Hurricane Energy PLC – Final Results

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, announces its final audited results for the year ended 31 December 2018. 

2018 Results summary

Financial results

• Loss after tax was $60.9 million (2017: $7.0 million) – the majority of which was the non-cash fair value loss of $42.4 million (2017: fair value gain of $10.4 million) on the embedded derivative associated with the Convertible Bond
• The Group finished the year with a closing cash position of $83.0 million in usable funds (including cash and cash equivalents and liquid investments, but excluding restricted cash) (2017: $326.6 million) 
• Development cash expenditure on the Lancaster EPS was $205.3 million, including continued upgrade work on the FPSO, well completions and SURF delivery and installation  
• Operating expenses were $12.7 million (2017: $14.6 million) with operating cash outflow 46% lower at $4.4 million (2017: $8.1 million) 

Operational and corporate developments

• Lancaster EPS delivery on budget and on schedule for first oil in 1H 2019, following completion of substantial FPSO upgrade and offshore installation works
• Transformational farm-in agreement with Spirit for 50% of the GWA
  –  Provides up to $387 million for a phased work programme
  –  Partners working towards unlocking half a billion barrels of reserves (gross) with initial full field development of the GWA 
• Transitioned from exploration and appraisal company to full-cycle exploration, development and, very shortly, production business
  –  Expansion in headcount and office space to support the step-up in scope of activity, whilst maintaining corporate culture and without substantial increase in overhead
  –  Continued enhancements in corporate governance and disclosure, targeting standards commensurate with a Premium Listed business

Outlook 

• Lancaster EPS expected to produce at net 17,000 barrels of oil per day following initial facilities ramp-up period
  –  Production per well of 10,000 barrels of oil per day at long-term uptime assumption of 85%, expected to be achieved 6 months following first oil
  –  Expected to generate in excess of $200 million in operating cash flow on a full year run-rate basis at a $60/bbl Brent oil price
• Lancaster EPS is poised to begin generating the reservoir data needed to clarify the ultimate potential of Hurricane’s extensive Rona Ridge reserves and resources
  –  Period of 6-12 months of steady-state production expected to provide data to support Hurricane’s reservoir model and indicate the ultimate potential of the Lancaster reservoir
• Fully-carried three well drilling programme on the GWA in 2019
  –  Three 1 km horizontal wells to be drilled and tested by year-end, ahead of tying a single well back to the Aoka Mizu
  –  All wells to be suspended with downhole gauges as a means of ‘seeing’ subsequent GWA well tests and confirming Hurricane’s geological model that the GWA is a single supergiant field rather than a number of separate hydrocarbon accumulations
  –  First well, Warwick Deep, expected to spud in April 2019
• Hurricane has a clear path to potentially booking over 100 million barrels of 2P reserves during 2020
  –  Final investment decision on GWA tie-back will add incremental production from 2020
  –  Commercial agreements and decision to proceed with gas export in 2020 is expected to allow an extension to the Lancaster EPS field development plan (FDP) to include the full 10-year contract life of the Aoka Mizu, subject to regulatory approvals
  –  Following gas export, debottlenecking is expected to raise Aoka Mizu throughput to 40,000 barrels of oil per day