Kerogen Capital backs Hurricane Energy

The $63m transaction will make the Hong Kong-based manager the largest shareholder in the UK-based oil and gas company.

Kerogen Capital has agreed to invest £44 million ($63 million; €56 million) in new ordinary shares issued by Hurricane Energy, a UK oil exploration company. 

Upon completion of the transaction, the Hong Kong-based private equity firm will become the largest shareholder in the business with a 29.9 percent stake. It will have representation on Hurricane’s board and on a newly formed joint technical committee. 

Kerogen is investing in the business through its second vehicle, launched last year with a target of $1.5 billion. It had raised $515.76 for the fund as at January 2016.

Certain existing shareholders of Hurricane, including the current largest shareholder, will also participate in the equity subscription, which together with Kerogen’s investment will provide gross proceeds of £52 million to the company.

Hurricane's sweet spot lies in naturally fractured basement reservoirs. To date the company has made two significant discoveries, each with independently certified resources of around 200 million barrels of oil equivalent (mmboe). The average discovery size on the UK Continental Shelf was 20-23 mmboe over the same period. 

Kerogen’s capital injection will fund the drilling of two wells in 2016 at the Lancaster oil field, a wholly-owned and operated anchor project by Hurricane. The company says the funding allows it to secure the attractive oilfield service contract rates that are available in today’s market. 

“Hurricane represents an outstanding opportunity for Kerogen to participate in the exciting fractured basement play by gaining exposure to the future development of the Lancaster oil field and prospective adjacent areas,” said Jason Cheng, Kerogen’s co-founder and managing partner.

“We are now involved in funding five appraisal and development wells in the North Sea in 2016, underlining our continued commitment to high quality opportunities in today’s oil price environment.”

Completion of the deal remains subject to approval by Hurricane’s shareholders at a general meeting scheduled on 9 May 2016. 

Kerogen has about $1.9 billion in funds under management. It invested in UK-based Zennor Petroleum last August with an initial commitment of $100 million.