Publication of Competent Person's Report

RNS Number : 3962E

Hurricane Energy PLC

08 May 2017

 

8 May 2017

This announcement contains inside information

Hurricane Energy plc

("Hurricane" or the "Company")

Publication of Competent Person's Report

Significant upgrade to resources and first reserves

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, is delighted to report the publication of an updated Competent Person's Report ("Lancaster CPR") by RPS Energy Consultants Limited ("RPS") concerning reserves and resources at the company's Lancaster field ("Lancaster"), West of Shetland, which attributes 2P reserves for the first time and details a highly significant increase in certified contingent resources. The CPR only concerns the Lancaster field within Licence P.1368 Central, at present. Resource estimates for the Greater Lancaster Area, and broader portfolio, are expected to be published by the end of the year.

Highlights:

·     Best estimate recoverable volumes of 523 million barrels of oil, an increase of 162% compared to the 2013 CPR 2C contingent oil resource figure

·     2P reserves of 37.3 million barrels of oil attributed to the initial six-year period of the planned Early Production System ("EPS") at Lancaster

·     The remaining 484 million barrels are classified as 2C Contingent Resources as 'Development Unclarified or On Hold' whilst the EPS assesses full field development potential

·     Should Hurricane extend the EPS to ten years, 2P reserves volume would rise to 62.1 million barrels

·     Best estimate of oil in place of over 2.3 billion barrels of oil, an increase of 120% compared to the equivalent 2013 CPR figure

·     An NPV of $525 million is attributed to the 2P reserves for a six-year EPS at a 10% discount rate

Since its 2013 CPR , the Company has successfully drilled five wells in its licences in the area (including a horizontal sidetrack). At Lancaster, this included drilling and testing 205/21a-7 (the "Pilot Well"), and two 1km horizontal production wells, 205/21a-6 (the "6 Well") and 205/21a-7Z (the "Horizontal Sidetrack Well"). The Pilot Well confirmed the presence of oil significantly below structural closure and successful Drill Stem Tests were carried out on both the 6 Well and the Horizontal Sidetrack Well, producing at maximum stable rates of 9,800 stb/d and 15,375 stb/d respectively (using Electric Submersible Pumps). These wells significantly improved the Company's understanding of the reservoir and expected performance of the first phase of Lancaster's development, the EPS.

RPS assigns combined 2P reserves plus 2C resources of 523 million barrels of oil to Lancaster, based on a recovery factor of 22.5%. This is an increase of 162% compared to the 2013 estimate of 200 million barrels of oil. The Lancaster CPR attributes 2P reserves at the field, with 37.3 million barrels of oil to be produced by the planned EPS, assuming output duration of six years. The six-year base case duration of the EPS is based on the assumption that this allows sufficient time for the full field development to be planned and commenced. The Lancaster CPR notes that the 2P reserve volume would rise to 62.1 million barrels of oil should Hurricane extend the EPS to ten years. The basis of design for the EPS is for ten years and it has been agreed with Bluewater Energy Services that the contract for the Aoka Mizu FPSO would include an extension option for up to ten years. The Company therefore sees no technical impediments to extension to ten years, should it be deemed commercially attractive to do so bearing in mind other operations on Lancaster and Hurricane's other assets.

The Company has published the full CPR to its website.

The table below is a summary of the resources evaluated by RPS for Lancaster within Licence P.1368 Central.

	Initially In-Place Volumes1			Reserves2, 3			Contingent Resources4,5
	Gross (100% basis) and Net Attributable6			Gross (100% basis) and Net Attributable Resources6			Gross (100% basis) and Net Attributable Resources6
	Low	Best	High	1P	2P	3P	1C	2C	3C
Oil (MMstb)	1,571	2,326	3,333	28.1	37.3	49.3	129.1	486.1	1,116.7
Notes Table shows discovered in-place volumes, reserves and contingent resources as of 1st January 2017, as per Table 1 in the CPR from RPS dated 02 May 2017 1 In Place Volumes quoted on an on block basis. Quoted values are totals of probabilistic volumes for Rona, Victory and Basement reservoirs. 2 Reserves based on six-year EPS duration.  3 In the event of Hurricane extending the EPS duration from six to ten years, additional P90, P50, P10 volumes of 16.4, 24.8 and 39.4 MMstb respectively would be produced in these additional four years which would then qualify as Reserves. This assumes that operations continue without interruption with the FPSO remaining on station for this duration. In this scenario, 1C, 2C, 3C quoted above would drop by 16.4, 24.8 and 39.4 MMstb respectively. 4 In the CPR dated 18th April 2013, Contingent Resources for Lancaster were classified as 'Development Pending'.  With the EPS assessing full field development potential, RPS now classify Lancaster Contingent Resources as 'Development Unclarified or On Hold'. 5 Contingent Resources associated with potential full field development based on analogue recovery factors (see Table 7.14 in the CPR). 6 Hurricane's working interest in Licence P.1368 is 100% and therefore Gross (100% basis) and Net Attributable volumes are the same.

RPS places the following valuations on the Lancaster reserves at the RPS Base Oil Price, over a range of discount rates. The results are quoted to the end of the first option period of the FPSO charter, which coincides with the six-year planned EPS.

Summary of NPVs of reserves at RPS Base Price

Discount Rate:	Post Tax Net Present Value Net Hurricane Share, (US$ Million, MOD)						Reserve Limit1
	0.00%	5.00%	7.50%	10.00%	12.50%	15.00%
1P	605	416	342	279	224	177	2024
2P	1,006	728	619	525	444	374	2024
3P	1,492	1,093	937	803	689	589	2024
Notes 1 Limited to the Lancaster EPS draft field development plan period of six years, and the expiry of the first option period of the FPSO charter at 31 December 2024. Oil Price Assumption  Economic valuation of and resources are linked to a long term price forecast for Brent. The RPS Base Case price used for all valuations presented in their report, in money of the day terms, is as follows. Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Lancaster Base Case (US$/stb) 50.50 56.00 58.30 61.60 65.70 71.80 75.20 78.90 83.87 85.63 87.42 89.25 91.12 93.02

All Reserves and Resources definitions and estimates shown in this report are based on the 2007 SPE/AAPG/WPC/SPEE Petroleum Resource Management System ("PRMS").

Summary of total Hurricane reserves and contingent resources

MMstb / MMboe	RPS 2013 CPR1 - 2C Resources			RPS 2017 CPR - 2P Reserves + 2C Resources2	Hurricane Total 2P Reserves + 2C Resources5
	Oil	Gas3	Oil Equivalents	Oil	Oil / Oil Equivalents
Lancaster	200	7	207	523	523
Whirlwind (Oil Case)4	117	88	205		205
Total5	317	95	412		728
Notes 1 RPS 2013 CPR figures are as per 19 November 2013 report, quoted on a block basis as of 1st October 2013 and before technical and economic limit tests. Classified by RPS at the time as 'Development Pending'. Excludes Strathmore and Tempest/Typhoon. 2 As of 1st January 2017, as per Table 1 in the CPR from RPS dated 02 May 2017; Reserves based on six-year EPS duration. Contingent Resources classified by RPS as 'Development Unclarified or On Hold' and are the volumes associated with potential full field development based on analogue recovery factors. 3 All figures in MMboe are with conversion of gas based on 1 boe = 6,000 scf; Recoverable gas is dry gas. 4 Whirlwind figures are oil case rather than gas condensate case (well test results from 205/21a-5 demonstrated the presence of hydrocarbons but the nature of the discovered hydrocarbons is unclear) 5 PRMS recommends that for reporting purposes, assessment results should not incorporate statistical aggregation beyond the field, property or project level. As such, the total figures that are the product of arithmetic addition are not statistically correct.

Dr Robert Trice, Chief Executive of Hurricane, commented:

"We are delighted to now have independent verification of the highly material uplift in the resources we have at Lancaster. It is also a landmark for Hurricane to have reserves assigned at the field relating to our planned EPS, for which we continue to advance plans, maintaining our target for first oil of H1 2019. We expect to publish CPRs relating to Halifax and Lincoln later in 2017, which we are confident will be a material addition to our already significant resource base."

Contacts: 

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

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
"Early Production System" or "EPS"	The Early Production System phase of development of the Lancaster field in licence P.1368
"FDP"	field development plan
"Lancaster CPR"	The competent person's report prepared by RPS in 2017 on the Lancaster field
"Oil"	a mixture of hydrocarbons of different molecular weight
"PRMS"	2007 SPE/AAPG/WPC/SPEE Petroleum Resource Management System
"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)
"stb/d"	stock tank barrels per day

 

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