Spirit Energy farms in to Hurricane's Greater Warwick Area

After many years of trying to find a farm-in partner, Hurricane Energy has finally succeeded in bringing in farminee for its Greater Lancaster/Warwick Area in the West of Shetlands.

Hurricane's tough journey had the company combating a falling oil price environment coupled with industry scepticism around its "fractured basement reservoir" plays. In 2017, it ploughed on alone with the sanction of an Early Production System ("EPS") at the Lancaster field without a partner.

With the improving oil price environment and refreshed North Sea corporate landscape, including the likes of Spirit Energy, Hurricane has finally found a partner for its assets. However Hurricane is not giving away its prize of the Lancaster field, instead Spirit Energy is buying into the yet undrilled and untested Warwick prospect and to be appraised Lincoln discovery.

Spirit Energy has farmed into 50% of Lincoln and 50% of Warwick licences, together the Greater Warwick Area (“GWA”) for a committed carry of USD387 million. This transaction is a major stamp of approval for Hurricane and a major step forward ahead of first oil from Lancaster. It also accelerates appraisal of the overall West of Shetland fractured basement play with significant appraisal drilling brought into 2019/20.

Greater Warwick Area is now envisaged to progress as its own separate development to the Greater Lancaster Area, although utilising the same Aoka Mizu FPSO export facilities and infrastructure.

The spending commitment by Spirit Energy will be spread over a number of phases:

• Phase 1: USD180.6 million carry to drill, log and test three exploration/appraisal wells (2019) including funding the purchase of long lead items and carrying out modifications of the Aoka Mizu
• Phase 2: USD187.5 million carry (Subject to FID following Phase 1) for 75% of costs for tie back of one of the GWA wells to the Aoka Mizu, FPSO modifications, and tying the vessel into the West of Shetland Pipeline (WOSP) system for gas export
• Phase 3 and 4: Hurricane will pay its share of the Phase 3 and 4 programme. Phase 3 includes three appraisal wells (2020) and is expected to provide the required well stock for the first phase of a full field development. Phase 4 comprises the front-end engineering and design necessary for the first phase of a full field development of GWA. Upon commencing this phase operatorship is to transfer to Spirit Energy
• Phase 5: The first phase of a full field development (expected 2021) Spirit Energy will carry between USD150 – 250 million of Hurricane’s costs through the development, dependent on the size of the 2P reserves at FID. Up to 300 mmboe would result in a contingent carry of USD150 million and for each barrel above this level, the contingent carry would increase by $0.50/mmboe, up to a maximum of USD250 million for a development of 500mmboe

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