SHARES in West of Shetland exploration pioneer Hurricane Energy have plunged around eight per cent from a low base after the company faced a fresh complication.
As the company prepares to complete a debt for equity swap that will leave creditors in control of the business, Hurricane has recorded a drop in output from the one field it has in production.
Hurricane said production from the P6 well on the Lancaster field averaged around 10,100 barrels oil daily in April compared to 11,200 bopd in the three months to March.
The fall could weaken Hurricane’s hand as the company seeks to win the backing of enough creditors for the proposed restructuring announced last month.
READ MORE: Creditors set to take control of Shetland oil pioneer once valued at £1.2bn
The company is dependent on production from Lancaster for its trading revenues.
The performance of Lancaster has fallen short of expectations since the field was brought onstream amid fanfare in June 2019.
Lancaster was one of a number of finds made by Hurricane in a relatively under-explored layer of rock West of Shetland.
The company’s success with the drill bit helped encourage hopes there could be a boom in the area.
However, Hurricane slashed estimates of the size of Lancaster and other fields after facing production setbacks. The fall in oil prices triggered by the coronavirus crisis posed fresh challenges. It has made it hard for oil and gas firms to raise funding.
READ MORE: Scottish Gas owner cuts valuation of Shetland exploration acreage
Hurricane has narrowed its focus with the aim of maximising production from the early production system developed for Lancaster. It had hoped that this would pave the way to a much bigger development.
The company yesterday cut forecasts of the amount of cash it could generate from the Lancaster EPS under two scenarios which would involve additional drilling, by around $5 million in each case.The scenarios would require the support of bondholders. The third scenario would involve no further investment in the Lancaster field.
Hurricane said last month that it had reached agreement in principle regarding a deal that that will see bondholders exchange $50m of the $230m debt owed to them for shares in Hurricane. The bondholders will have 95% of the shares in the company after the proposed restructuring.
READ MORE: Plans to develop billion barrel oil field off Shetland set to be revived
Hurricane said the fall in production in April followed well testing work that was completed for reservoir management purposes. The fall was in line with its near-term production strategy. Hurricane is now producing 11,600 bopd from the P6 well.
Hurricane Energy shares closed down 0.07p at 0.78p yesterday, leaving the firm with a market capitalisation of around £16m. Shares in the company sold for more than 60p each in June 2019, valuing it at £1.2billion.
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