Hurricane Energy plc, the UK based oil and gas company, provides a trading and operational update ahead of its results for the year ended 31 December 2021. This information is unaudited, and subject to further review and adjustments.
Trading Update
• Operations
o Production for the final three months of 2021 averaged 10,000 bopd, within guidance
o Production and oil sales for the year ended 31 December 2021:
§ Production: 3.7 MMbbls (average of 10,267 bopd) v
§ Oil sales: 3.6 MMbbls across seven cargoes
o Aoka Mizu FPSO uptime of 99% during 2021
• Key financials for the year ended 31 December 2021:
o Revenue: $239 million (2020: $180 million)
o Average realised oil price: $67/bbl (2020: $35/bbl)
o Year-end total debt: $78.5 million following repurchase of $151.5 million of outstanding Convertible Bonds for cancellation during H2 2021
o Year-end net free cash(1): $50 million
o Year-end net debt(2): $28.5 million
Lancaster Field Operations Update
3. The 205/21a-7z ("P7z") well was not on production during December 2021
4. Expressed as total water produced divided by total fluid (oil and water) production
5. Pressure reported is the monthly minimum from well downhole gauge
6. December month average rate impacted by downtime arising from testing and pigging operations
During December, the well gauge pressure reached and declined below bubble point, in line with the previously guided timing of this occurring between late December 2021 and mid-February 2022. No production issues arising from reaching bubble point have been observed to date.
As of 15 January 2022, Lancaster was producing c.9,650 bopd from the P6 well alone with an associated water cut of c.39%.
The next cargo of Lancaster crude is anticipated to be lifted towards the end of January 2022.
Financial Update
As of 31 December 2021, the Company had net free cash(1) of $50 million, compared to the last reported figure of $127 million as of 30 November 2021. There were no liftings of Lancaster crude in December.
During December 2021, $73.5 million in aggregate principal amount of the Company's $230 million 7.50 per cent. Convertible Bonds due 2022 were repurchased and cancelled by a subsidiary of the Company for a total cash consideration of $70.3 million (including accrued interest). As a result of the repurchases of the Bonds in December 2021, and the $78.0 million tender offer which settled on 15 September 2021, the Company has generated a combined net saving of $29.5 million in debt repayment and interest charges. $78.5 million in aggregate principal amount of the Bonds now remain outstanding, resulting in net debt(2) of $28.5 million as at 31 December 2021.
The Company, in finalising its tax returns for the years ended 2019 and 2020, has made claims for R&D tax credits, including via the surrender of certain of its subsidiaries' brought forward tax losses. Should these claims be approved by HMRC, the Company anticipates a cash credit of up to c.$4.5 million to be received during Q2 2022.
The Company believes that net free cash provides a useful measure of liquidity after settling all its immediate creditors and accruals and recovering amounts due and accrued from joint operation activities, outstanding amounts from crude oil sales and after settling any other financial trade payables or receivables. It should be noted that the net free cash is calculated as at the balance sheet date and does not take into account future liabilities that the Company is already committed to but have not yet been accrued. As such, not all of the net free cash would be available for repayment of the remaining outstanding Convertible Bonds at their maturity in July 2022.
Antony Maris, Chief Executive Officer of Hurricane, commented:
"Despite the major challenges faced by Hurricane last year, the team has done a superb job at delivering excellent production performance and high uptime on the FPSO, as well as finding cost savings. All this has been done while at the same time maintaining high levels of HSSE performance, which is always the first priority for the Company.
"Oil prices, while volatile, have been stronger in the second half of the year and, combined with the impact of the bond buybacks, production performance and cost reduction measures, we are optimistic that the ability to repay the bonds in full at maturity is now within reach.
"Given our current prediction of performance and assuming oil prices continue to be within the range experienced over the past month, we believe that post clearing our bond debt Hurricane will have between $8-38 million of net free cash at the end of July 2022. This needs to cover any subsequent working capital requirements until revenue is received from the next lifting. The amount of net free cash will also be reduced by the level of escrowed cash that Bluewater, our FPSO provider, requires as part of any extension deal. We continue to engage with Bluewater and remain optimistic of finding a mutually acceptable deal that will enable the Company to continue production beyond repayment of the bond.
"As such, going forward we are working hard towards ensuring a confident future for Hurricane based upon a sustainable financial platform."
