Hurricane Energy has agreed a deal with investment bank Stifel Nicholas Europe Ltd to gain access to flexible working capital as it aims to bring its Greater Lancaster discovery on stream in the next two years.
The UK based oil and gas firm said it had entered into a deed of warrant grant under which Stifel will be entitled to subscribe for up to 25,000,000 ordinary shares of 0.1p each in the capital of the company.
Hurricane hope to bring on the Lancaster field, west of Shetland, in the first half of 2019.
It is being touted as one of the biggest untapped hydrocarbon discoveries in the North Sea of recent years.
An independent competent persons’ report recently found the field held best estimate recoverable volumes of 523 million barrels of oil.
In a statement, Hurricane said that in order to maintain the first oil timetable the company has committed to, and plans to further commit to, certain pre-sanction long lead items.
These include commencing work on the FPSO and mooring buoy, ordering the fabrication of key subsea components such as Christmas trees, and undertaking certain geotechnical and geophysical studies in relation to the proposed location of the FPSO.
By committing to these expenditures, due to be incurred at the end of Q2 this year, the company said it will “reduce the risk” that key equipment will not be available for installation during the weather window next summer.
Capex to bring the project’s early production system (EPS) on stream is expected to be approximately $467 million. This estimate includes all pre-sanction expenditures including front end engineering design studies, long lead items, project management and time writing to FID.
Dr Robert Trice, Hurricane’s chief exectuive, said: “We are pleased to have issued the Warrants to Stifel, our Joint Corporate Broker.
“We believe that the structure of the Warrant Issue provides the Company with access to a flexible working capital funding structure which would not be available through other means of financing.
“We expect that any proceeds raised will help preserve the company’s optionality over the timing and choice of funding route and will strengthen the company’s hand in discussions with counterparties.
“This demonstrates the board’s confidence that the company’s work on the EPS development remains on track according to the current timetable.”
The exercise price under each of the warrants is 95% of the volume weighted average price of the Ordinary Shares, calculated over the trading day prior to exercise.
Stifel will use reasonable endeavors to procure purchasers for the Ordinary Shares issued, if any, under the warrants. The warrants may be exercised in whole or in part by Stifel.
Unless the Hurricane consents to a continuation of the warrants, they will lapse on 31 May 2017. If the warrants are continued they will lapse on the final longstop date of June 30, 2017.
A block listing application has been made to the London Stock Exchange for the admission to trading on AIM of up to 25,000,000 Ordinary Shares.