Hurricane Energy plc said investment allowances could offset its forecast £5 million bill under the new energy profits levy (EPL) from its operations at the Lancaster field, west of Shetland.
ENERGY PROFITS LEVY
In its monthly financial and operational report of 31 May 2022, the company added it was unable to determine the full impact of the EPL until the Government publishes full details of the new tax.
“Included in the forecast July net free cash balance above is a preliminary estimate of the liability up to the end of July 2022, totalling approximately $5 million, based on the information available to date.
“It should be noted that this estimate could change and be significantly higher or lower depending on the actual details contained within the legislation.
“As the EPL includes an investment allowance, should the company decide to invest in further development on its existing assets or development on assets following an acquisition, such investment would partially offset the EPL charge.”
FINANCES
The report showed Hurricane held net free cash of $139m (30 April: $92m).
A total of $78.5m convertible bonds remain outstanding and are due to be repaid in July 2022.
Following the repayment, and with the assumption that oil prices remain at over $90/bbl, at the end of July the company forecasts net free cash in excess of $75m.
If oil prices for the July cargo are above $120/bbl, the net free cash forecast is above $90m.
PRODUCTION
Overall production fell due to two-day tests over well P7z resulting in reduced oil flow from P6.
Data obtained will be used to refine production forecasts for P6 and evaluate potential future field development opportunities.
As of 14 June 2022, Lancaster was producing 8,700 bopd from the P6 well alone with an associated water cut of c.45%.
| P6 | P7z(1) | |
| Oil produced during the month (Mbbls) | 259 | 0.4 |
| Average oil rate (bopd) | 8,366 | 203 |
| Water produced during the month (Mbbls) | 201 | 9 |
| Average water cut(2) | 44% | 96% |
| Well gauge pressure (psia)(3) | 1,572 | n/a |
The 29th cargo of Lancaster oil of approximately 547 Mbbls was lifted on 24 May 2022.
STABILITY
Chief executive Antony Maris added that the company was looking beyond bond repayment to investment opportunities.
“Our industry works within the framework of long investment cycles and highly volatile commodity markets.
“Fiscal stability is key in supporting the investment decision making to meet the UK’s energy transition targets and the introduction of the EPL is unhelpful in that regard.
“However, as a potential investor in future UK oil and gas assets, we also stand to benefit from investment incentives/relief.”