Hurricane Energy (LON: HUR) and its partner Spirit Energy have given up on the Warwick Area in the West of Shetland.
In a statement, Hurricane said that, following appraisal and development costs, development of the Warwick discovery within the remaining licence term is “not feasible”.
Hurricane is taking a $4.1m impairment in its accounts as a result.
Hurricane and Spirit Energy have relinquished the P2294 licence back to the North Sea Transition Authority (NSTA), following an earlier decision to hand back the Lincoln P1368 sub-area.
The pair first signed a deal to enter the Greater Warwick Area (GWA) together in 2018, with Spirit farming into 50%.
In July 2019, the highly anticipated Warwick Deep well did not encounter commercial rates of oil and gas.
Five months later, Hurricane announced the discovery of “light, mobile oil” at its Warwick West well, but shares sank as questions cropped up about its commerciality.
Elsewhere, Lincoln was hailed as a discovery in September 2019 and had been intended as a tie-back to the Aoka Mizu vessel, which is producing the nearby Lancaster field.
However Hurricane said the following March that it had been “unable to achieve regulatory consent” to undertake a field development.
CEO Antony Maris said: “”We have made this decision deploying the rigorous screening criteria we bring to all opportunities in terms of determining the most appropriate allocation of our capital to deliver the best value for shareholders.
“There is no reasonable expectation that the P2294 licence could generate any near-term cash realisation, thus voluntarily relinquishing the licence at this time allows the Company to focus its time and financial resources on alternative and more attractive opportunities.
“Following the recent May lifting we have updated our cash forecast such that if oil prices remain over $90/bbl we now forecast to have over $70 million of net free cash post bond repayment.
“As such we are looking to utilise this cash to generate the best return for shareholders at an acceptable level of risk.”
Hurricane, which has been subject to trials and tribulations following major downgrades to resources in the West of Shetland, said in April that it expects production life at its Lancaster field to cease around the end of 2023.
But higher oil prices have helped the firm, with 2021 pre-tax profits totalling $18.2m, reversing $571m of losses in 2020.
Publishing the results, Hurricane said it was “focused on building” its position and “increasing strength and value”.