Friday 11 September 2020

Operations - Greater Lancaster Area ("GLA")

· Hurricane continues to adhere to the strict procedures in place for UKCS offshore activity during the COVID-19 pandemic, with negligible disruption to the Company's operations during the period.

· The Aoka Mizu FPSO continues to deliver excellent uptime, with an average of 99% in H1 2020.

· Lancaster EPS production averaged 14,600 bopd for both H1 2020 and the year to date ended August 2020. Prior to the recent scheduled shutdown, field production of c.15,000 bopd was from the 205/21a-6 well alone on natural flow, with the 205/21a-7z well currently shut in to manage reservoir voidage and pressure decline.

· In light of the revised interpretation of the OWC, the area of the P1368 Central licence outside the determined Lancaster field area is being voluntarily relinquished and, following relinquishment, the Company will be released of its obligation to drill the Lancaster commitment well.

Operations - Greater Warwick Area ("GWA")

· Interpretation of the results of the 2019 drilling programme and ongoing pressure monitoring of the 205/26b-14 Lincoln well have led to a significant reappraisal of the GWA licence potential.

· The downhole gauges installed in the suspended 205/26b-14 Lincoln well are now yielding potentially important pressure data. Two sets of data have now been retrieved and analysed, providing valuable insight into long distance reservoir behaviour.

· As previously announced, the OGA has agreed to extend the deadline for the GWA licence commitment well from 31 December 2020 to 30 June 2022

Outlook

· Lancaster EPS production for September to December 2020 is expected to average 12,000-14,000 bopd, based on production from the 205/21a-6 well on natural flow, expected decline rates and 95% FPSO uptime.

· Work continues on a possible 2021 activity programme for Lancaster, including the provision of pressure support via water injection, improved recovery from the existing EPS wells and evaluation of the onlapping sandstones. This planning is expected to be finalised before the end of 2020.

· While no drilling is anticipated on the GWA licence during 2021, Hurricane will continue to work with the GWA stakeholders on possible pathways towards development for the Lincoln discovery.

· Lower oil prices and reduced production expectations will negatively impact anticipated future cash flows, despite the expected reduction and deferral of licence commitment well spending. Consequently, the Company intends to engage with all key stakeholders regarding its forward work programme, capital allocation and financing arrangements.

Steven McTiernan, Chairman of Hurricane, commented:

"2020 is proving to be a hugely challenging year for Hurricane. We have had to contend with not only a significant fall in oil prices and the effects of the COVID-19 pandemic, but also poorer than expected reservoir performance from the Lancaster EPS.

The EPS was always intended as a long-term production test to establish the size and production characteristics of this unique and pioneering basement play. Basement reservoirs are subject to profound technical risks, with difficult well conditions impacting the effectiveness of evaluation tools, creating uncertainties which can only be resolved by observation of actual production performance.

It is nonetheless disappointing that the Technical Review has so far resulted in significant reductions in reserves and resources. On a more optimistic note, initial studies suggest water injection could partially mitigate the reserves downgrade, and onlapping sandstones at Lancaster could represent material upside potential.

The Board is enormously grateful to Beverley Smith for leading the Technical Review during a period of considerable change for the Company. We are also most fortunate that stewardship of the Company is now passing to Antony Maris, our new Chief Executive Officer, who has significant experience of basement reservoir developments and will provide strong leadership to the refreshed management team."

Antony Maris, Chief Executive  Officer Designate of Hurricane, commented:

"Through hard work and dedication, the Hurricane team developed the Lancaster project safely, on time and on budget, and has now successfully operated the Lancaster EPS for 16 months. This capability is a core strength of the business, and I am delighted to be joining this accomplished operating team.

Following the uncertainty of recent months, as the significance of the EPS reservoir performance has become clearer, we must now focus on extracting value from Lancaster and our other discoveries, while optimising the use of our significant installed infrastructure West of Shetland. In particular, the Technical Review has identified upside within sandstone reservoirs on the flanks of the Lancaster field, with the potential for volumes of recoverable oil which are significant in a UKCS context. Furthermore, together with Spirit, we are working towards consideration of a viable development plan for the Lincoln field.

Our near-term priority is further technical work to refine an activity plan for Lancaster, which we expect to be finalised by the end of this year and executed in 2021, with an overarching focus on capital discipline. We will be engaging with all our key stakeholders regarding our forward work programme and financing arrangements and updating the market on these efforts in due course."

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