UK-based Hurricane Energy has been granted an extension for a UK license which contains the Lancaster and Lincoln areas. The extension comes with a commitment to drill a well on each of the areas.
Hurricane said on Friday it had been granted a five-year extension for the P1368 license, covering the Lancaster and Lincoln subareas, subject to conditions including the drilling of certain commitment wells.
Hurricane’s P1368 license includes the following sub-areas: P1368 (Central) – Lancaster; P1368 (South) – Lincoln; P1368 (North) – Whirlwind; and P1368 (South West) – Strathmore.
The Lancaster sub-area and the Lincoln sub-area extensions are subject to spudding a commitment well by December 22, 2021, and December 22, 2020, respectively. This will be done to determine the maximum extent of the fields, following which updated field determinations will be made.
The Whirlwind and Strathmore sub-areas have been relinquished at the OGA requirement. The carrying value of Whirlwind of approximately $67 million will be fully impaired in the company’s 2019 financial results and the value of Strathmore has already been fully impaired.
The company will no longer recognize resources in relation to Whirlwind (2C contingent resources of 179-205 mmboe) or Strathmore (2C contingent resources of 32 mmboe).
As a result of the license extension, Hurricane has updated its work program for 2020, reflecting the requirements of the extension.
Greater Warwick Area
Hurricane is currently planning one or more sub-vertical wells to determine the maximum vertical extent of the Lincoln field in order to meet the commitment well requirement of the license extension.
At a minimum, this well will seek to confirm the mid-case oil-water contact at 2,200 meters TVDSS. As a consequence, the company no longer has plans to drill any additional horizontal producers on the GWA in 2020. The well planning work is ongoing. Hurricane said it would announce once the well plan has been confirmed.
Drilling activity is not expected to start earlier than June 1, 2020, given the time required to undertake planning and permitting for the well.
As a result of this, there is likely to be a period of time between February and June 2020 that the contracted rig is standing idle, incurring a cost of up to $10 million net to Hurricane. Hurricane is currently considering alternative options to utilize the rig during this period.
The tie-back of a Lincoln well to the Aoka Mizu FPSO, a tie-in to WOSPS, and associated modifications to the FPSO are still planned for 2020. Obtaining regulatory approval for this plan may, however, delay activity until 2021.
Confirmation of the tie-in program is expected during 1Q 2020. In the absence of OGA approval for the tie-in of the Lincoln Crestal well (205/26b-14), the license partners will be required to plug and abandon the well before June 22, 2020, in line with current regulatory approvals.
Greater Lancaster Area
The 2021 work program will include one or more sub-vertical wells to determine the maximum extent of the Lancaster field in order to meet the commitment well requirement of the license extension. It is expected that these wells will be broadly similar in design to the 2020 Lincoln commitment well(s).
Debottlenecking work will be undertaken in 2021, to be available for the additional throughput from the Lancaster and Lincoln wells. Total throughput on the Aoka Mizu FPSO is expected to be 40,000 barrels of oil per day, before operational downtime, from 2022 onwards.
Hurricane is currently in discussions with Spirit Energy for the potential use of the Transocean Paul B. Loyd Jr. rig, which has been contracted by the GWA joint venture for 2020 activity, to accelerate the drilling of a third horizontal producing well in the Lancaster field in order to minimize the time that the rig is standing idle.
Should this well proceed, it is envisaged that it will be tied back to the Aoka Mizu FPSO in 2021 with the first oil expected at the end of 2021.
Dr Robert Trice, Chief Executive of Hurricane, commented: “2019 has been a transformational year for Hurricane, as we saw first oil from the first fractured basement development on the UKCS. I am delighted with the performance of the Lancaster EPS and look forward to presenting what we have learned and what we expect from this reservoir at our Capital Markets Day in March. The results of the individual well tests have surpassed our expectations.
“We are pleased to have extended the license over the Lancaster and Lincoln subareas for a further five years. We anticipate having taken a final investment decision on full field development plans for both fields by the end of that period. The deep wells that now form part of our program will target the delineation of the maximum extent of both the Lancaster and Lincoln oil columns to a more definitive level.”
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