(This story removes paragraph 7 description of Hurricane’s drilling methods, replacing with description of fractured basement reservoirs.)
By Ron Bousso
LONDON (Reuters) - Hurricane Energy (HUR.L) plans to raise $520 million (400.65 million pounds) for test drilling at its Lancaster oilfield in the North Sea, a major milestone for the project that could breathe new life into the ageing offshore basin.
The plans include placing new shares expected to raise a minimum of $300 million at 32 pence per share, as well as a $220 million convertible bond offering, Hurricane said on Thursday.
Hurricane, listed on London’s Alternative Investment Market (AIM), has seen its shares rise sharply since 2016 after it revised upwards resource estimates for its flagship field in the West Shetlands region, which it thinks could be Britain’s largest undeveloped oil find.
Hurricane shares were up 8 percent at the close of trading.
The funds will go towards financing an early production system (EPS) to test the Lancaster field ahead of a full field development decision. The EPS is expected to produce 17,000 barrels of oil per day, Hurricane said. Production from Lancaster is expected to start in the first half of 2019.
In April, Hurricane upgraded its recoverable resource estimate for the Lancaster field to 593 million barrels from 200 million in a 2013 assessment.
Hurricane specialises in recovering oil from hard and brittle rock such as granite that was fractured through earthquakes, allowing oil to accumulate in what is known as fractured basement reservoirs.
The Lancaster field development could be one of few major new projects in the UK North Sea which has seen production steadily decline since the late 1990s despite a revival in recent years.
Hurricane’s largest shareholder, private equity fund Kerogen Capital, has indicated it intends to subscribe in the placing in an amount of $35 million, Hurricane said.
Cenkos Securities is acting as adviser and joint bookrunner to the company for the placing, along with Stifel Nicolaus.
The company will hold a general meeting on July 21 to vote on the proposed placing and bond offering.
Reporting by Ron Bousso; Editing by Mark Potter