WEST of Shetland-focused Hurricane Energy has suffered another production setback ahead of crunch investor meetings today.
Hurricane announced that it had shut in a production well on the key Lancaster field, following problems with a pump.
The company restarted production but without the benefit of the support provided by the pump.
Hurricane did not provide details of the latest flow rates but it seems likely that the reverse will deprive the company of valuable income while the pump is offline.
It comes as creditors of the firm are set to take control of the business in a restructuring that would see shareholders virtually wiped out. These have seen the stock market valuation of the company plunge from more than £1 billion in 2019 to around £20m.
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Shares in the company fell sharply yesterday following news of the latest problems on Lancaster, which once generated huge excitement in the industry.
Lancaster was one of a series of finds made by Hurricane in a relatively under-explored layer of granite. These helped encourage hopes that there could be a boom in the West of Shetland frontier area.
Founded by geologist Robert Trice, the company was hailed as an industry success story after starting production from Lancaster in June 2019. Scottish Gas owner Centrica was so excited about the potential of Hurricane’s acreage that it paid millions to buy into it.
However, production from Lancaster fell after the company experienced problems with a well that was shut in in May last year.
The company subsequently slashed estimates of the size of Lancaster and other finds following a review.
Mr Trice resigned in June last year.
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Hurricane has spent the last few months battling the grim market conditions that have accompanied the coronavirus crisis.
The plunge in oil prices last year hit revenues and made it hard for oil firms to raise funding.
In May Hurricane posted a $625 million annual loss, after cutting the valuation of Lancaster and its exploration assets by $567m last year.
The company has $230m bonds that are due for repayment next year.
The new management team concluded that the company had no realistic option other than to agree a deal that will leave bondholders with 95% of its shares. This will involve them swapping $50m debt for shares, leaving $180m outstanding.
Shareholders have reacted with fury to the proposal. Claiming that the company was acting prematurely, a leading investor launched a bid to get most directors voted off the board.
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Hurricane proposed to complete the restructuring without giving shareholders a vote until a High Court judge ruled last month they should have one.
However, Hurricane noted then that the court could approve a plan even if shareholders objected to it.
The saga will near a conclusion at meetings that are due to be held today.
Bondholders will vote on the proposed plan at a meeting that is due to start at 11am.
A meeting of shareholders is scheduled to start at 12 noon.
The High Court is due to start considering the restructuring plan on June 21.
Hurricane’s board has said that if the proposed restructuring is not approved at one or more of the meetings of bondholders and shareholders, or fails to win court sanction, it is likely there will be an insolvent liquidation of the company.
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However, shareholders may attempt to win court approval for an alternative plan if they can come up with one in time.
Crystal Amber Fund, which has a 14 per cent holding in Hurricane, has requisitioned an extraordinary general meeting to vote on its proposal for the chairman of Hurricane, Steve McTiernan, and all four non-executive directors to be removed from office with immediate effect.
It has said chief executive Antony Maris and chief financial officer Richard Chaffe should continue in office for the time being because of their technical and financial knowledge of the situation.
It is possible that the proposed restructuring will have been completed by the time the EGM is due to be held, on July 5.
Shares in Hurricane Energy closed down 7%, 0.08p, at 1.12p. They sold for 60p in June 2019, when Hurricane commanded a £1.2bn stock market valuation. The company produced an average 11,370 barrels oil daily from the P6 well on Lancaster in May. It said the P6 well is currently on natural flow.
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