Hurricane Energy (LON: HUR) has opted not to drill a new well at its flagship Lancaster field after it failed to secure assurances around flaring permits.
Without a guarantee from the North Sea Transition Authority (NSTA), the company said it is unable to make “significant financial commitments” to the equipment and services needed to deliver the P8 well.
Discussions between the pair have been taking place in recent months about whether flaring concents could be secured for the project.
But having considered Hurricane’s case, the NSTA allegedly responded yesterday to say it “does not give such comfort”.
As such, Hurricane has decided the “additional financial commitments to offshore equipment suppliers and the associated financial risk of proceeding with P8is too great”.
Antony Maris, Hurricane chief executive said: “Looking to Lancaster’s future, we have expended considerable effort and some funds into maintaining the ability to deliver a new well in the Lancaster Field, termed P8, in order to meet our “maximum economic recovery” obligations to the UK Government.
“Given our emissions challenges, we have worked closely with the UK’s offshore regulator, the North Sea Transition Authority (“NSTA”), to plot a way forward for Lancaster.
“It is disappointing that despite the enormous efforts of our team, and extensive interactions over many months, the NSTA is unable to provide comfort to the Company with regard to the likelihood of it being granted the necessary consents related to flaring for Hurricane to make further commitments to investment in Lancaster.
“In parallel, however, we have been pursuing alternative capital allocation opportunities outside of our existing asset base – a task which is challenging owing to the current market volatility – and one that we can now focus on completely.
“With our strong balance sheet, no debt, and our decommissioning liabilities being fully funded, I believe Hurricane, with our committed and capable team, is well placed to be able to create additional value for our shareholders.”
Things looking up
Despite the disappointment, Hurricane says it is focussed on “building a positive long-term future” after a return to fortunes.
For the first half of the year, the North Sea oil firm, which had recently looked like it was coming to the end of the road, posted pre-tax profits of $62 million.
That is a hefty increase on the $43m it reported in the corresponding period in 2021.
Revenue for the first six months of 2022 was $159.5m, the result of three liftings of crude from its West of Shetland field.
Hurricane has toasted “excellent operational performance” at the Aoka Mizu FPSO, which serves Lancaster.
On average, field production uptime of 98% was achieved in H1 2022, compared to 96% in H1 2021.
Annual planned maintenance shutdown was successfully carried out earlier this month, with the next lifting from the FPSO slated for October.
Repayment of bonds
During the period, Hurricane also passed a “key milestone”, repaying its outstanding convertible bonds post-period end in July 2022.
Mr Maris said: “Repaying our Convertible Bonds and becoming debt-free has enabled us to consider multiple trajectories for Hurricane’s future. At the same time as ensuring continuing production from Lancaster, we have been working diligently on many workstreams, all with the aim of creating additional value for our shareholders.
“In terms of Lancaster, continuing our close collaboration with our FPSO operator, we have been able to deliver superb uptime performance, leading to the production of more oil in the period. Our team can be justifiably proud of the fact that we bettered our targets set for the shutdown and unplanned downtime without at any time compromising the safety of our operations.”