North Sea explorer Hurricane Energy saw its shares surge in value by almost a quarter yesterday after revealing “particularly impressive” test results from a well at its Lancaster discovery west of Shetland.
The firm, backed by sector giant BP, estimates it is sitting on 207 million barrels of oil equivalent at its wholly-owned field, which was discovered in 2009.
Its appraisal well was drilled in April and Hurricane said yesterday that it will be suspended as a “future producer” having delivered flow rates at the upper end of its pre-drilling estimates, with the help of an electrical submersible pump.
Chief executive Robert Trice said: “The maximum sustainable flow rate of 9,800 stock tank barrels of oil per day (STB/d) is particularly impressive as it was achieved despite being constrained by surface equipment.
“Whilst the artificial lift rates are important, the fact that the well also flowed oil at 5,300 STB/d unaided is a clear demonstration that Hurricane’s plans for progressing to a Lancaster field development are technically viable.”
Shares in the company, which joined London’s Alternative Investment Market in February, jumped 6.88p, or 23.2 per cent, to close at 36.5p yesterday.
Analysts at SP Angel said the flow tests will help Hurricane’s management team assess how much of its estimated reserves at Lancaster can be reclassified as “proven and probable”.
In a note to clients, the broker added: “While determining recoverable volumes from basement reservoirs is difficult, due to a lack of clarity on the extent of the reservoir (basement is invisible to seismic), and we would risk adjust any reserves for that, a good estimate can be gained from the fluid’s pressure responses in flow and build-up tests.”
Trice told investors that the test was a “major step” towards determining how much oil can be recovered from its estimated total reserves of between 444 and 447 million barrels. The firm also owns the Lincoln, Strathmore, Typhoon and Whirlwind discoveries.
“This successful outcome reinforces the potential importance of basement resources as a strategic resource for the UK,” Trice added. Basement reservoirs have proved successful in areas from California to Vietnam, but Hurricane – which has its head office in Surrey and its operations base in Aberdeen – is the first UK oil firm to focus on these assets.
According to Hurricane, the UK’s Department of Energy & Climate Change believes that the west of Shetland/Atlantic margin contains “the most significant remaining UK resources yet to be discovered”, at about 7.9 billion barrels of oil equivalent.
The firm focuses on areas where oil has been found in basement structures by previous operators, but not exploited because the reserves where not believed to be commercially viable.
The explorer raised £31.4m last year to fund the Lancaster project, in a move that saw BP join its rank of investors.