UK share markets are stepping tentatively higher in Tuesday business. Both the FTSE 100 and FTSE 250 are up fractionally as hopes over the economic recovery keep investor appetite bubbling. But the Hurricane Energy (LSE: HUR) share price hasn’t fared quite so well after it released its latest operational update.
Hurricane Energy has slumped after announcing drilling problems associated with its Lancaster field in the North Sea. It plunged below 3p per share earlier on Tuesday morning, its cheapest for around a month. While recovering some ground, it was last trading around the 3.15p marker, down 15% on the day.
Hurricane Energy announced plans in December to drill a second production well as part of its development plan for Lancaster. This would involve side-tracking from its existing 205/21a-7z well into the central area of the field.
However, the complexity of the operation means that Hurricane Energy doesn’t now expect to be able to begin the work during the summer. It said that “the incorporation of an intelligent completion and the challenges of delivering the well trajectory from the side-track location” meant that creation of the side-track would be trickier than work at other wells at Lancaster.
Hurricane Energy thus concluded that “it will not be possible to drill this well during the 2021 summer weather window without unacceptable operational and cost risk.”
The business suggested in December that maiden oil from this second well should begin flowing by the end of 2021. It estimated development costs of $60m back then too.
Hurricane Energy rolls out other options
The oil explorer said that it has yet to make definite decisions as to how to proceed. However, it suggested that drilling of the second well now won’t happen until 2022.
Hurricane Energy said that there were various options on the table regarding how to proceed. It could continue planning in 2021 with a view to drilling the side-track next year, it said. The business has also touted drilling the side-track at the same time as a water injection well in 2022 as a combined programme. It is also looking at drilling the side-track in 2022 and a water injection well in 2023.
Hurricane Energy said that the development of Lancaster might depend on factors outside its control. These include “field performance, prevailing oil prices and support from relevant stakeholders and counterparties,” it said.
The company is now engaged in discussions with stakeholders regarding a proposed development plan, as well as funding of work at Lancaster. These stakeholders include a group of convertible noteholders. It added that “discussions on the company’s forward work programme, strategy, financing and balance sheet recapitalisation are ongoing.”
City analysts had been expecting Hurricane Energy to flip from losses of 0.4p per share in 2021 to earnings of 1.4p in 2022 prior to today’s update.
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