Spirit Energy will invest in exploration and appraisal West of Shetland for the first time early next year after farming into 50 per cent of Hurricane Energy’s Greater Warwick Area.
Spirit Energy will fund a US$180 million (£139 million) campaign to drill three wells 100 km West of Shetland, to further prove up the potential of an area which holds an estimated 2 billion barrels of oil equivalent (boe) in prospective and contingent resources.
The three wells will be drilled in licences operated by Hurricane Energy. They will target the Lincoln discovery and the Warwick exploration prospect, which are estimated to hold 604 million boe of 2C contingent resources and 935 million boe of prospective resources respectively.
The transaction will be fully funded from Spirit Energy’s cashflow and gives the company access to one of the largest resource bases in Europe.
Should the well campaign and further tests in the area be successful, Spirit and Hurricane aim to progress Lincoln and Warwick towards full field development. At the development stage Spirit Energy would become licence operator, combining Hurricane’s expertise in the West of Shetland area with Spirit’s experience of operating assets on the UK Continental Shelf, including via floating production storage and offloading (FPSO) vessels which may be required for the development.
Chris Cox, chief executive of Spirit Energy, said: “Appraising the Lincoln discovery and exploring for new reserves in Warwick offers a tremendous opportunity for Spirit to participate in the early phases of resource maturation in one of the last known world-class oil development opportunities in the UK. We are looking forward to partnering with Hurricane Energy to progress these two West of Shetland licences.”
As part of the farm-in agreement Spirit Energy will fund 100 per cent of the initial drilling campaign. If these additional phases proceed, Spirit Energy will carry 50 per cent of Hurricane’s costs of the tie in of the well to the FPSO and pay a bonus payment of between $150 million-$250 million towards Hurricane’s costs of the full field development, contingent on a positive final investment decision.