Competent Person's Report

RNS Number : 8941Y

Hurricane Energy PLC

11 December 2017

 

11 December 2017

Hurricane Energy plc

("Hurricane" or the "Company")

Publication of Competent Person's Report

Contingent Resources Assigned to Lincoln and Halifax

Total 2P Reserves + 2C Contingent Resources Increases to 2.6 Billion Barrels Across All Assets

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, is pleased to report the publication of an updated Competent Person's Report ("CPR") by RPS Energy Consultants Limited ("RPS"). The updated CPR concerns all of the Company's Rona Ridge assets excluding the Lancaster field (licence P.1368 Central), which was covered by a CPR released in May 2017. The new report is available on the Company's website.

Highlights:

·     Substantial resource increase - Hurricane total 2P Reserves + 2C Contingent Resources increased by ~231% to 2.6 billion barrels of oil equivalent

·     Halifax 2C Contingent Resources of 1,235 million barrels of oil equivalent

·     Lincoln 2C Contingent Resources of 604 million barrels of oil equivalent

·     The undrilled Warwick prospect is assigned Best Case (P50) Prospective Resources of 935 million stock tank barrels of oil, with a 77% chance of being a discovery

Note: Totals above include Whirlwind under the oil case

Halifax

RPS has concluded that the available data indicates that Halifax has similar reservoir properties to Lancaster. Furthermore, Halifax and Lancaster do not appear to exhibit significant differences in their respective oil types and may share a common aquifer. RPS also recognises the possibility that the difference in depth in the oil water contact between Lancaster and Halifax, which is circa 200m, may reasonably be explained by a tilted oil water contact or the presence of intra basement sealing faults. RPS agrees with Hurricane's hypothesis that the most likely reason for the Halifax Drill Stem Test recovering only traces of formation oil to surface is a combination of drilling mud and granite fines that resulted in a thick paste which blocked fractures and made it very difficult for the well to flow.

Lincoln

As with Halifax, RPS considers that Lincoln has similar reservoir properties to Lancaster and that Lincoln and Lancaster exhibit no significant differences in their respective oil types. RPS recognises the Company's view that that the Brynhild Fault Zone separates Lancaster from Lincoln, and that consequently the oil water contact at Lincoln is materially deeper than that established for Lancaster. Whilst RPS also recognises the potential for Lincoln and Warwick to be a single hydrocarbon accumulation, they have elected to take a more conservative approach by evaluating them as separate structures, at least until a well is drilled at Warwick. This approach attributes 2C Contingent Resources of 604 million barrels of oil equivalent to Lincoln alone.

The Company is pleased that RPS supports its geological model for Halifax and Lincoln, and is looking forward to de-risking the contingent resource further in the future, recognizing the wide 1C to 3C resource ranges ascribed by RPS at the current stage of these assets' development. This will include work to confirm reservoir fluid properties, the respective oil water contacts and demonstrable commercial flow from well testing. These technical issues, more fully outlined in the CPR, will need to be resolved as well as the formation of a development plan before an economic limit test can be applied and a monetary value ascribed.

Warwick

Warwick is undrilled and is therefore the only asset in the CPR which is not assigned Contingent Resources. It is assigned Prospective Resources of 935 million stock tank barrels of oil and assigned a chance of discovery of 77%, given the proximity to the Lincoln discovery and Lancaster field.

Whether they are separate structures or prove to be a single accumulation, Lincoln and Warwick (the "Greater Warwick Area") are comparable in resource potential to Lancaster and Halifax (the "Greater Lancaster Area") with a combined, recoverable resource that could potentially be in the order of 1.5 billion barrels of oil equivalent.

Other Assets

Whirlwind 2C Contingent Resources of 179 - 205 million barrels of oil equivalent from the November 2013 CPR are reiterated (depending on the hydrocarbon case). Strathmore Contingent Resources are also reiterated. Strathmore is a sandstone reservoir and the only non-basement discovery in Hurricane's portfolio.

Licences P.1485 and P.1835, which contain the Typhoon and Tempest prospects, have been excluded from this report. The Company intends to relinquish these licences.

Farm-out

Hurricane is committed to maximising shareholder value, and is committed to monetising the vast resource within its portfolio via a farm-out, and ultimately a sale to an industry partner, at the appropriate time.

The Lancaster Early Production System ("EPS") is fully funded and on track for first oil in H1 2019. This first phase of development is designed to provide data to better understand the reservoir characteristics of the basement on the Rona Ridge, whilst providing the Company with substantial cashflow. This CPR has reiterated that Hurricane's other Rona Ridge assets have very similar properties to Lancaster and the EPS is expected to develop the understanding of these discoveries whilst providing capital for the next phase of development. The EPS has given the Company the flexibility to continue to de-risk its assets independently, until such time that it receives an offer from an industry partner that reflects appropriate value for shareholders. 

Hurricane's data room remains open. We have been encouraged that certain potential counterparties have expressed a desire to transact across Hurricane's entire Rona Ridge portfolio. However, given the potential capital commitments for a development of the size indicated by this resource upgrade, it is likely that potential partners will wait to see initial results from the Lancaster EPS.

Dr Robert Trice, Chief Executive of Hurricane, commented:

"We are pleased to now have independent validation of our geological model for the Rona Ridge basement play. The Lancaster EPS will go a long way, together with other appraisal work, to narrowing reservoir resource ranges on our assets on the Rona Ridge, following target first production in H1 2019. In addition to providing significant cash flow, the Company believes that a successful EPS will provide a read-across to the production potential of all our basement assets, materially de-risking Lancaster and the surrounding fields at Lincoln, Halifax, Warwick and Whirlwind."

CPR Tables

The Company has published the full CPR on its website. All Reserves and Resources definitions and estimates shown in the report are based on the 2007 SPE/AAPG/WPC/SPEE Petroleum Resource Management System ("PRMS").

The table below is a summary of the discovered in-place volumes and Contingent Resources evaluated by RPS for Hurricane's assets within Licence P.1368 (North, South and Southwest), Licence P.2294 and Licence P.2308.

				In-Place Volumes1			Contingent Resources2
				Gross (100% basis) and Net Attributable3			Gross (100% basis) and Net Attributable Resources3
				Low	Best	High	1C	2C	3C
P.2308		Halifax (Development Unclarified)	Oil (MMstb)	2,514	5,143	9,043	251	1,157	3,165
			Associated Gas (Bscf)	n/a	n/a	n/a	102	469	1,282
			Free Gas (Bscf)9	53	84	124	n/a	n/a	n/a
			Total (MMboe)4	2,523	5,157	9,064	268	1,235	3,379
P.2294 / P.1368 South		Lincoln (Development Unclarified)	Oil (MMstb)	1,404	2,514	4,113	140	566	1,440
			Associated Gas (Bscf)	n/a	n/a	n/a	57	229	583
			Total (MMboe)4	1,404	2,514	4,113	150	604	1,537
P.1368 North		Whirlwind5 (Development Unclarified)
		Oil Case	Oil (MMstb)	219	409	652	59	117	203
			Associated Gas (Bscf)	n/a	n/a	n/a	236	528	1,017
			Total (MMboe)4	219	409	652	98	205	373
		OR5
		Gas / Condensate Case	Condensate (MMstb)	n/a	n/a	n/a	18	44	84
			Gas (Bscf)6	712	1310	2,067	437	808	1,303
			Total (MMboe)4	137	268	445	91	179	301
P.1368 Southwest		Strathmore (Development on Hold)	Oil (MMstb)	131	182	246	20	32	57
			Gas (Bscf)	n/a	n/a	n/a	n/a	n/a	n/a
			Total (MMboe)4	131	182	246	20	32	57
Total7			Oil (MMstb)	4,268	8,248	14,054	470	1,872	4,865
(Whirlwind Oil Case)			Gas (Bscf)8	53	84	124	395	1,226	2,882
			Total (MMboe)4	4,277	8,262	14,075	536	2,077	5,345
Total7			Oil/Condensate (MMstb)	4,049	7,839	13,402	411	1,755	4,662
(Whirlwind Gas / Condensate Case)5			Gas (Bscf)8	765	1,394	2,191	596	1,506	3,168
			Total (MMboe)4	4,195	8,121	13,868	528	2,050	5,274
Notes
1	In-place volumes are all quoted on an on block basis
2	Resources are all quoted on an on block basis and before technical and economic limit tests.
3	Hurricane's working interest in Licences P.1368 (North, South and Southwest), P.2294 and P.2308 is 100% and therefore Gross (100% basis) and Net Attributable volumes are the same.
4	Conversion used for dry gas is1 boe = 6,000 scf. Wet gas in-place has been calculated from dry gas in-place estimate plus an initial condensate in-place estimate.
5	Well test results from 205/21a-5 demonstrate the presence of hydrocarbons but the nature of the discovered hydrocarbons is unclear. For this reason volumes have been quoted for either oil or gas/condensate.
6	Gas in place is for wet gas while recoverable gas is for dry gas.
7	PRMS recommends that for reporting purposes, assessment results should not incorporate statistical aggregation beyond the field, property or project level.  The total Resources are therefore the product of arithmetic addition and as such are not statistically correct.  As a result the total Low In-place and 1C resources may be very conservative estimates and the total high In-place volumes and 3C resources very optimistic assessments.
8	Includes associated gas for the recoverable figures
9	RPS has assumed that the gas cap would not be developed, with any development wells purposefully kept away from the gas cap to avoid wells coning gas.  On that basis, no free gas Contingent Resources have been assigned.

The table below is a summary of the undiscovered in-place volumes and Prospective Resources evaluated by RPS for Hurricane's Warwick prospect, within Licence P.1368 South and Licence P.2294.

				In-Place Volumes1			Prospective Resources2			GPOS
				Gross (100% basis) and Net Attributable3			Gross (100% basis) and Net Attributable Resources3
				Low	Best	High	Low	Best	High	(%)
P.2294 /P.1368 South		Warwick Prospect	Oil (MMstb)	2,275	4,157	6,975	228	935	2,790	77
Notes
1	In-place volumes are all quoted on an on block basis
2	Resources are all quoted on an on block basis and before technical and economic limit tests.
3	Hurricane's working interest in Licences P.2294 and P.1368 S is 100% and therefore Gross (100% basis) and Net Attributable volumes are the same.

Contacts: 

Hurricane Energy plc	Dr Robert Trice (Chief Executive Officer)/Alistair Stobie (Chief Financial Officer)	[phone]
Stifel Nicolaus Europe Limited	Nominated Adviser and Corporate Broker Callum Stewart/Nicholas Rhodes/Ashton Clanfield	[phone]
Vigo Communications	Public Relations Patrick d'Ancona/Ben Simons	[phone] [e-mail]

About Hurricane

Hurricane was established to discover, appraise and develop hydrocarbon resources associated with naturally fractured basement reservoirs.

Hurricane's acreage is concentrated on the Rona Ridge, West of Shetland. The Lancaster field, the Company's most appraised asset, has combined 2P Reserves and 2C Contingent Resources of 523 million stock tank barrels of oil. The Company is currently proceeding towards the first phase of development of Lancaster, an Early Production System, with first oil targeted for 1H 2019.

During the 2016-2017 drilling campaign, the Company made two significant discoveries* at Halifax and Lincoln. Together, these discoveries* have 2C Contingent Resources of 1,839 million barrels of oil equivalent.

Hurricane's other assets include Warwick, which has best case Prospective Resources of 935 million stock tank barrels of oil, Whirlwind, which has 2C Contingent Resources of 205 million barrels of oil equivalent (under the Whirlwind oil case) and Strathmore, which has 2C Contingent Resources of 32 million stock tank barrels of oil. Together, this brings Hurricane's total combined 2P Reserves and 2C Contingent Resources to 2.6 billion barrels of oil equivalent.

*Discovery - This classification is consistent with SPE/AAPG/WPC and SPEE guidelines for Petroleum Resource Management - Determination of Discovery Status

Inside Information

This announcement contains inside information as stipulated under the market abuse regulation (EU no. 596/2014). Upon the publication of this announcement via regulatory information service this inside information is now considered to be in the public domain.

Competent Person

The technical information in this release has been reviewed by Dr Robert Trice, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Dr Robert Trice, Chief Executive Officer of Hurricane Energy plc, is a geologist and geoscientist with a PhD in geology and has over 30 years' experience in the oil and gas industry. 

Glossary

"1C"	denotes a low estimate scenario of Contingent Resources
"2C"	denotes a best estimate scenario of Contingent Resources
"3C"	denotes a high estimate scenario of Contingent Resources
"boe"	barrels of oil equivalent
"Contingent Resources"	those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies
"CPR"	competent person's report
"Discovery"	A discovery is one petroleum accumulation, or several petroleum accumulations collectively, for which one or several exploratory wells have established through testing, sampling, and/or logging the existence of a significant quantity of potentially moveable hydrocarbons.
"Early Production System" or "EPS"	the Early Production System phase of development of the Lancaster field in Licence P.1368
"GPOS"	geological possibility of success
"Lancaster CPR"	the competent person's report prepared by RPS in May 2017 on the Lancaster field
"Logging"	borehole measurements such as mudlogging, wireline logging, production logging and logging while drilling data.
"MMboe"	million barrels of oil equivalent
"MMstb"	million stock tank barrels of oil (where barrels of oil are referred to in this document, the references are to stock tank barrels)
"Oil"	a mixture of hydrocarbons of different molecular weight
"P50"	denotes a best estimate scenario of Prospective Resources
"PRMS"	2007 SPE/AAPG/WPC/SPEE Petroleum Resource Management System
"Prospective Resources"	are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.
"Resources"	Contingent Resources, unless otherwise specified
"Reserves"	those quantities of petroleum which are anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions, reference should be made to the full PRMS definitions for the complete definitions and guidelines
"stb"	stock tank barrels of oil (where barrels of oil are referred to in this document, the references are to stock tank barrels)

 

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