Hurricane Energy PLC (LON:HUR) halved in value during Friday’s early deals after it reported a US$307.7mln loss for the first half of 2020, including a US$238.9mln impairment against the Lancaster oil field.
Production from the Lancaster early production system (EPS) averaged 14,600 barrels of oil per day (bopd) leading to US$81.9mln of revenue and operating cash flow of US$21.9mln.
It comes after Hurricane last month warned it will be forced to take a material downgrade to its oil resources across its West of Shetland projects, following a worse than expected performance at the Lancaster EPS.
“2020 is proving to be a hugely challenging year for Hurricane,” said Steven McTiernan, Hurricane chairman in a statement. “We have had to contend with not only a significant fall in oil prices and the effects of the COVID-19 pandemic, but also poorer than expected reservoir performance from the Lancaster EPS.
“The EPS was always intended as a long-term production test to establish the size and production characteristics of this unique and pioneering basement play. Basement reservoirs are subject to profound technical risks, with difficult well conditions impacting the effectiveness of evaluation tools, creating uncertainties which can only be resolved by observation of actual production performance.
“It is nonetheless disappointing that the technical review has so far resulted in significant reductions in reserves and resources.”
Incoming chief executive Anthony Maris, meanwhile, added: “Following the uncertainty of recent months, as the significance of the EPS reservoir performance has become clearer, we must now focus on extracting value from Lancaster and our other discoveries, while optimising the use of our significant installed infrastructure West of Shetland.
“In particular, the Technical Review has identified upside within sandstone reservoirs on the flanks of the Lancaster field, with the potential for volumes of recoverable oil which are significant in a UKCS context. Furthermore, together with Spirit, we are working towards consideration of a viable development plan for the Lincoln field.”
Maris continued: “Our near-term priority is further technical work to refine an activity plan for Lancaster, which we expect to be finalised by the end of this year and executed in 2021, with an overarching focus on capital discipline.
“We will be engaging with all our key stakeholders regarding our forward work programme and financing arrangements and updating the market on these efforts in due course.”
Hurricane’s outlook for the remainder of the year anticipates that the Lancaster EPS will average production of 12,000 to 14,000 bopd.
The company said it will continue to work on a 2021 activity programme for Lancaster, including the provision of pressure support via water injection to support production. It added that lower oil prices and reduced production will negatively impact future cashflow.
In London, Hurricane shares were down 3.11p or 49.37% changing hands at 3.19p, but had traded as low as 3.05p at one point this morning.