Hurricane Energy, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, has provided its 2021 interim report and half-year results for the six-month period ended 30 June 2021, and an update on Lancaster field operations and net cash balances as of 30 September 2021.
2021 Interim results summary
- Revenues of $124.5 million from four liftings of Lancaster crude (H1 2020: $81.9 million from seven liftings)
- Cash production costs† of $24.8/bbl (H1 2020: $18.2/bbl)
- Generated $75.9 million of operating cash flow (H1 2020: $21.9 million), equivalent to $38.0/bbl (H1 2020: $8.2/bbl)
- Profit after tax for the period of $42.8 million (H1 2020: loss after tax of $307.8 million)
- Net free cash of $132.3 million at 30 June 2021 (31 December 2020: $111.4 million)
Operations - Greater Lancaster Area ('GLA')
- The Aoka Mizu FPSO continues to deliver excellent uptime, with an average field production uptime of 96% in H1 2021
- 10-million-barrel production milestone reached during H1 2021
- Lancaster EPS production averaged 11,100 bopd for H1 2021 (H1 2020: 14,600 bopd), primarily from the 205/21a-6 well ('P6 well') alone, with the 205/21a-7z well remaining shut in to manage reservoir voidage and pressure decline
- Elected not to exercise the three-year extension option for the Aoka Mizu that would have continued the contract to June 2025. Hurricane remains in positive negotiations with Bluewater over alternative extension options that would allow production to continue beyond June 2022
Operations - Greater Warwick Area ('GWA')
- Post period-end, in July 2021, completed the plug and abandonment of the 205/26b-14 well, which Hurricane operates on behalf of the GWA joint venture, fulfilling its regulatory obligation. Contracted the Stena Don semi-submersible rig with the operation completed within both schedule and budget
- OGA previously agreed to extend the deadline for the GWA licence commitment well from 31 December 2020 to 30 June 2022 as a result of the disruption caused by the COVID-19 pandemic. The Company continues to engage with the Joint Venture, and OGA, on the most appropriate timeframes for future GWA activities
- The Company's proposed financial restructuring was ultimately not pursued following the High Court Judgment that the restructuring should not be implemented
- In June 2021, the incumbent non-executive directors resigned from the board, with John Wright and David Craik appointed to the board as non-executive directors and John Wright assuming the position of Interim Chairman
- Post period-end, on 15 September 2021, the Company completed the repurchase of approximately 34% of its outstanding $230 million 7.5% Convertible Bonds due in July 2022 at a cost of $62 million (including accrued interest), reducing the par value of Convertible Bonds held by third parties to $152 million
- As previously announced, production guidance for the six months from 1 October 2021 is in the 8,500 - 10,000 bopd range, based on an improved FPSO production uptime assumption of 96.5% and production from the P6 well alone on artificial lift via ESP
- Hurricane continues to evaluate options to bolster production from the Lancaster field, in addition to engaging with GWA stakeholders on possible pathways towards development for the Lincoln discovery
- Following the recent Convertible Bond buyback which saves the Company approximately $22 million in future obligations to bondholders, Hurricane continues to evaluate options to further reduce its debt and improve the viability of its Balance Sheet
- Stronger oil prices and current production forecasts, combined with the impact of the bond buyback, internal cost cutting exercises and other cost reduction measures, have reduced the anticipated funding gap for the repayment of the Convertible Bonds. Whilst there remains uncertainty if the Company will have sufficient net free cash to repay the Convertible Bonds, the board of directors are optimistic that even if a shortfall remains it may be possible to bridge the gap
Antony Maris, Chief Executive Officer of Hurricane, commented:
'The first six months of 2021 have proved very challenging. The focus has been on exploring ways to provide a stable financial platform for the Company, whilst in parallel delivering production as safely and efficiently as possible from Lancaster. Recent stronger oil prices combined with the impact of the bond buyback, internal cost cutting, and other cost reduction measures, has brought the possibility of bridging the funding gap for the repayment of the bonds within reach. However, the challenge of funding investment in our assets remains.
Going forward our near-term priority remains the repayment of our convertible bonds, and as such we move into the second half of the year with an overarching focus on capital discipline and operational performance. We are optimistic that, despite the economic and operational uncertainties that exist, even if a shortfall remains it may be possible to find a solution to repay the bond in full at maturity.
We continue to engage with all our key stakeholders regarding our financing arrangements as we concentrate on removing the debt burden as well as extracting further value from Lancaster and our other discoveries.'
Source: Hurricane Energy