Hurricane Energy Plc (LON:HUR) has confirmed it will cost US$6.5mln net to plug and abandon the Lincoln-14 well after it contracted a rig.
The company drilled the well in the Greater Warwick Area which was suspended by the company’s previous management as a ‘future producer’ after initial testing in September 2019 confirmed light crude oil, flowing at a maximum rate of 9,800 barrels per day with the support of an electric submersible pump (ESP).
It was a joint venture with Spirit Energy which is majority owned by Centrica, though for some time the British Gas parent company has sought to sell its interest in the oil company. The venture did not proceed into Phase 2 as originally anticipated and regulatory obligations require that the suspended well is plugged and abandoned before October 31.
Hurricane today reported that the Stena Don semi-submersible rig is now on hire and the programme will run for at least 20-25 days.
The gross cost of the programme will be US$13mln, which is US$6.5mln net to Hurricane.
At the same time, in a separate statement, the troubled UK offshore oiler announced that it has successfully restarted the electric submersible pump in the Lancaster field’s remaining production well. The well had been impacted by a failure of its ESP.
Hurricane said it now intends that oil production will ramp back up to 11,000 bopd – at which point, it is expected that volumes will continue into natural decline.
Refinancing and EGM
The latest problem for Lancaster came amidst a particularly turbulent moment for Hurricane.
Earlier this month, it was announced that the company would not be renewing the lease for the Aoka Mizu floating production vessel beyond 2022, declining an existing three-year option in its contract for the vessel. Hurricane said it was not in the company’s best interests to exercise the option in its current form due to the significant financial obligations it would entail.
The Lancaster field has for some time been performing below the company’s original expectations, and, following management changes in 2020 the board has been working on a financial restructuring which aims to hand over a substantial allotment of equity to bondholders, to stave off debt pressures.
In May, Hurricane announced a deal with a 69% majority of the group’s convertible bondholders which proposed a US$50mln shares-for-debt exchange, to reduce its US$230mln debt-pile.
The refinancing would see existing shareholders diluted significantly, with bondholders receiving new shares equating to 95% of the company whilst retaining the remaining US$180mln bonds under extended maturity out to December 2024.
Shortly after, activist investor Crystal Amber Fund called for an extraordinary general meeting to oust five non-executive directors and put its own two appointees in place.
The fund, which owns 14.7% of the company, said it provided funds totalling £25mln in three tranches since 2013 but had since lost faith in the board.
Hurricane shortly thereafter confirmed it would hold the requisitioned EGM on July 5, at 11:00am BST.