Monday 3 September 2018

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, announced that Spirit Energy Limited has farmed-in to 50% of Hurricane's Lincoln (P.1368 South) and Warwick (P.2294) licences, together covering the Greater Warwick Area ("GWA") (the "GWA Farm-in").

The GWA Farm-in opens up a significant new work programme across Hurricane's assets, widening strategic options and accelerating their potential monetisation by targeting reserve growth. Hurricane and Spirit Energy are committing to a work programme which envisages first oil on the GWA by 2020 and final investment decision ("FID") on the first phase of a full field development by 2021. This is intended to unlock initial reserves of half a billion barrels (gross) from current GWA resources.

Spirit Energy is a strong, technically and commercially aligned partner, which will ultimately take on the role of GWA licence operator, following successful drilling during 2019 and 2020.

Highlights

- Transaction opens up a significant new work programme across Hurricane's assets

- GWA becomes a new leg of Hurricane's business with a forward work plan agreed, targeting FID on the first phase of a GWA full field development in 2021, which is intended to unlock half a billion barrels of reserves (gross) from current GWA resources

- Commitment by Spirit Energy of up to $387 million in carry

- Significant GWA work programme, including:

- Phase 1 - 2019: Hurricane fully carried through $180.6 million (gross) programme to drill, log and test three exploration and appraisal wells to accelerate appraisal of the Lincoln discovery and exploration of the Warwick prospect; fund the purchase of long lead items to allow the tie-back of one or more GWA wells to the Aoka Mizu FPSO in 2020; and carry out host modifications of the Aoka Mizu

- Phase 2 - 2020: Assuming Phase 1 is successful and FID is taken to proceed with the GWA well tie-back, Hurricane carried through 50% of its share of an estimated $187.5 million (gross) programme to tie-back one GWA well to the Aoka Mizu, complete host modifications of the Aoka Mizu, tie-in to the West of Shetland Pipeline (WOSP) system for gas export, and thereby allow for first oil from an Early Production System ("EPS") on the GWA in Q4 2020

- Contingent further contribution by Spirit Energy of $150 - $250 million, in the form of a carry of Hurricane's share of GWA full field development costs, following FID of this phase

- Rig contract signed for use of the Transocean Leader semi-submersible drilling rig for the 2019 three well programme, to commence in Q1 2019

- Work programme aims to accelerate conversion of resources to reserves - a single well tie-back from the GWA is expected to provide a daily production rate of 10,000 bopd and associated reserves in excess of 20 million barrels (gross), whilst taking FID on the first phase of a full field development is expected to unlock reserves of half a billion barrels (gross)

- Increases financial flexibility - the GWA Farm-in allows cash flow generated by the Lancaster EPS to be focussed on appraisal and further development of the Greater Lancaster Area ("GLA")

- Hurricane retains 100% of remainder of portfolio including Lancaster, which will benefit from accelerated gas export, unlocking increased oil throughput availability for the Lancaster EPS

- Efficient use of facilities - maximising benefit of infrastructure through de-risking of two accumulations in parallel

Full announcement