26 May 2023
Hurricane Energy plc
("Hurricane", the "Company", or the "Group")
Full-year Results 2022
Hurricane Energy plc, the
Highlights
Financial results
· Revenues of
· Cash production costs of
· Generated
· Profit after tax for the period of
· Net free cash† of
· Full bond repayment made in July 2022 of outstanding Convertible Bonds leaving the Company debt free
Operations
· Production within guidance with average daily rate of 8,500 bopd (2021: 10,300 bopd)
· Excellent operational uptime of 97%, covering planned and unplanned events
· Crude oil sales of 3.2 Mbbls sold across six cargoes in 2022
· Agreement reached in March 2022 with Bluewater for an extension to the Bareboat Charter for the Aoka Mizu FPSO
· Following technical reassessment, the
Corporate
· In February 2022, Philip Wolfe took over from John Wright as Chairman, followed by Juan Morera being appointed as a shareholder nominated Non-Executive Director in March 2022
· In May and July 2022, Linda Beal and Robin Allan respectively were appointed to the board as Independent Non-Executive Directors
· In November 2022, following receipt of an unsolicited bid for the Company valuing each share at 7.7p which the Board concluded should not be recommended to shareholders, the Company launched a Formal Sale Process , the results of which were announced post period
Post Period
· In March, following the FSP process, the Board recommended an acquisition of the entire issued, and to be issued, share capital of the Company by Prax Exploration & Production PLC, to be effected by means of a Scheme of Arrangement under Part 26 of the Companies Act 2006 (the Scheme), valuing each share at up to
· Shareholder and applicable regulatory approvals for the recommended acquisition were received in May 2023
· The Court Sanction Hearing to consider the Scheme is scheduled for 7 June 2023. The Scheme remains subject to certain other conditions, including sanction by the Court at the Court Sanction Hearing and the delivery of a copy of the Court Order to the Registrar of Companies. Subject to the Scheme receiving the sanction of the Court, the delivery of a copy of the Court Order to the Registrar of Companies and the satisfaction (or, where applicable, the waiver) of the other Conditions set out in Part III of the Scheme Document, the Scheme is expected to become effective on 8 June 2023.
Antony Maris, CEO of Hurricane, commented:
"2022 has been both very challenging and a highly successful year for Hurricane, whilst also an extraordinarily volatile period for our sector. During the year, the importance of domestic energy security was exacerbated by the terrible events in
The resulting high oil price early in the year, combined with outstanding operational performance at the Company's
The delivery of a technically skilled and commercially efficient, debt-free Company enhanced our industry reputation and attracted outside investor interest.
All this is a great credit to the team's ability and commitment which, given the challenges of the last few years in particular, have delivered full value and a great return for Shareholders."
†Designates a non-IFRS measure. See Appendix B to this announcement for definition and reconciliation to nearest equivalent statutory IFRS measures.
Contacts:
Hurricane Energy plc Antony Maris, Chief Executive Officer communications@hurricaneenergy.com
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+44 (0)1483 862 820 |
Stifel Nicolaus Europe Limited Nominated Adviser & Joint Corporate Broker Callum Stewart / Jason Grossman
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+44 (0)20 7710 7600 |
Investec Bank plc Joint Corporate Broker Chris Sim / Jarrett Silver / Charles Craven
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+44 (0)20 7597 5970 |
Vigo Consulting Public Relations Patrick d'Ancona / Ben Simons
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+44 (0)20 7390 0230 |
About Hurricane
Hurricane has a 100% interest in and operates the
Visit Hurricane's website at www.hurricaneenergy.com
Inside Information
This announcement contains inside information as stipulated under the market abuse regulation (EU no. 596/2014). Upon the publication of this announcement via regulatory information service this inside information is now considered to be in the public domain.
Competent Person
The technical information in this release has been reviewed by Antony Maris, Chief Executive Officer, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Mr Maris is a petroleum engineer with more than 35 years' experience in the oil and gas industry. He has a B.Sc.(Eng.) Petroleum Engineering (Hons) from the Imperial College of Science and Technology (University of
Standard
Reserves and Contingent Resource estimates for the
Chairman's Statement
Dear shareholder,
I am pleased to present the 2022 annual report for Hurricane Energy, the first year of my chairmanship.
2022 was a busy and important year for Hurricane, and 2023 to date has been transformational for the Company, as we hope to complete the recommended acquisition of Hurricane by Prax Exploration & Production PLC (Prax) (a wholly-owned subsidiary of State Oil Limited) imminently.
The terrible events in
Operationally and commercially 2022 was a strong year for the Company. Production averaged 8,500 bopd from the
Having repaid our debt and established a firmer footing, the Company considered its options in terms of increasing production at
In November 2022, following receipt of an unsolicited bid for the Company valuing each share at 7.7p which the Board concluded should not be recommended to shareholders, and with our largest investor, Crystal Amber, being clear that they wished to monetise their holding in Hurricane and would not support an investment-led growth strategy, the Board launched a Formal Sale Process.
This thorough and exhaustive process culminated in the Board recommending an offer from Prax. Should the Scheme be sanctioned by the Court, I believe Hurricane has an exciting future as part of the wider Prax organisation.
During what has been an exciting but also challenging period, I would like to thank our staff, the Board and our advisors for their continuing hard work during a particularly busy and uncertain time for the Company.
Philip Wolfe
Chairman
25 May 2023
Chief Executive Officer's Review
"A year of continued strong delivery"
Introduction
2022 has been both highly challenging and a highly successful year for Hurricane, whilst also an extraordinarily volatile period for our sector. During the year, the importance of domestic energy security was exacerbated by the terrible events in
The resulting high oil price early in the year, combined with outstanding operational performance at the Company's
Alongside this, working closely with our FPSO operator, we delivered superb uptime performance and produced towards the upper end of our annual production guidance. The field has now produced more than 15 million barrels.
With Hurricane finally underpinned by firm financial foundations, debt-free and with significant cash in hand, we devoted more time to addressing the future of the Company, prioritising the best investment opportunities that could add significant value for shareholders. This, however, attracted attention from outside investors at a time when our largest shareholder had also indicated its desire to monetise the value of its shareholding and that it would not support an investment-led growth strategy.
Following an unsolicited offer for the Company, the Board decided to launch a Formal Sale Process (FSP), which, at the end of a thorough and exhaustive process, delivered an offer from Prax Exploration & Production PLC (Prax). The Court hearing to sanction the Scheme resulting from that offer is scheduled for 7 June 2023.
Operational review
The year saw a very strong operational performance by the Aoka Mizu FPSO at the Company's
During the period there were six cargo liftings totalling 3.2 million barrels delivering revenues of
Over a two-day period in May the Company conducted several flow performance tests on the P7z well that involved temporarily reducing the flow rate from the P6 well. The data obtained will be useful in refining production forecasts for P6. In September the planned annual maintenance shutdown was carried out on the Aoka Mizu with production being successfully restarted ahead of the originally anticipated timeframe.
As a condition of the approval from the Regulator for below bubble point production, renewed production, flare, and vent consents are applied for on an ongoing three-monthly basis. During December 2021, the well gauge pressure reached and declined below bubble point. No production issues arising from reaching bubble point have been observed to date. The Company continues to monitor this closely and has continued to receive the required consents from the Regulator on a three-monthly basis.
Management's production guidance for the full calendar year 2023 is 5,900 - 7,100 bopd. This assumes FPSO production planned uptime of 96.5% and production from the P6 well alone on artificial lift via an electrical submersible pump (ESP). Guidance also includes the impact of an annual maintenance shutdown, anticipated to occur during Q3 2023.
Hurricane concluded positive negotiations with Bluewater (Aoka Mizu) B.V. (Bluewater), the owner of the Aoka Mizu FPSO, with regards to an extension and announced in March 2022 that it had signed a contract with Bluewater for an extension to the Bareboat Charter beyond the original expiry date of 4 June 2022.
The key terms of the extension are:
1. The charter was extended to cover the remaining economic life of the
2. Either party can give six months' notice to terminate the charter.
3. The existing day rate and tariff for the vessel remained at
4. Hurricane agreed to establish a secured deposit account of up to
This was an important step forward. It was key that Hurricane and Bluewater found a mutually acceptable deal to enable the Company to continue production beyond repayment of the Convertible Bonds.
Alongside ongoing production operations, the Company evaluated the possibility of drilling an additional production well, the P8 well. Although first discussed with the Regulators in 2021, in early 2022, when the Company recognised that not only would it clear its debt but also potentially have sufficient funds to both fully cover the cost of a new well in
The originally approved development plan included flaring as the approved gas disposal mechanism and, under the NSTA approval of the amendment to this plan, allowed for production below the bubble point.
The Company has worked hard to reduce its emissions and had significant success in achieving reductions through the combined hard work and efforts of our team and Bluewater. Hurricane is fully cognisant of the increased scrutiny and oversight in this area and continues to look at ways of further reducing our overall environmental footprint, where it is economically and commercially viable to do so. However, being fully aware of the challenge concerning flare volumes and the impact that any additional production would have, the Company worked tirelessly with both OPRED and the NSTA to address the environmental impact of new investment.
We believe that the project is consistent with the requirements placed upon Hurricane to maximise economic recovery as part of the OGA Strategy's Central Obligation 2a. Whilst the project would lead to a short-term increase in emissions, we also believe we are fully aligned with the OGA Strategy's Central Obligation 2b, which is to assist the Secretary of State in meeting the country's Net Zero targets.
Interaction on this latter point has been detailed, and rightly both challenging and highly scrutinised. The situation Hurricane faces is that the retrofitting of a new gas export or disposal system to the existing development is technically challenging, with a high capex requirement. The expected recovery of gas from an additional well, including the benefit of the extended life of the field, was such that the economics of the investment were below the threshold considered appropriate for Hurricane to commit to such a project.
We are fully aware of the challenge the NSTA faces in terms of the interaction between the competing objectives of maximising economic recovery whilst reducing emissions. The Company therefore offered that all incremental emissions from the new well (including those associated with the extension of the life of the field) would be covered by verifiable carbon offsetting.
The informal feedback from the NSTA during the six months of interaction was that, even where there is no technical and economically viable solution to mitigate the emissions that is reasonable in the circumstances, then the NSTA still may or may not grant the consents when requested.
The project and the level of financial commitments are of major significance to the Company, particularly given the risk associated with continued performance of the existing single well. Therefore, whilst the Company believes the proposed P8 project would be within the regulatory guidance, the Board has concluded that, in the absence of any comfort from the Regulator, the additional financial commitments to offshore equipment suppliers and the associated financial risk of proceeding with P8 was too great.
In April, the GWA Joint Venture (JV) announced that it had reassessed its understanding of the
In June, Hurricane reported that it had determined that further appraisal and development costs to reach an economic development on the
In addition, in September 2022 the Company determined that the costs required to further evaluate the
We have delivered all the required information and data to the Regulator and these assets have been relinquished. Activities to close down the JV are ongoing, and this is anticipated to be completed during 2023.
Decommissioning Activities
In early 2022, in accordance with the provisions of the Petroleum Act 1998 and related guidance, Hurricane and Bluewater submitted for the consideration of the Secretary of State for Business, Energy and Industrial Strategy, a draft Decommissioning Programme for the Lancaster Field FPSO. The draft was published to allow interested parties to be consulted on such decommissioning proposals well in advance of forecast cessation of production operations.
Health and Safety
In 2022 Hurricane delivered excellent HSE performance with no Lost Time Incidents or Recordable Incidents throughout the year, and no spills to sea and no loss of containment events. The Lost Time Incident Frequency Rate (LTIFR) for 2022 was nil compared to 1.71 for 2021 and 1.29 for 2020 (figures are per million man-hours).
Throughout the year, the impact of COVID-19 on our operations reduced significantly through the effectiveness of the Government's vaccination programme and relaxation of Government and Health Protection COVID-19 Guidelines. Two occupational illness cases were recorded where occupational transmission of COVID-19 occurred. We retained offshore COVID-19 testing capability, the ability to quarantine positive cases and repatriate confirmed positive COVID-19 cases to shore via our Central Medical Emergency Dispatch (CMED) aviation provider. Where there have been any suspected or confirmed cases offshore, medics have acted promptly to ensure anyone affected was isolated and treated in conjunction with advice from Bluewater's topside doctor. Dedicated Aviation Contractor CMED flights, with attendant paramedics were retained to repatriate suspected or confirmed COVID-19 cases back to shore for further assessment and treatment where necessary. We are pleased to report that COVID-19 did not adversely affect safe operations throughout the year.
Key activities undertaken throughout the year included continued safe production from the Lancaster Field with Bluewater's Aoka Mizu FPSO, completion of our annual planned maintenance shutdown for safety and production critical maintenance, completion of the Deep Cygnus subsea inspection, repair and maintenance (IRM) scope in August 2022 and successful recovery of a fishing net left at the location of the Whirlwind well head. This enabled completion of the seabed clearance at Whirlwind 205/21-5. All this work was completed without incident.
ESG
Despite the challenges the year has provided, Environmental, Social and Governance ("ESG") remains a key area of scrutiny in the Company. In June 2022, Hurricane published its third standalone ESG report, covering the approach to ESG and performance across its operations for the 2021 calendar year.
During 2022, our Scope 1 greenhouse gas emissions were 110,576 tonnes CO₂e, or 35.8 kg/bbl on an intensity basis. This compared with 139,584 tonnes CO₂e, or 37.2 kg/bbl in 2021, and 210,884 tonnes CO₂e and 41.5 kg/bbl in 2020.
These emissions meet the OEUK Scope 1 definition and include CO₂ as well as other greenhouse gases specified by the Kyoto Protocol. These figures are based on Intergovernmental Panel on Climate Change's (IPCC) Fifth Assessment report.
Currently, associated gas production from the Lancaster EPS is partially used as fuel gas for the Aoka Mizu FPSO, with the remainder flared under the consent within the approved Field Development Plan Addendum. We remain fully cognisant of the increased scrutiny and oversight in this area and are committed to continuing to look at ways of further reducing this figure and our overall environmental footprint in 2023 and beyond where it is economically and commercially viable to do so.
Reserves and resources
Since 2021, following the complete re-evaluation of the
This demonstrates an excellent understanding of what we have and how to extract it safely, efficiently and at the best value. In addition, based on our performance and interaction with them, the NSTA has agreed, without the need for a lengthy process to amend the formal Field Development Plan, to increase the pressure below the bubble point we can produce to - up to 600 psi from 300 psi.
This change in our depletion management regime and the incorporation of the oil volumes potentially present in the Victory and Rona sandstones, which onlap the
Hurricane elected to retain ERC Equipoise Limited (ERCE) to update its Competent Person's Report (CPR) on the Reserves and Contingent Resources of the
While the latest CPR shows an increase in the reserves, these reserves will largely be produced in the "tail" so are low contributors to value. We will continue to review trends in production decline, pressure, and water cut that may impact future production and the level of reserves.
In the ERCE CPR, ERCE has evaluated the Reserves for the field, assuming the effective date of 31 December 2022. The estimates of Reserves and the economic limit in each case are summarised in the table below.
Hurricane |
Gross Reserves |
Net Attributable Reserves |
||||
100% and operator |
1P |
2P |
3P |
1P |
2P |
3P |
Reserves (MMstb) |
4.1 |
6.6 |
10.3 |
4.1 |
6.6 |
10.3 |
Economic Limit |
Dec-2024 |
Feb-2026 |
Nov-2027 |
Dec-2024 |
Feb-2026 |
Nov-2027 |
A summary of the movements in net attributable 2P Reserves as compared to the previous CPR (effective date of 31 December 2021) is as follows:
|
Net attributable 2P Reserves (MMbbl) |
At 31 December 2021 |
5.8 |
Produced volumes in 2022 |
(3.1) |
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Change in assumptions and economic life |
3.9 |
At 31 December 2022 |
6.6 |
ERCE has also updated its estimates of 2C Resources (Development Unclarified), which require further drilling to convert to Reserves. These are set out in the table below:
Hurricane |
Gross Contingent Resources |
Net Attributable Contingent Resource |
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100% |
1C |
2C |
3C |
1C |
2C |
3C |
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(MMstb) |
(MMstb) |
(MMstb) |
(MMstb) |
(MMstb) |
(MMstb) |
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8.3 |
31.6 |
82.7 |
8.3 |
31.6 |
82.7 |
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New Business Opportunities
In addition to considering investing further in the Lancaster Field, the Company has been actively pursuing potential opportunities outside the Company's current asset base.
Focusing on the UKCS, the Company has continued to evaluate a number of farm in opportunities, acquisitions and mergers. Hurricane's management and staff have extensive experience in both oil and gas, through all stages of the asset life-cycle, and therefore the scope covered a range of new oil and gas investment opportunities. Should the Prax transaction complete, we will continue to look for both asset and corporate level opportunities that will help diversify our asset base, deliver value to shareholders, and strengthen the Company for the future.
Despite the volatility in commodity prices, and the uncertainties these create, Hurricane believes that its strong balance sheet, technical and operational expertise, and proven track record of capital project delivery offer a strong competitive advantage among its peer group.
Formal Sale Process
Following receipt of an unsolicited offer in mid-2022 and after a period of engagement with the offeror, Hurricane received a follow-up offer from that offeror which the Hurricane Board concluded should not be recommended to Hurricane Shareholders. Thereafter, on 2 November 2022, Hurricane announced the initiation of a FSP, to establish whether there was a bidder prepared to offer a value that the Hurricane Board considered to be attractive, relative to the standalone prospects of Hurricane as a publicly traded company and accordingly one that should be recommended to all Hurricane Shareholders. The Board appointed Stifel Nicolaus Europe Limited as its independent financial adviser with regards to the FSP.
The FSP was marketed to a wide audience of potential acquirors with an interest in acquiring assets on the
Reduction of Capital
Alongside the FSP, the Company also committed, that if the FSP did not result in a transaction, to commence a significant capital return programme with up to
The High Court approved the Reduction of Capital on 31 January 2023 with the sealed court order subsequently filed with the Registrar of Companies. This completed the Reduction of Capital process, allowing the Company to make capital returns to shareholders and supporting the FSP.
People and operations
This year has been another challenging one and I would also like to express my thanks to all our colleagues for their hard work, professionalism, and dedication. Hurricane's operational delivery since start-up of the
Since 2021, following the complete re-evaluation of the field and its performance, the Company has been consistently in line with its production guidance, announced annually, and its cost base has been very stable year on year through the hard work of the team to reduce and remove cost pressures, rising mainly as a result of macro-inflationary pressures.
Following the Government's relaxation of COVID-19 precautionary measures, we reopened the office in February 2022, returning to a hybrid working arrangement preserving some measure of home working. However, we have not forgotten the lessons learnt from the pandemic where we actively encouraged flexible working recognising that employees may have responsibility for childcare, home schooling, family members as well as other obligations. We continue to look at what works best as greater pressures for more interactive office-based work grows.
Outlook
When I joined Hurricane, my priority, working closely with the senior team, was to focus on creating value for shareholders despite the huge technical and financial challenges we faced. The offer from Prax shows how well we, as a team, have done.
Technically, we have demonstrated excellent operational understanding and found ways to improve recovery despite the financial limitations. Commercially, we have cleared our debt, provided a firm financial footing for assessing future opportunities and kept control of our costs despite inflationary pressures.
All this has built an excellent reputation across our industry and attracted outside investors wanting to take advantage of what could we bring to them.
Antony Maris
Chief Executive Officer
25 May 2023
Chief Financial Officer's Review
"A year of continued recovery and consolidation"
Highlights
|
2022 |
2021 |
Production |
3,089 Mbbl |
3,748 Mbbl |
Production rate* |
8,500 bopd |
10,300 bopd |
Sales volumes |
3,226 Mbbl |
3,576 Mbbl |
Revenue |
|
|
Average sales price realised |
|
|
Cash production cost per barrel† |
|
|
Free cashflow† |
|
|
Net free cash† |
|
|
Net debt† |
NIL |
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Underlying profit before tax† |
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Statutory profit after tax |
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|
* Rounded to nearest 100 bopd
† Non-IFRS measures. See Appendix B to the Financial Statements for definition and reconciliation to nearest equivalent statutory IFRS measures.
Overview
2022 was a year of continued recovery and consolidation for Hurricane. The first half of 2022 was an extraordinarily volatile period for our sector due to surging oil prices, exacerbated by the terrible events in
Over 3.2 million barrels of
Hurricane completed its repayment of Convertible Bonds during the year, with a final payment of
Although uncertainties remain, with oil prices still supportive and a debt free position, Hurricane is in a strong financial position.
Revenue
Revenue recognised for the year was
The average netback to the contractual Brent price was
Cost of sales
Total cost of sales was
Excluding the revenue-linked incentive tariff, cash production costs per barrel increased from
Impairment of intangible assets and GWA licences
The overall strategic intent of the GWA Joint Venture has previously been the exploration and appraisal of the GWA licence areas, to assess hydrocarbon resource and commercially producible reserves, with the aim of producing reserves and ultimately identifying a fit for purpose field development in line with the GWA Joint Venture objectives and MER
Hurricane together with its joint venture partner Spirit Energy has determined that further appraisal and development costs to reach an economic development on the discoveries in the GWA area within the remaining licence terms is not feasible, and the licences for P1368(S) (
In anticipation of the licence
The aim going forward into 2023 is to bring the GWA JV to an orderly conclusion, with the main activity being the ongoing storage and disposal of joint property.
FPSO lease
In March 2022, Hurricane announced it had concluded an agreement with Bluewater to extend the charter of the Aoka Mizu FPSO beyond June 2022. The key terms of the agreement included:
· either party can give six months' notice to terminate the charter;
· the existing day rate and tariff for the vessel remains at
· Hurricane agrees to establish a secured deposit account of up to
The revised agreement therefore gives Hurricane the security and flexibility to cover production from the
Convertible Bond and debt management
During the second half of 2021, Hurricane completed a series of Convertible Bond buybacks leaving an amount of
Net debt and net free cash evolution:
The above chart shows net free cash of
Other profit and loss
Net general and administrative costs (G&A) before non-cash items reduced from
Cashflow
Net free cash† bridge
1. Including transaction costs
† Non-IFRS measure. See Appendix B to the Financial Statements for definition and reconciliation to nearest equivalent statutory IFRS measure(s).
The Group ended the year with
Free cash flow† for the year was
Restricted funds
As of 31 December 2022, the Group held
At the start of the year, the Group held
Included within restricted cash, cash equivalents and liquid investments is
Tax
The Group recognised a total net tax charge for 2022 of
Included in the net tax charge for the period is a tax charge of
Offsetting the EPL charge is a credit of
Tax losses
Due to the nature of the Group's business, it has accumulated significant tax losses since incorporation. The Group has
Access to these losses and allowances is likely to be severely restricted at the point at which trading activities end (which would include a permanent cessation of production from the Lancaster EPS). Furthermore, in the event of any corporate transaction, access to the brought forward losses may be restricted if trade was deemed negligible at the point of a change in control or there was deemed to be a major change in the nature or conduct of the entity's trading activities. Furthermore, at prevailing oil prices, the Group will continue to utilise its existing ring fence losses as the Lancaster EPS generates taxable profits.
Going concern
The Directors have considered both the going concern and longer-term prospects of the Group, and have a reasonable expectation that the Group will continue in operational existence throughout the going concern period. For further details and analysis, see the Going Concern section of the Strategic Report.
Richard Chaffe
Chief Financial Officer
25 May 2023
Going concern and the Group's longer-term prospects
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in this Strategic Report. The Group ended the year with
Further details of the financial position of the Group, its cash flows and liquidity position are described in the Chief Financial Officer's Review; with the Group's off- and on-balance sheet commitments set out in notes 2.7 and 5.3 of the Group Financial Statements. In addition, note 5.8 to the Group Financial Statements includes the Group's objectives, policies and processes for managing its capital; and note 4.4 includes the Group's objectives concerning its financial risk management objectives; details of its financial instruments; and its exposures to credit, market and liquidity risk.
The Group monitors its capital position and its liquidity risk regularly throughout the year, with cashflow models and forecasts regularly produced and refreshed based on production profiles, latest estimates of oil prices, operating and G&A budgets, working capital assumptions, movements to and from restricted funds, and the Group's debt repayments. Sensitivities are run to reflect different scenarios including changes in reservoir performance, movements in oil price and changes to the timing and/or quantum of capital expenditure projects.
Assessment of going concern
Whilst each of the Principal Risks, which will be outlined in the 2022 Annual Report, has a potential impact on the business, the Directors' assessment of going concern focused on those that are the most critical to the Group's prospects, which are considered to be:
· Production delivery risks;
· FPSO and third-party infrastructure risks; and
· Oil price volatility
The Group's base case going concern assessment assumed the following:
· average Dated Brent oil price of
· no sanctioned capital or development projects;
· continued use of the Aoka Mizu FPSO throughout the assessment period; and
· production from the P6 well alone in line with approved guidance and the production profiles consistent with the most recent CPR
· a return of cash by the Company to its shareholders in the form of either
o a dividend of
o in event that the above acquisition is not completed, a return of
Under the base case scenario, the Group had sufficient headroom for a period of at least 12 months to fund ongoing working capital requirements.
Sensitivity analyses were also undertaken to reflect the following:
· a reduction to the forecast oil price curve of
· a 20% reduction to forecast production rates
Under the sensitivity cases above, both individually and in aggregate, the Group is projected to have sufficient cash to continue operating for a period of at least 12 months.
Reverse stress tests were also prepared to reflect additional adverse reductions in oil price and production to determine at what price or rate each would need to reduce to such that the Group would not have sufficient cash to continue operating for a period of at least 12 months. In the opinion of management, the likelihood of such a fall in price and/or production rate that would give rise to an inability to continue to operate over this period is remote.
Conclusion
As a result of the going concern assessment presented above, the Directors have a reasonable expectation that, taking into consideration the current macroeconomic situation, the Group has adequate resources to continue in operational existence throughout the going concern period.
Therefore, the Directors continue to adopt the going concern basis of accounting in preparing these consolidated financial statements and the financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
Assessment of the Group's longer-term prospects
The longer-term prospects of the Group are driven by its strategy and business model, whilst factoring in the Group's principal risks and uncertainties.
Assessment of the business is performed over a number of different time periods for differing reasons, which include an annual budget cycle (with reforecasts made as appropriate during the year) and a long-term corporate model which incorporates the latest annual budget and provides forecast cash flow detail, where appropriate, on a field-by-field basis along with cash flows incurred and generated at a corporate level. These forecasts take into account the level of unrestricted cash and cash equivalents at the latest practicable date of preparation of this review, together with the forecast cash flow generation from the Lancaster EPS (based on expected production rates and oil prices as outlined above).
Extending the base case assessment (using average Dated Brent oil prices of
As the Group is able to exit the FPSO charter giving six-months notice and incurring no termination penalties, it has additional flexibility should oil price and/or production rate give rise to a significantly shorter than expected remaining economic life of the Lancaster EPS, or other factors mean the EPS was operating significantly below break-even level. Furthermore, the Group has placed significant funds in Trust as security to cover estimated decommissioning liabilities for the EPS and FPSO.
Hurricane Energy plc
Group Financial Statements 2022
Group Statement of Comprehensive Income
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Year ended |
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Year ended |
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Notes |
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31 Dec 2022 |
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31 Dec 2021 |
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