The struggles facing North Sea oil and gas play Hurricane Energy (HUR:AIM) show no signs of letting up as two rather ominous deadlines continue to loom for the company. Its shares fell 18.6% to 3.42p on Monday morning.
Late on Friday night the company revealed that it couldn’t secure an extension on an obligation to drill a well on its P1368 (S) Lincoln licence by June 2022 - contained within what Hurricane calls the Greater Warwick Area and on which it is partnered by Spirit Energy (in which Centrica (CNA) is the largest shareholder).
The partners have been looking for a third party to fund a well but have not been able to attract any outside interest.
As a result the company has warned of a $54 million impairment if it is forced to relinquish the asset, though it added that it would ‘continue to actively explore potential options over the coming months’ to retain the licence.
Separately on Monday morning the company announced that a review of the actions of its previous management, requested by some shareholders, concluded they discharged their fiduciary duties (or in other words duties to shareholders) diligently and no further action was required.
BUYING BACK BONDS
The review largely related to a proposed restructuring to deal with a $230 million 7.5% convertible bond which is due to mature in July 2022. Specifically there were suggestions that buying up the bonds earlier would have been in the interest of the company.
Hurricane is continuing to carry out repurchases of these bonds ‘when attractive terms have arisen’ - using cash flow from the still-producing Lancaster field - the latest update in early December revealed $137 million still outstanding.
The restructuring plan, which would have seen shareholders’ interests more or less wiped out, was thrown out by a court back in June. Hurricane has previously said it might need to decommission the Lancaster field if it can’t resolve its financial issues.
Hurricane joined the market to some fanfare in 2014 as it became the first operator in the UK to produce hydrocarbons from so-called fractured basement reservoirs. These are bodies of rock beneath the earth formed more than two billion 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.
Apparent success with wells on the Lancaster and Halifax wells, in 2014 and 2017 respectively, lifted the shares above 60p but some embarrassing reserve downgrades as well as financial and operational issues in the interim have seen the stock trade at a fraction of those highs.
