UK-based oil and gas company Hurricane Energy said Friday it had signed a contract with Bluewater, the owner of the Aoka Mizu FPSO, for an extension to the bareboat charter beyond the current expiry date of June 4, 2022.
The FPSO has been producing oil from Hurricane Energy's Lancaster offshore oil field since 2019.
However, following a significant downgrade to the field's reserves estimate, Hurricane Energy last June said it would not the extend charter of the Aoka Mizu FPSO for a period of three years from June 2022 to June 2025 "on current terms," adding it was open to a shorter FPSO extension than the one originally agreed with the FPSO owner Bluewater. After months of discussions, an agreement seems to have been reached.
In a statement on Friday, Hurricane said that the charter was extended to cover the remaining economic life of the Lancaster field. However, the parties have agreed that either party can give six months' notice to terminate the charter.
The existing day rate and tariff for the vessel remain at $75,000 per day and 8% of revenue respectively.
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.
Apart from the FPSO charter extension Hurricane Energy said it had negotiated with BP Oil International, the buyer of its crude oil, a facility that will allow for cash to be advanced ahead of a lifting.
"This provides the ability to create more frequent cash receipts and assist with the company's working capital. The facility incurs a financing fee that is only payable if the company uses it," Hurricane said.
"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 optimize 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."