Whilst the Lancaster Early Production System ("EPS") has cash operating costs of $17 per barrel at current production levels and oil prices, operating cash flow from the Lancaster EPS will be materially lower than previously forecasted for an indeterminate period. Hurricane has a strong balance sheet, including $164.3 million of unrestricted cash (at 18 March 2020) and is therefore in a strong position to weather this current downturn. However, should this change in the market environment persist, it is likely to have a material impact on our capacity to fund capital expenditure.

Operational Update
Oil production from the Lancaster EPS continues in line with previous updates, at approximately 20,000 barrels of oil per day. Guidance for 2020 remains at 18,000 barrels of oil per day, taking into account an assumed 90% uptime and production to date.
A more detailed update will be provided as part of the Company's regular quarterly production reporting next due in early April.

Annual Report and AGM
Hurricane notes the recent announcement by the Financial Conduct Authority on 21 March 2020 requesting that, as a result of COVID-19 uncertainties, all listed companies should observe a moratorium on the publication of preliminary financial statements for at least two weeks. Hurricane has already released its preliminary unaudited results for the year ended 31 December 2019 and currently expects no delay in releasing its annual report and accounts, containing its audited results for the year ended 31 December 2019, in April. However, the Company will closely monitor further measures should they have an impact on our reporting timetable.
Hurricane's 2020 AGM is currently scheduled to take place on 3 June 2020 at the Royal Society in central London. We will continue to monitor the potential impact of COVID-19 restrictions on the feasibility of continuing to hold this event in the normal format. We are examining possible different formats and venues, so as to be able to proceed with the event whilst mitigating risks to those involved. It is currently anticipated that all shareholders will be encouraged to lodge their vote via proxy ahead of the AGM.

Dr Robert Trice, Chief Executive of Hurricane, commented:
"COVID-19 has had an unprecedented impact on all aspects of daily life. Having already cancelled the in-person element of the CMD, we were looking forward to providing a detailed update by webcast. The latest restrictions make even that unviable.
"2019 proved to be a transformational year for Hurricane. The market environment and the oil industry in 2020 pose significant challenges but we continue to see good production performance and data gathering at Lancaster, at low operating costs. Our understanding of the reservoir continues to improve day by day and I look forward to reporting on this once the rearranged CMD is able to be held."

FabianBjornseth
Lemon Pip
Posts: 59
Joined: July 6th, 2018, 10:41 pm
Has thanked: 68 times
Been thanked: 67 times

Re: Hurricane Energy (HUR)

#293878

Postby FabianBjornseth » March 25th, 2020, 6:25 am

May someone enlighten me as to how travel restrictions prevent a webcast from going through? Short of a poor web connection at the presenters' residences, I struggle to understand this. There are of course many other reasons why this may not be a great time to unveil the data from Lancaster, be they good or bad, so it's not straightforward to interpret the message one way or the other.

The OGA news is welcome though - deferring the committment appraisal wells may significantly reduce the financial risk of the company.

ReallyVeryFoolish
Lemon Slice
Posts: 281
Joined: October 5th, 2019, 12:06 pm
Has thanked: 209 times
Been thanked: 123 times

Re: Hurricane Energy (HUR)

#293882

Postby ReallyVeryFoolish » March 25th, 2020, 6:45 am

FabianBjornseth wrote:May someone enlighten me as to how travel restrictions prevent a webcast from going through? Short of a poor web connection at the presenters' residences, I struggle to understand this. There are of course many other reasons why this may not be a great time to unveil the data from Lancaster, be they good or bad, so it's not straightforward to interpret the message one way or the other.

The OGA news is welcome though - deferring the committment appraisal wells may significantly reduce the financial risk of the company.

I see nothing sinister here. Production guidance is still solid. Under government mandate the presenters would have to sit several metres apart or even in separate rooms during a WebCast. It would be very undesirable for the HUR management team to risk cross infection of each other. I think the whole thing just falls into the "too difficult" category. Of course, I may be entirely wrong.

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#293908

Postby dspp » March 25th, 2020, 8:20 am

FabianBjornseth wrote:May someone enlighten me as to how travel restrictions prevent a webcast from going through? Short of a poor web connection at the presenters' residences, I struggle to understand this. There are of course many other reasons why this may not be a great time to unveil the data from Lancaster, be they good or bad, so it's not straightforward to interpret the message one way or the other.

The OGA news is welcome though - deferring the committment appraisal wells may significantly reduce the financial risk of the company.


And hopefully giving time for a solution to be found for the Lincoln Crestal well that must otherwise be P&A. Even suspending it for a few years may assist from a data gathering perspective (pressure observations), plus keeping alive the option of an eventual tieback if (the hypothesised) issue is technical & solvable rather rather tan commercial & unsolvable.

regards, dspp

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#293909

Postby dspp » March 25th, 2020, 8:22 am

FabianBjornseth wrote:May someone enlighten me as to how travel restrictions prevent a webcast from going through? Short of a poor web connection at the presenters' residences, I struggle to understand this. There are of course many other reasons why this may not be a great time to unveil the data from Lancaster, be they good or bad, so it's not straightforward to interpret the message one way or the other.

The OGA news is welcome though - deferring the committment appraisal wells may significantly reduce the financial risk of the company.


There is a difference between a webcast of a conference room, and a webcast of a webconference. The UK has been lazy and slow to adopt the latter, whereas the US has moved fairly fast over the last few years to do so. Now this sluggishness is causing the UK / LSE / etc problems in catch up.

regards, dspp

PeterGray
Lemon Slice
Posts: 631
Joined: November 4th, 2016, 11:18 am
Has thanked: 307 times
Been thanked: 210 times

Re: Hurricane Energy (HUR)

#293951

Postby PeterGray » March 25th, 2020, 9:47 am

FB, I wondered for a short time why they weern't doing it as a webcast. But then I realised that just doing that at short notice, and by traditional techn iques requires having several people, including key staff in close proximity. A disappointing decision, but certainly the right on, and they are clear they are looking at ways to do it both safely and properly as soon as possible. I see nothing worrying about it.

And they wouldn't be making statements about producing at 20k, excluding normal downtimes, for the rest of the year if they weren't confident of their models.

PeterGray
Lemon Slice
Posts: 631
Joined: November 4th, 2016, 11:18 am
Has thanked: 307 times
Been thanked: 210 times

Re: Hurricane Energy (HUR)

#293953

Postby PeterGray » March 25th, 2020, 9:50 am

And hopefully giving time for a solution to be found for the Lincoln Crestal well that must otherwise be P&A.

That's a point I hadn't considered,dspp. The case for the OGA for forcing HUR to go ahead with what looks like "non essential" work in the short term would be weak, so as you say, it seems likely that could be covered by their flexibility, which would be postive news..

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#296491

Postby dspp » April 1st, 2020, 12:10 pm

Spark Exploration slideset for Bader prospects etc further up Rona Ridge
https://sparkexploration.com/wp-content ... ration.pdf

OGA DATA
Seems delayed

OFFTAKE
One recently, Stena Natalita coming in soon, I will update when OGA released

CMD
Not impressed that they are sitting on their hands. No reason to not do a webcast by now. Shareholders are owners.

regards, dspp

ReallyVeryFoolish
Lemon Slice
Posts: 281
Joined: October 5th, 2019, 12:06 pm
Has thanked: 209 times
Been thanked: 123 times

Re: Hurricane Energy (HUR)

#296801

Postby ReallyVeryFoolish » April 2nd, 2020, 3:51 am

Thanks. I looked at Spark last year. They're a tiny firm based in Perth, West Australia. They appear to be trying to say "look at us, we're another Hurricane". I don't think they have any money, and now is the worst time for decades to be going cap in hand asking for funds. Interesting that they seem to have acreage with a gap in the middle. Apparently, they are bidding to close the gap in a new licencing round. Also interesting, at least to me, is that there's plenty of reference to Lancaster and Halifax. But none to Warwick or Lincoln. I suppose that's understandable when you are trying to persuade someone to spend money on your assets for you.

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#296888

Postby dspp » April 2nd, 2020, 10:27 am

OGA data now out. As we knew watercut appears to be rate dependent ... except that HUR say it is not ...

Come on HUR, don't be coy, learn how to do a webcast, it is not that hard. It is just like the morning ops call but with analysts who occasionally talk back.

Image
Image
Image

regards, dspp

FabianBjornseth
Lemon Pip
Posts: 59
Joined: July 6th, 2018, 10:41 pm
Has thanked: 68 times
Been thanked: 67 times

Re: Hurricane Energy (HUR)

#296935

Postby FabianBjornseth » April 2nd, 2020, 11:44 am

dspp wrote:OGA data now out. As we knew watercut appears to be rate dependent ... except that HUR say it is not ...


From the HUR RNS 29th January 2020:

The Lancaster 6 Well flowed at an average rate of approximately 12,500 barrels of oil per day from the start of individual well flow period on 20 November 2019 until the latest (eighth) lifting on 22 January 2020.

Hurricane intends to complete its individual well flow test on the 6 Well before the end of this month and thereafter intends to flow both the 6 Well and the 7Z Well at a combined rate of approximately 20,000 barrels of oil per day.


From this statement, the December and January data likely reflects the individual performance of the -6 well, not corrected for uptime. The average rate appears stable. The water cut is slowly increasing, although not quite as fast as it did for the -7Z well last year. Details on this is overdue.

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#296963

Postby dspp » April 2nd, 2020, 12:39 pm

FabianBjornseth wrote:
dspp wrote:OGA data now out. As we knew watercut appears to be rate dependent ... except that HUR say it is not ...


From the HUR RNS 29th January 2020:

The Lancaster 6 Well flowed at an average rate of approximately 12,500 barrels of oil per day from the start of individual well flow period on 20 November 2019 until the latest (eighth) lifting on 22 January 2020.

Hurricane intends to complete its individual well flow test on the 6 Well before the end of this month and thereafter intends to flow both the 6 Well and the 7Z Well at a combined rate of approximately 20,000 barrels of oil per day.


From this statement, the December and January data likely reflects the individual performance of the -6 well, not corrected for uptime. The average rate appears stable. The water cut is slowly increasing, although not quite as fast as it did for the -7Z well last year. Details on this is overdue.


Yes, it suggests the -6 well is perhaps also cutting water ........ :(

regards, dspp

ReallyVeryFoolish
Lemon Slice
Posts: 281
Joined: October 5th, 2019, 12:06 pm
Has thanked: 209 times
Been thanked: 123 times

Re: Hurricane Energy (HUR)

#296980

Postby ReallyVeryFoolish » April 2nd, 2020, 1:07 pm

dspp wrote:
FabianBjornseth wrote:
dspp wrote:OGA data now out. As we knew watercut appears to be rate dependent ... except that HUR say it is not ...


From the HUR RNS 29th January 2020:

The Lancaster 6 Well flowed at an average rate of approximately 12,500 barrels of oil per day from the start of individual well flow period on 20 November 2019 until the latest (eighth) lifting on 22 January 2020.

Hurricane intends to complete its individual well flow test on the 6 Well before the end of this month and thereafter intends to flow both the 6 Well and the 7Z Well at a combined rate of approximately 20,000 barrels of oil per day.


From this statement, the December and January data likely reflects the individual performance of the -6 well, not corrected for uptime. The average rate appears stable. The water cut is slowly increasing, although not quite as fast as it did for the -7Z well last year. Details on this is overdue.


Yes, it suggests the -6 well is perhaps also cutting water ........ :(

regards, dspp

If you are right. And if the delayed CMD is seen to be a strategic delay in informing the market of this development. I see an already trashed stock heading towards a low single digit valuation. In today's economic climate, it could be disastrous to the company valuation and reputation. On balance, I still think Dr T is an honourable professional. But the doubts are clearly there.

PeterGray
Lemon Slice
Posts: 631
Joined: November 4th, 2016, 11:18 am
Has thanked: 307 times
Been thanked: 210 times

Re: Hurricane Energy (HUR)

#297036

Postby PeterGray » April 2nd, 2020, 2:58 pm

OGA data now out. As we knew watercut appears to be rate dependent ... except that HUR say it is not .

You may well be right, dspp, but I really don't think you can say that with any real confidence from the data so far.

Firstly, just taking the crude scatter (which by the way is missing the last, January, point), the slope of the correlation is pretty much flat, though given the scatter that's not far off a useless conclusion.

Secondly, of course we know it's not that simple. There are two wells with different apparent water cuts being flowed at different rates at different times, and we only have a very rough indication of which was flowing when, and almost none of the relative proprotions when both are. I'd say it's imnpossible to tell with what we know. And we have to accept what we are being told by people have vastly more data, and direct control on how it's produced.

I entirely agree that they really need to get some sort of presentation put together, perhaps a Zoom style Q&A for CM people, asap. Their reasons for cancelling the CMD were good ones, but the longer we wait for a clear presentation of the data and its interpretatiion, the more concern there is bound to be.

dspp
Lemon Quarter
Posts: 4829
Joined: November 4th, 2016, 10:53 am
Has thanked: 3971 times
Been thanked: 1316 times

Re: Hurricane Energy (HUR)

#297182

Postby dspp » April 2nd, 2020, 11:32 pm

PeterGray wrote:OGA data now out. As we knew watercut appears to be rate dependent ... except that HUR say it is not .

You may well be right, dspp, but I really don't think you can say that with any real confidence from the data so far.

Firstly, just taking the crude scatter (which by the way is missing the last, January, point), the slope of the correlation is pretty much flat, though given the scatter that's not far off a useless conclusion.

Secondly, of course we know it's not that simple. There are two wells with different apparent water cuts being flowed at different rates at different times, and we only have a very rough indication of which was flowing when, and almost none of the relative proprotions when both are. I'd say it's imnpossible to tell with what we know. And we have to accept what we are being told by people have vastly more data, and direct control on how it's produced.

I entirely agree that they really need to get some sort of presentation put together, perhaps a Zoom style Q&A for CM people, asap. Their reasons for cancelling the CMD were good ones, but the longer we wait for a clear presentation of the data and its interpretatiion, the more concern there is bound to be.


PG,
The evidence so far in the public domain tends towards rate dependency, despite HUR's protestations otherwise. If they are now managing the wells to get below critical rate that rather reinforces the point (though it would have the side effect of flattening the aggregate correlation). Yes, of course it is aggregate, but as FB points out the -6 well may also be cutting water now in which case an explanation is even more relevant. They need to 'fess up or risk impairing their reputational value in a fairly permanent way. Or they need to prove otherwise, and en passant explain why they were backwards in coming forwards previously. Investors are not schoolchildren to take it on teacher's say so that the earth is flat (or round). All that coyness re data and conclusions is in itself a shareholder matter in the modern world. As shareholders we are all right to be concerned, for many very valid reasons.
regards,
dspp


Return to “Oil & Gas & Energy (Sector & Companies)”

Who is online

Users browsing this forum: No registered users and 2 guests