SHETLAND-focused Hurricane Energy has seen its shares plunge around 20 per cent following a reverse which could dent hopes of a bonanza in the area.

Hurricane Energy has helped generate huge interest in the West of Shetland area after enjoying success with the drill bit with a pioneering drive in what remains an under-explored region.

The company garnered headlines last month after starting production from the Lancaster field off Shetland which it reckons could contain more than 500 million barrels.

Read more: Giant West of Shetland field start up vindicates oil pioneer

However, Hurricane revealed yesterday that a well to test a prospect nearby called Warwick had failed to produce oil or gas at commercial rates.

Describing the results as disappointing, chief executive Robert Trice said the well would be plugged and abandoned but put a brave face on the setback.

He noted production from Lancaster has been in line with forecasts and said Hurricane will now focus on drilling an appraisal well on the Lincoln find it made in 2016.

Hurricane will have its costs for both wells covered under a deal it cut with Spirit Energy last year.

Read more: Bumper oil deal fuels fresh interest in West of Shetland frontier

However, the fall in the company’s share price yesterday suggested some investors were reassessing their views of Hurricane’s growth prospects.

It wiped around £200 million off the company’s stock market valuation.

The setback with Warwick could cause reverberations in the industry.

The drilling campaign had been eagerly awaited amid hopes discoveries West of Shetland could help support another generation of activity in the North Sea.

Spirit, which is part-owned by energy giant Centrica, did not comment on the result of the Warwick well.

It said last year that the deal with Hurricane allowed it to buy in to one of the last known world-class oil development opportunities in the UK.

Spirit agreed to fund a $180m three well programme and said it could contribute more than that towards the cost of bringing any commercial finds into production

The deal helped stoke interest in exploration activity West of Shetland where a range of firms have acquired acreage in recent years.

Read more: Mammoth gas find stokes excitement about West of Shetland

By contrast, exploration drilling has fallen to record lows in areas of the North Sea closer to mainland Scotland amid the fallout from the crude price plunge from 2014 to 2016.

This prompted firms to slash investment in the North Sea triggering a deep downturn that took a heavy toll on the supply chain.

While the partial recovery in the crude price from late 2016 has encouraged firms that operate oil and gas fields to spend on new projects again, trading conditions remain challenging.

The deal with Spirit provided a huge vote of confidence in Mr Trice who founded Hurricane in 2005. After working for Enterprise Oil and Shell Mr Trice decided to focus on an area of granite called the fractured basement. This lies beneath the sandstone on which most North Sea activity has focused.

The deal with Spirit allowed Hurricane to move relatively quickly on Lincoln and Warwick without shifting resources from Lancaster.

Mr Trice said yesterday that Lincoln has become the preferred candidate for a project that would involve connecting a second field to the floating production facility developed for Lancaster.

Hurricane is expected to drill another well in the Warwick area this year.

Shares in Hurricane Energy closed down 19%, 9.84p at 42.66p. That left it with a market capitalisation of £845 million.

Read more: North Sea exploration deal coup for Cluff

Separately Cluff Natural Resources said a consultant’s report on the Dewar prospect off eastern Scotland indicated the field could generate cash flows worth £550 million.

A study by io found Dewar could be developed by linking it to production facilities for the BP-operated Eastern Trough Area Project.