REFLECTING on the success he has achieved in growing a firm started in his garden shed into a billion pound oil and gas business, Robert Trice says the crude price plunge of 2014 delivered a hammer blow that turned out to be a blessing in disguise.
The Hurricane Energy business he developed to pioneer the hunt for hydrocarbons in an under-explored zone West of Shetland floated on Aim in February of that year only to find the oil price tanking four months later.
Read more: North Sea firms slash jobs as confidence falls to record low
“That was not good; for us that was a Monty Python slap in the face with a wet fish,” recalls Mr Trice in a reference to the legendary comedy series. “We could not believe it.”
The slump was especially painful because Mr Trice was increasingly convinced he was right in his hunch that a layer of granite beneath the waters off Shetland could contain huge amounts of recoverable oil, although other firms had focused on shallower levels.
Hurricane expects to be able to produce from basement reservoirs by tapping into natural fractures in the granite through which oil could flow. This would not involve using hydraulic fracturing techniques.
With flow rates “running off the scale” from its latest well, Surrey-based Hurricane thought it had broken the back of the fractured basement basin only to find itself having to grapple with the fallout from an oil price drop that broke many firms.
But after taking a fresh look, Mr Trice and the small team he had assembled at Hurricane realised the turmoil in the oil and gas market had created opportunities, not least in the form of a big drop in the price of support services. Drilling rigs became available at a fraction of the day rates they commanded during the boom in North Sea activity supported by the long period of $100 per barrel plus oil that ended in 2014.
Hurricane has gone on to put itself in what looks like an extremely strong position by drilling wells that have resulted in estimates Lancaster could contain two billion barrels of oil with 500 million currently seen as economically recoverable.
Read more: Oil firm locates 'largest undeveloped discovery' in UK waters
Lancaster was first encountered by Shell in 1974 but Hurricane has done the geoscience and drilling work needed to confirm its potential while making further discoveries.
The company raised around £400m from investors in 2017 to fund work on an early production system (EPS) for Lancaster, which it expects to bring onstream in the first half. It suffered a glitch this week when a rope attached to a buoy that forms part of the EPS got snagged requiring the giant production vessel that will be used on the field to return to the Cromarty Firth. However, the startup timetable remains unchanged.
Looking ahead to celebrating the start of production offshore with a glass of lemonade, Mr Trice observes: “Without that fall in the oil price I don’t think we would be where we are today.”
But his response to the crude price plunge reflects an enterprising approach that is rooted in Mr Trice’s character.
He became interested in the fractured basement while spending an enjoyable 11 years at Enterprise Oil, before moving on after the firm was acquired by Shell.
“I’m not a big corporate guy. Enterprise was very entrepreneurial. It was taken over by Shell and I spent two years there but the culture was not for me, I’m an entrepreneur by nature.”
Mr Trice says he never had any doubts that Hurricane would come good. However, he enjoyed some good fortune in the early days when a cabbie who was driving him to Heathrow put him in touch with an entrepreneur, James Huddlestone, who provided valuable investment and co-founded Hurricane.
Hurricane has grown to command a market capitalisation of around £925m and has been considering moving from Aim to the main market.
Read more: Bumper oil deal fuels fresh interest in West of Shetland
But Mr Trice is confident it has not become too big to remain true to his philosophy.
Noting the company expects to grow its workforce to around 75 this quarter, he says: “I don’t consider that too big. We still maintain an entrepreneurial and minimum bureaucracy environment. Aside of corporate governance and other requirements we try and work smart and clever and we have a mentality of having no managers. In other words, anyone that’s in a managerial role has to be doing real work other than just pushing people or paper around.”
The geologist insists he is relaxed about the corporate governance requirements that come with life as a listed company.
“We don’t feel hemmed in. You know what your requirements are; you know what your corporate governance keeps you on track to do. You plan for that and you deal with it as just part of the business.”
Mr Trice reckons other firms did not spot the potential of the fractured basement because they preferred to do what they were used to doing.
“In the UK they have historically chased the conventional stand stone reservoirs. Their geology teams are trained in analysing sandstone reservoirs and they generally don’t have the exposure or the risk understanding of dealing with fractured reservoirs … You require a different approach and that’s from the bottom up.”
His faith in the fractured basement might lead Hurricane to develop operations overseas.
“The company was set up to demonstrate that the basin in the UK could work and we could take an exploration idea to production. Having proved that we could achieve that as a company we could do it again.
“We believe the basin is the world’s most under-explored play and there is a hell of a lot of opportunity.”
However, the success Hurricane has achieved has encouraged others to take a closer look at the opportunities available off Shetland.
While exploration activity hit record lows in UK waters last year, oil and gas consultancy Wood Mackenzie recently highlighted surging exploration interest in the West of Shetland area, where majors such as BP and independents including Siccar Point are active.
Spirit Energy, which is part-owned by Centrica, provided a huge vote of confidence in September when it bought into the Greater Warwick Area (GWA) acreage containing the Lincoln find made by Hurricane and the Warwick prospect. It agreed to fund a $180m drilling campaign.
Noting the approach from Spirit came out of the blue, Mr Trice enthuses: “The beauty is it’s allowed us to have two projects going on in parallel (Lancaster and GWA).”
The renewed fall in the oil price since October does not trouble the 58 year old.“We can make real money at north of $40 a barrel.”
He believes there are grounds for optimism about the future of the UK North Sea, as the industry emerges from a deep downturn.
“We have been through a shocking time since 2014 but the vibe is that people are looking more positively and doing far more than they were; there’s no question of that.”
Across the wider North Sea area there is still a “very material resource” to bring to the market.
“With the concept of Maximising Economic Recover and what the Oil and Gas Authority is doing we have the target and the desire to grow the reserve base in the UK. The foundation is there, whether it’s executed is down to oil companies.”
Happy to indulge a fascination with rocks that he developed as a youngster, Mr Trice is having great fun at Hurricane. The only source of frustration seems to be that he has been left with little time of late to pursue hobbies that range from Karate to table top strategic gaming.
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