September 3, 2018 / 8:47 AM / in 8 months

Spirit buys into Hurricane Energy North Sea fractured oilfield

LONDON (Reuters) - Spirit Energy, backed by Centrica (CNA.L), has agreed to invest almost $400 million (£310.4 million) in exchange for 50 percent of Hurricane Energy’s (HUR.L) Greater Warwick Area (GWA) North Sea oil project, Hurricane said on Monday.

The deal aims to confirm 500 million barrels of reserves in the area west of Britain’s Shetland Islands which would be a major boost for the North Sea basin.

Hurricane, whose shares jumped as much as 15 percent to a one-year high on Monday, specialises in recovering oil from fractures in hard and brittle rock such as granite known as fractured basement reservoirs, which some see as a risky way to extract oil.

Currently there is no such field in production in Britain but Lundin Petroleum (LUPE.ST) last month announced good productivity from a fractured reservoir in the Norwegian North Sea.

“(The GWA project) offers a tremendous opportunity for Spirit Energy to participate in the early phases of resource maturation in one of the last known world-class oil development opportunities in the UK,” Chris Cox, Spirit Chief, said.

Hurricane and Spirit, which will eventually operate the GWA fields, target first oil from the project by 2020 and aim to make a final investment decision for the first phase of full field development by 2021, shaving years off initial projections.

Spirit will provide up to $180.6 million for the first three GWA wells, with further payments based on the progress of the project.

Hurricane’s next goal is early production from the adjacent Greater Lancaster Area (GLA), which is expected in the first half of next year.

It will start looking for a partner and operator for GLA after a year of output using the Aoka Mizu floating production and storage unit (FPSO)”This deal (on GWA) does not change that aspiration. What this deal does, is it means that we are in a much stronger position to negotiate with a future potential partner (for GLA),” said Hurricane Chief Executive Robert Trice.

One of the wells on the GWA, due to be drilled next year, will be tied back to the Aoka Mizu, allowing for the crossreading of data on the two areas to gain clues about future production.

Hurricane also hopes that linking the two projects will double the Aoka Mizu’s capacity to around 40,000 barrels per day.

Hurricane hopes to confirm by 2025 that both projects will add net reserves of 750 million barrels to its portfolio.

“In our view, this is a major step forward with a credible industry player transacting ahead of first oil from Lancaster,” RBC said in a note about the GWA deal.

Centrica owns 69 percent of Spirit Energy, whose other shareholders comprise Stadtwerke München and Bayerngas GmbH.

Additional reporting by Ron Bousso; editing by Jason Neely and Kirsten Donovan

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