UK's Hurricane under pressure after West of Shetland field warning

UK independent Hurricane Energy is under growing pressure from shareholders after saying it may have to shut production at its troubled Lancaster West of Shetland oil project next year due to unsatisfactory terms on offer for the production vessel.

The 'fractured basement' field, in production since 2019 and billed as a new geological play type for the UK industry with potentially hundreds of millions of barrels, has fallen well short of expectations, and Hurricane has been engaged in a financial restructuring.

Hurricane slashed reserves expectations for Lancaster and an undeveloped nearby field known as Lincoln in September 2020, putting proved and probable reserves for its two Lancaster wells at 9.4 million barrels and contingent, or '2C' reserves at 58 million barrels, barely a tenth of the previous estimate.

The West of Shetland area is a mainstay of UK oil production, most of its operated by BP. But new investment has been sparse in recent years, albeit there are hopes of progress on two major projects, Cambo and Rosebank.

Output from Lancaster, Hurricane's sole producing asset, was just under 14,000 b/d last year, and the company said last week it had decided against a three-year extension of the charter for the floating production storage and offloading vessel beyond its expiry in June 2022, adding it was seeking a shorter extension from owner Bluewater Energy Services.

But otherwise, "Hurricane may need to pursue a controlled wind-down of its business and cease operations at the Lancaster field upon the expiry of the Bareboat Charter... at which point the field would be decommissioned."

In a new notice on June 7, Hurricane announced an extraordinary general meeting for July 5 to consider a proposal for a change of directors made by one of its largest shareholders, activist investor Crystal Amber Fund.

The company's original CEO, Robert Trice, resigned in June 2020 after production expectations fell short, partly reflecting "interference" between the two wells, according to the company.

Separately, the UK Department for Business, Energy & Industrial Strategy said last week it had received an environmental statement for the Cambo project, thought to hold hundreds of millions of barrels, as a step toward a final investment decision by the operator, Siccar Point Energy, and project partner Shell.