Troubled North Sea oil firm Hurricane Energy has struck a deal to extend the stay of the FPSO on its flagship Lancaster field.
The company has signed a contract with Bluewater, the owner of the Aoka Mizu, to allow the floating production vessel to remain on the field for the remainder of its economic life.
The original charter had been due to expire on June 4.
Hurricane (LON: HUR) previously said that had it been unable to secure an extension for the Aoka Mizu, it would lead to the company being wound down sooner than first thought.
Shares in the company soared off the back of the news. At the close of play on Friday they were trading at 11.7p a share, a 20% increase.
Under the terms of the deal the charter has been extended to cover the remaining economic life of the Lancaster field, the company said.
The existing day rate and tariff for the vessel remains at $75,000 per day and 8% of revenue respectively.
Either party can give six months’ notice to terminate the charter.
Hurricane has also agreed to establish a secured deposit account of up to $18.7 million, for the benefit of Bluewater, to cover the costs associated with the day rate for the six-month notice period and decommissioning in respect of the vessel.
In addition to the charter extension, Hurricane has negotiated with BP, which buys the crude from Lancaster, a facility that will allow for cash to be advanced ahead of a lifting.
It will allow for the creation of “more frequent cash receipts” and help with the company’s working capital.
In order to use the facility, a “financing fee” will be incurred.
Antony Maris, chief executive of Hurricane, said: “Securing the extension to the FPSO contract is an important next step forward. It was key we found a mutually acceptable deal that will enable the Company to continue production beyond repayment of the bond. Based on the current oil price and field performance predictions we forecast this to be at least 18 months from 4 June 2022.
“With production continuing in line with our projections, good uptime performance on the FPSO and assuming oil prices are in the range $90-110/bbl, we believe that post clearing our bond debt and after funding the Bluewater secured deposit account, Hurricane will have between $50-80 million of net free cash at the end of July 2022.
“This is an important moment for the Company. Against the backdrop of our demonstrable operational track record, financial discipline and the significant rise in oil prices, we are preparing Hurricane for the future. The UK Government’s renewed emphasis on security of supply is welcome. We are working hard to identify how best to optimise capital allocation in future activities to build further value for our shareholders, whether through further investment in our existing portfolio, or in new opportunities in the UK oil and gas sector, or both.”
Analyst Ashley Kelty, of investment bank Panmure Gordon, said it “is an encouraging step forward, and with high oil prices placing HUR in a position to repay the outstanding debt in the summer, the company should be able to move forward unencumbered”.
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