This morning Hurricane Energy announced the flow test results from its Warwick West well, which is the third and last well from the 2019 drilling campaign in the Greater Warwick Area (GWA). The well confirmed the discovery of 43° API light oil and tested at a stable flow rate of 1,300bod on natural flow with less than 0.5% of water being produced. Hurricane and Spirit Energy are evaluating the results of the 2019 drilling campaign and further technical analysis will determine both the potential for GWA to be a single accumulation and its volumetrics. Our risked valuation of Hurricane stands at 102.8p/share, with GWA tieback valued at 3.5p/share and GWA full field development at 21.6p/share. Hurricane shares are trading at 37.5p after dropping c 20% this morning. This implies the market is not attributing any value to the GWA full field, even though an oil discovery was observed.
Warwick West is the last well of a three-well drilling campaign in the GWA, following the Lincoln Crestal well discovery. The well flowed for a total of 85 hours in different flowing periods, using an electric submersible pump (ESP) and under natural flow, while work continued to clean the well and evaluate the reservoir performance. A final flow period was conducted under controlled natural flow conditions achieving a stable rate of 1,300bod, lower than the natural flow rates found in Lancaster at 5,300bod and 6,520bod. A stable rate using an ESP could not be reliably measured. The well produced 43° API light oil, with less than 0.5% water. The oil API gravity is similar to Lincoln oil samples. The joint venture will now evaluate the results and further technical analysis will help determine the potential for the GWA to be a single accumulation, its volumetrics and longer-term developments, on which we will update our full GWA valuation.
Hurricane also announced it is making progress in better understanding the Lancaster reservoir, with average production for the rest of the year expected to be in line with guidance at c 11,000bod. The company expects to provide a further update later in December.