Here comes the Hurricane

Hurricane floated on Aim in February 2014 and within five months had successfully drilled a horizontal well at its Lancaster fractured basement discovery, west of Shetland. That update, which revealed a pump-assisted flow rate of 9,800 barrels of oil a day, pushed the shares to a high of 45p, although the stock has since tracked Brent crude's downward trajectory.

Hurricane owns assets comprising 444m-470m barrels of 2C - that is, proven but undeveloped - resources and, unlike many of its North Sea peers, has no debt. This resource base was central to the recent fundraising, £44m of which was provided by oil-focused private equity fund Kerogen. Kerogen has also been awarded 23m warrants exercisable at 20p.

If all goes to plan, the money will allow Hurricane to refine the resource range and support the development of the Lancaster field. Management also believes the financing "fundamentally changes" the negotiating position with potential farm-out partners, ultimately likely to be one of the oil majors.

The timing could hardly be better. Massive capital expenditure cuts by North Sea explorers have devastated oil services companies, and had left Swiss offshore drilling contractor Transocean (US:RIG) without a home for its state-of-the-art Spitsbergen drilling rig. Hurricane has been able to secure the rig's use for under half the normal rate. Such a coup would have been unthinkable even a year ago. At the same time as Hurricane is undertaking this bout of exploration into early 2017, the oil price is forecast to recover some ground. That said, the combined capital and operating expenditure is unlikely to exceed $40 a barrel at Lancaster, meaning the field is cash generative even at current prices.

Farm-in agreements aren't going to be a walk in the park, given the majors' lower spending plans this year and next. Fortunately, Hurricane's board includes some A-list oil industry executives - including BP's former chief geologist, a one-time head of oil and gas at Royal Bank of Scotland and an ex-vice president of production at Petrofac - to assist with those negotiations or seek alternative routes to production. Chief executive and founder Dr Robert Trice, who cut his teeth at Shell and Enterprise Oil, also takes a hands-on approach to his role, and will be based at the rig for the majority of this summer's drilling.