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Hurricane Energy posts loss of US$625.3 million

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Hurricane Energy, the operator of a number of offshore licences on the UK Continental Shelf, West of Shetland, has recorded a loss for 2020 of US$625.3 million, including impairment charges totalling US$567.1 million in respect of the Lancaster field and the company’s exploration assets and an associated deferred tax write-off of US$54.2 million.

An internal technical review of the Lancaster field reservoir model resulted in significant downgrades to Lancaster's reserves and contingent resources. This revised interpretation was broadly consistent with a Competent Person’s Report by ERC Equipoise published in April 2021, and also negatively impacted the resource potential of the company’s other discoveries.

Net free cash of US$111.4 million at 31 December 2020 (31 December 2019: US$133.6 million) was significantly less than anticipated due to lower oil prices caused by the COVID-19 pandemic as well as lower Lancaster production than anticipated. Net debt at year-end was US$118.6 million (31 December 2019: US$96.4 million).

If duly approved and implemented, a proposed financial restructuring, announced in April 2021, is expected to take effect in June 2021.

Antony Maris, CEO of Hurricane, commented: “This has been a profoundly difficult period for Hurricane and its stakeholders. The understanding of the West of Shetland fractured basement play has changed significantly. As a result, the potential of the Lancaster field is much smaller than originally thought and cannot support the level of debt in the company which was sized for a much larger Reserves and Contingent Resources base.

Against this extremely challenging backdrop, the company has explored all potential options to resolve the company’s financial situation, with the proposed financial restructuring ultimately being deemed the best possible outcome. We understand the impact this will have on our shareholders and the strong feelings that have been expressed as a result, but this was a necessary move in order to secure the company’s future.

If the proposed restructuring is approved and implemented, we will focus our efforts on maximising Lancaster cash flows to pay down debt, as well as making the case for further development of our West of Shetland asset base.”

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