In an announcement issued on Friday last week, Hurricane Energy writes that the company – together with JV partner Spirit Energy – has elected to continue its plans to suspend further funding towards well planning and drilling of the obligation well on the Lincoln licence (PL1368S).
Hurricane Energy is the operator of the Lancaster field West of Shetland, which is producing oil from fractured basement and the overlying clastic wedge and Spirit Energy is the 50% partner is some of the nearby licences.
According to the announcement, the OGA is not supportive of deferring the obligation well unless the partnership can satisfy the regulator that they will be able to fund an obligation well in a timely manner.
As it doesn’t look like the partnership will be able to secure funding in a timely manner, the licence may need to be relinquished on or before 30 June 2022, Hurricane writes.
Is it a surprise that this is unfolding? Not really, given the situation both companies are in. As we reported on recently, with the sale of Spirit Norway, the remaining Spirit UK entity will be managed in “run-off mode” which means no exploration and a focus towards meeting the shutdown costs of its assets.
At the same time, Hurricane Energy has had to materially downsize its reserves following the Lancaster-Halifax debacle, with the resulting effects on investment capabilities.
Lincoln
The well that the companies are trying to delay is likely another appraisal well on the Lincoln discovery to the southwest of Lancaster. It was originally drilled in 2016 (205/26b-12) by Hurricane and encountered hydrocarbons, but the well was not successfully tested.
An appraisal well on Lincoln was subsequently drilled in 2019 (205/26b-14), which did flow hydrocarbons to surface. However, the 2021 CPR indicates that appraisal is at an early stage and a development plan is lacking. On that basis, the contingent resources of 18.45 MMstb (2C Net) attributed to Lincoln could only be presented on the condition that further appraisal drilling takes place.
Therefore, it seems most likely that the well discussed in Friday’s announcement is the second appraisal well on the Lincoln discovery.
Given the tone of the announcement though, it seems unlikely that this well will be drilled next year. This in turn does not paint a very rosy picture for the fractured basement play West of Shetland.
HENK KOMBRINK
