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Hurricane Energy: Independent test highlights Lancaster well potential

15/09/2014 by


Hurricane Energy advanced on Monday, rising over 12% at one point, after expectation beating analysis of the Lancaster project, a fractured basement oil play in the West of Shetland region of the UK North Sea.

Having reported in June flow rates of almost 10,000 barrels per day from a recently drilled will, third party analysis has now indicated flows of up to 20,000 barrels a day are possible.

The analysis demonstrated a very good quality reservoir, Hurricane said.

Dr Robert Trice, chief executive, added he was delighted that Hurricane’s pre-drill geological model of the fractured basement has been confirmed, while the key production metrics related to oil productivity were even better than expected.

"Such a level of productivity means that an early phase of field development and commercial production could be initiated with the addition of only one more horizontal well," he said.

Analysis also confirmed that the oil is 38 degrees API and consistent with that produced from previous Lancaster wells, while the productivity index showed the well was capable of delivering sustained commercial flow under production conditions.

Tidal data, which Hurricane added is very important, also confirmed the intervening fractured basement rock, as well as the seismic scale fault zones, contributed to flow something that also corroborates the pre-drill geological model but demonstrated a highly permeable, well connected fracture network.

As an additional boost, the well also encountered an interval of previously undrilled oil-bearing Jurassic-Cretaceous sandstone, though more work on this is required, Hurricane said.

Cenkos analyst Ashley Kelty reckons Hurricane has “blown away” expectations with the Lancaster well testing results and the AIM share is now set for a major re-rating.

Kelty, in a note, points out that with a current price of about …p Hurricane is priced at a 60% discount to his price target of 103p.

The success revealed today provides the trigger for the share to close this gap, he explains.

“We believe that this result dispels some of the markets concerns about the production potential of basement [plays], and would anticipate that the discount will unwind as the company moves towards the development of the Greater Lancaster Area.”

Kelty adds: “We believe these results are hugely positive for Hurricane, and de-risk multiple development solutions, alongside illustrating the potential offered by the basement play. 
Hurricane is unmatched in the sector in terms of exploration success, having found more net resources in the UKCS than anyone else in the last 10 years.
With a 100% interest in all licenses and over 400mmboe of resources, this excellent detailed well result will both excite and encourage potential industry partners (who have been keenly waiting for this result).”

Oil stock expert Malcolm Graham Wood, meanwhile, was in bullish mood following the well testing results foreseeing a significant increase in recoverable reserves from Lancaster and saying Hurricane chief Dr Robert Trice was “right about basement plays after all.”

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