With sentiment towards the sector still very fragile, now is not a good time for an oil and gas company to be announcing operational failures. This was proved this morning by a 42.7% plunge in Hurricane Energy’s (HUR:AIM) shares to 7p.
The company has been trying to increase the level of production from the two wells which feed into its Lancaster Early Production System (EPS), located West of Shetland in the North Sea, to 20,000 barrels of oil per day (bopd).
That now looks a pretty distant prospect as the company confirms that an increase in output led to flow instability on its 205/21a-7Z well thanks to interference with the 205/21-a-6 well. The plan now is to test how much it can produce from the latter well.
This is currently delivering 10,300 bopd. From both wells production had been averaging 15,500 bopd year-to-date.
OIL FROM A SINGLE TAP
The pain is more acute because this is Hurricane’s only producing asset, with the result that it has been forced to concede output will be significantly below its previous 18,000 bopd guidance.
Hurricane is the first in the UK to produce hydrocarbons from so-called fractured basement reservoirs. These are bodies of rock beneath the earth formed more than 2bn years ago.
In certain places these massive structures – located deeper than the sandstones which have traditionally been the focus of oil exploration in the UK – have been pushed up and violently fractured by earthquakes and other tectonic forces.
The hydrocarbons discovered by Hurricane are contained within the cracks in these formations.