Hurricane Energy to divest 50% stake in two North Sea licences

4 September 2018 (Last Updated September 4th, 2018 12:25)

UK-based oil and gas company Hurricane Energy has agreed to divest 50% of its Lincoln (P.1368 South) and Warwick (P.2294) licences, together covering the Greater Warwick Area (GWA) in the North Sea, to Spirit Energy for $387m.

UK-based oil and gas company Hurricane Energy has agreed to divest 50% of its Lincoln (P.1368 South) and Warwick (P.2294) licences, together covering the Greater Warwick Area (GWA) in the North Sea, to Spirit Energy for $387m.

The agreement enables Hurricane to commit to a firm work programme on the GWA through to the end of 2019, without causing any risk to the activity on the GLA.

Structured into five phases, the work programme seeks to expedite the first production.

Hurricane Energy CEO Dr Robert Trice: “This transaction allows us to accelerate monetisation of our GWA resource base through a work programme designed to target significant reserve growth. The initial phases include three wells, one of which is anticipated to be tied-back to the Aoka Mizu in 2020.

“At this point, Hurricane will have two significant accumulations developed to Early Production System stage, providing long-term production data – critical to the realisation of value from fractured basement fields, as well as generating significant cash flows.

“This transaction allows us to accelerate monetisation of our GWA resource base through a work programme designed to target significant reserve growth.”

“We are already planning for three further GWA wells and commencement of full field development FEED during 2020, allowing us to aim for development sanction in 2021.”

Under the 2019 drilling campaign, three horizontal wells will be drilled on the GWA. Each well will be earmarked as a future producer. There are plans to tie back one of these wells back to the Aoka Mizu to facilitate early production. There are also plans to offer data to accordingly design the first phase of a complete field development of the GWA.

The well programme will also meet Hurricane’s Warwick licence commitments.

Spirit Energy will fund 100% of this three well drilling programme, which is up to $180.6m, besides some engineering work and long lead items for future phases.

Later, Spirit Energy will pay 75%, up to a maximum of $140.7m, of the expected gross cost of the tie back and the needed modifications to the vessel in order to enable production from the GWA additional well to the vessel.

Hurricane and Spirit Energy also target drilling three additional wells to further assess the accumulation and to undertake front-end engineering and design (FEED) before approving the first phase of a standalone GWA full field development in 2021.

Spirit Energy will also provide a further $150m-$250m at this stage.

Until the commencement of the full field development work streams, Hurricane will remain field operator, following which operatorship will transfer to Spirit Energy after receiving regulatory approval.