With the Aoka Mizu FPSO now on station and hooked up at the Lancaster field, early production system (EPS) first oil remains on track for the end of H119. Hurricane (HUR) is currently focusing on topside commissioning prior to start up, which will be followed by a ramp-up period to a targeted gross plateau rate of 20kbd. In addition to progressing Lancaster, the company has a full programme of activity in its neighbouring Greater Warwick Area (GWA), with a three-well E&A programme expected to kick off in Q219 at Warwick Deep. This accelerated GWA programme is being made possible by Hurricane’s 2018 farm-out to Spirit Energy. Our risked valuation stands at 102.3p/share (from 102.8p/share) as we remove Edison’s 5% capex cost contingency, roll forward NAV and adjust our short-term oil price assumptions (long-term Brent remains $70/bbl).
With the Aoka Mizu FPSO now successfully hooked up to the buoy, the focus shifts to commissioning, production performance and data gathering. Management guides at improving operational efficiency over the first six months of operation prior to stabilised production of 17kbd (net of operational downtime). We believe a minimum six- to 12-month period of data gathering will be required to begin to evaluate the long-term producibility of the reservoir.
The Transocean Leader semi-sub is expected to begin the three-well GWA drilling programme with the Warwick Deep exploration well, 205/26b-C. This well is designed to be drilled below structural closure and to prove deep oil and will also provide key data for the planning of the 2020 GWA appraisal programme. Next to be drilled will be the Lincoln appraisal well. One of the three GWA wells is expected to be tied back to the Aoka Mizu in 2020 for long-term testing.
Changes to our valuation are driven by the removal of EPS capex contingency (5%), rolling forward our NAV and a fall in short-term Brent price expectations, which are based on EIA forecasts. Our long-term (2022 onwards) Brent expectations remain at $70/bbl. Brent for FY19 falls from $73.7/bbl to $62.8/bbl and for FY20 from $71.9/bbl to $62/bbl. Our risked valuation is currently 102.3p/share; changes to our short-term financial forecasts are highlighted within this note.