Hurricane Energy Plc (LON:HUR) shares may well be up 400% over the past year but there is, in theory, much more to come from what is becoming one of the North Sea’s most important oil story.
Successful wells drilled last year have been decisive in Hurricane’s pioneering strategy in West of Shetland region.
Hitting an oil column – at more than 600 metres, a very large oil column – in the first of two new wells at the Lancaster field proved what Hurricane chief executive Dr Robert Trice has long believed; that substantial oil volumes existed within fractured basement rocks, and that in targeted areas those oil resources could be reached.
Not only did the well prove the company’s exploration concept, it also woke investors up to the potentially huge implications for this ‘play opening’ project.
Lancaster is presently estimated to have around 330mln barrels oil resources, albeit some experts believe this may look conservative once Hurricane has completed a full analysis of the 2016 drilling season.
Hurricane followed up the Lancaster success with a new discovery at nearby Lincoln - a Lancaster lookalike – where estimates put the prize at further 250mln barrels and it has now begun drilling Halifax, another Lancaster analogy (also estimated to have 250mln barrels).
Halifax could be the cherry on the cake
Halifax, located within a recently secured licence block, is located to the North East and is contiguous to the Lancaster field.
Last year’s positive well data indicated that the Lancaster oil accumulation is likely to extend beyond its licence boundary.
Seismic data meanwhile indicates that at Halifax a well-defined fault network is present within the fractured basement rocks, this is analogous of the geology seen at the Lancaster field. It is planned that the Halifax well will drilled below the structural closure, and it will undergo testing.
Well results are anticipated towards the end of the first quarter.
“This has already been a hugely successful drilling campaign for Hurricane and the Halifax Well marks an exciting opportunity with which to close it,” said Dr Robert Trice, Hurricane Energy chief executive.
“The prospect is also a logical conclusion to the drilling programme as, following the success of the Lancaster Pilot Well, we believe that the oil column extends beyond the Lancaster block boundary and potentially up to the Halifax Prospect.”
Hurricane boss Robert Trice says Halifax is a “really exciting well”
Trice recently explained to Proactive Investors that Halifax shares similar characteristics with Lancaster, and maybe they could even be connected.
“In that case we believe that that oil will be trapped by the Westray transfer fault zone – which is similar to the fault zone between Lancaster and Lincoln.”
“The whole objective of the well is to demonstrate unequivocally that there is mobile oil below the structural closure,” Trice adds.
If that goal is achieved, Hurricane would then look to deepen the well to establish where the oil-water contact is.
“If we are able to demonstrate it’s a similar contact to that at Lancaster then that goes some way to arguing that there’s a single accumulation between Halifax and Lancaster, which would of course be an enormous field of some 30 kilometres in length.”
Significant not just for Hurricane, but also the North Sea and UK
Altogether the three assets, found in an area within the West of Shetland region, could potentially exceed one billion barrels of resources.
That would be a major milestone that would cement Hurricane as having truly world class development assets.
The implications are very significant not just for Hurricane but also for the North Sea, Scotland and the United Kingdom – though much has yet to be done before the true extent of the project can be confirmed.
Development of large world class discoveries could, for example, bring investment to establish vital infrastructure which could in time help open up and unlock many other discoveries (big and small) in the West of Shetland area for commercial development.
But, as exciting as the big picture is for North Sea and West of Shetland, for Hurricane the focus of 2017 will be on completing exploration drilling, analysing the extent of the new resources and significantly on taking Lancaster through its initial development.
A final investment decision is anticipated by around the half year marker, and key pieces of the project are already being put in place (for example a floating production vessel was signed up in late November).