I am usually just an observer on this site (Thanks for all the great discussions!), however I’ve just come across some info on Hurricane that I find quite disturbing so thought it was worth sharing.
When an asset goes into development the most important person to guide the strategic thinking is the reservoir engineer, in terms of planning for the optimal drive mechanism and therefore executing well placement that has the most commercial impact while minimising cost and risk. Hurricane’s Reservoir Engineering manager is a guy called Dan Bonter who is a Paleontologist by education and his previous role appears to have been in the geoscience department at RPS, so no experience as a reservoir engineer in an operator on a development. The Geoscience lead, Clare Slightam, also appears to have no more than a year of development experience in an operator but at least she is trained in the subject and is backed up by Robert Trice.
Realizing that the lead subsurface personnel in the company have no experience of developing a reservoir, then some of the poor historical decisions make sense. Two in particular:
On Lancaster they claim to have two producing horizontal wells - it is true they have two wells drilled and tied in but they drilled them so close together that in terms of extracting from the reservoir they are essentially the same well. This means that if one pulls water from the aquifer through a highly connected fracture then it will almost immediately be drawn in to the other well. Therefore, the second well (-7z) hasn’t really added to reserves but has increased the risk to the production. When this well was drilled the reservoir engineer, Dan Bonter, would have known they were in a highly connected fracture system so to place that well there when it adds nothing, in fact is detrimental, and at a cost I understand to be near $60M when the company was strapped for cash, highlights the complete lack of experience and understanding of reservoir behaviour & risk.
In the current GWA appraisal campaign the wells are planned as future development wells though it is clear there has been no future planning of what that development would be. The wellheads of the three wells could not be further apart which means any future development will be unnecessarily costly. The wells are spudded on the edge of the reservoir with vertical trajectories through the overburden, I get that the wells are drilled vertically to reduce cost but spudding them centrally in the reservoir with even a small inclination in each would bring them significantly closer together at minimal cost, saving potentially tens of millions in the future. To not have even considered this shows a complete lack of commercial understanding and foresight (brings into question Spirit’s due process as well).
Even though the assets are likely good these kinds of mistakes that lead to massive overspends will lead to constant requirement for more financing, effecting share price (like 2017) and potentially sinking the company.
When they were an exploration company, having a useless Reservoir Engineer they could maybe get away with but now to have him as lead with no oversight while developing a producing asset is unacceptable. For the senior leadership to allow this is a big red flag.
They have to bring in a more experienced reservoir engineer otherwise I’m out after this campaign.