NORTH Sea-focused Hurricane Energy has secured £52 million from investors which will allow the firm to drill wells on the Lancaster find West of Shetland this year.
The Kerogen private equity firm has agreed to provide £44m of the funding, which will boost Surrey-based Hurricane’s hopes of developing Lancaster. The company calls Lancaster one of the UK’s largest yet to be developed fields.
It secured the investment against a challenging backdrop as firms slash spending in the North Sea in response to the long crude price slump.
Hopes that the market may be starting to recover were dented at the weekend when a meeting of producer nations in Qatar broke up without a widely expected deal to freeze production being agreed.
Brent crude traded down around three per cent, $1.31 per barrel at $41.79 per barrel yesterday afternoon.
The oil price had increased to $44/bbl last week from $27/bbl in January amid hopes leading producers such as Saudi Arabia would take action to support prices.
Market watchers said yesterday it was unlikely producing nations would be able to agree to freeze production so long as Iran remains intent on boosting exports.
Iran wants to capitalise on the recent lifting of sanctions on the country.
However, Kerogen’s managing partner Jason Cheng said: “Our investment in Hurricane underlines our confidence in the long-term potential of the North Sea and our continued commitment to the oil and gas sector in the current market environment.”
The investment provides further evidence that financiers believe opportunities have emerged to buy into North Sea assets at attractive prices following the plunge in the oil price from $115/bbl in 2014.
Hurricane agreed the £52m placing at 15p per share. This represented a premium of 46.3 per cent to the closing middle market price of 10.3p on Friday. Shares in Hurricane fetched 54p in June 2014.
Kerogen noted it has also backed the Zennor Petroleum business, which plans to drill in the North Sae this year.
Zennor recently bought interests in four producing fields from the administrators to the First Oil Expro business developed by Ian Suttie.
Kerogen said the funding provided for Hurricane would enable the firm to secure the attractive oilfield service contract rates that are available in today’s market.
The price of services such as drilling has fallen sharply in response to cuts in activity in the North Sea.
The £52m placing is subject to approval by Hurricane shareholders. The company secured £8m funding from existing holders including £7m from Crystal Amber, the activist investor.
The two wells Hurricane plans to drill on Lancaster this year will help the company firm up estimates of the size of the find, so that it could decide next year whether to invest in developing the first phase of production.
Estimated to contain up to around 450 million barrels of oil equivalent, Lancaster is a flagship project for Surrey-based Hurricane.
It hopes to bring Lancaster onstream in 2019.
Lancaster lies in an area of hard granite rock found below the sandstone reservoirs that have formed the basis for the majority of North Sea exploration.
Hurricane expects to be able to produce from such basement reservoirs by tapping into natural fractures in the rock through which oil could flow.
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