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Hurricane Energy (HUR)

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Re: Hurricane Energy (HUR)

#144443

Postby Carcosa » June 8th, 2018, 10:15 am

dspp thanks for your 103338 and prior post. Seems a reasonable estimate given the subsequent info contained in the AR.

Peter
I don't see that it has much impact on "value".
Agreed not in the context of company 'value' but as a shareholder a 30% dilution is not welcome. Understand the need that to get where we are today/going' required those dilution terms. As far as retail investors go, other than a small minority, I do not believe the subject of dilution crosses people's minds. Institutional investors may be a different story. Those who benefit from the dilution may well find a need to sell shares in the open market (a little like Crystal Amber is doing at the moment) so this may well depress the share price.

Timing, company progress, price of oil and corporate activity are all factors which make predicting what will happen a futile exercise; what I would suggest however is that it is probably advantageous for retail investors to accumulate their final shareholding over the coming few weeks rather than leave it until later. But that would be timing the market which I have failed to do for my advantage for 25+ years!

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Re: Hurricane Energy (HUR)

#145016

Postby dspp » June 11th, 2018, 7:27 pm

The folks on the LSE board have spotted an updated Edison note giving an 81p/share valuation, using fully diluted numbers of shares, and for the current situation (i.e. impending EPS). This is up from the prervious Edison valuation of 78p/share.

This compares with my 12 Dec 2017 valuation 103338 that estimated 87p/share for the corresponding 'time now' situation (i.e. my table 1).

They come at it using discounted cash flows for one scenario, whereas I mostly come at it the rather simpler way of using $/bbl for different reserves categories and again one scenario. That means they can run a sensitivity analysis for different oil prices which is helpful. Both are valid approaches at this stage, and there are others as well. Anyway 78, 81, and 87p are all very close to each other in the context of HUR. But let's hope this game lasts long enough to take a look at the later valuations I set out.

regards, dspp

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Re: Hurricane Energy (HUR)

#148494

Postby dspp » June 28th, 2018, 12:04 am

dspp wrote:The folks on the LSE board have spotted an updated Edison note giving an 81p/share valuation, using fully diluted numbers of shares, and for the current situation (i.e. impending EPS). This is up from the prervious Edison valuation of 78p/share.

This compares with my [11] Dec 2017 valuation 103338 that estimated 87p/share for the corresponding 'time now' situation (i.e. my table 1).

They come at it using discounted cash flows for one scenario, whereas I mostly come at it the rather simpler way of using $/bbl for different reserves categories and again one scenario. That means they can run a sensitivity analysis for different oil prices which is helpful. Both are valid approaches at this stage, and there are others as well. Anyway 78, 81, and 87p are all very close to each other in the context of HUR. But let's hope this game lasts long enough to take a look at the later valuations I set out.

regards, dspp


I can see some of you are confused as to how to interpret my tables in my 11 Dec 2017 valuation (see link above).

Look at table 1, line 2, which shows $5/bbl for pre-FOIL EPS yielding a EV of $311m for that line. Do the same for the other lines, add it all up, divide by the fully diluted number of shares, fiddle with exchange rates, and you get £0.87/share. That's just a sum representing a pre-FOIL value and the only real wet-finger-in-air bit is the $/bbl bit for the different reserves classifications for each block/sub-block. Every other number is basically taken straight from reports (well, one is a bit of a fiddle, the sharp eyes will notice it).

Now look at table 3, line 2, which shows $14.65/bbl for post-FOIL EPS yielding an EV of $910m for that line. The point is that I did a basic DCF for 10yrs production at $25/bbl margin to get $14.65 which is simple maths in a basic spreadsheet. That is an increase in $/bbl for having got from the "pre FOIL" condition to the "post-FOIL" condition, i.e. a significant reservoir and production system derisk. Similarly I have set out a likely appraisal (drilling etc) programme and described the assumed 50/50 success outcomes (i.e. success at proving up the 50/50 volumes), which affects the $/bbl for each line item, and I have explained (simplistically) how it is paid for. That yields £1.98/share when all the line items are totted up.

In both these (and the third, table 4) cases what is being described is a very simplistic fair expectation value for the sum of all the reservoir assets if sold together in a trade sale at each stage along the derisking & proving up pathway. The share price could (in principle) be higher or lower on the day of sale, indeed I would ordinarily expect the share price to be lower than the EV per share (would you buy into an overpriced share ?). However the share price might go higher or lower for a whole variety of rational and/or irrational reasons. That's the whole point of a market.

There are many (very many) other ways of doing these calculations, but I am a bear of little brain, and not much spare time, and this is a freebie, so that is why I am putting up these simplistic versions. If you have better plain vanilla numbers (e.g. if you have run DCFs for cold-start developments at different oil prices), or if you have better purchaser-specific numbers (e.g. if you have figured out the ullage in the various pipelines, and have worked out the available value/avoided tariff/etc) then please post them (HERE) and I am happy to look at them and chew over them. Given the right incentive I will also do more work myself, but seriously I am busy elsewhere.

I suggest you also trawl through the other significant posts by myself and others as there is quite a lot of background info as to what we are each worried about, and that is a pretty good pointer as to what risks would worry anybody else knowledgeable in the industry. Risks = low price.

The timeline I sketched out could be easily 4-years long. A lot can change in that time, including everything shifting right by a few years. Or left. Or going completely wrong for endogenous or exogenous reasons. Or whatever. As of now this is just a hole-in-the-ground-story-stock. One I happen to think is interesting, but nonetheless not a slam dunk. Never fall in love with a stock.

regards, dspp

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Re: Hurricane Energy (HUR)

#148622

Postby ap8889 » June 28th, 2018, 1:58 pm

I rather enjoyed Dr Trice's CEO interview today. He is exuding quiet confidence, and lays out the situation nicely for the newcomer.

https://www.youtube.com/watch?v=QGF_G-U2qtk

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Re: Hurricane Energy (HUR)

#148678

Postby feste » June 28th, 2018, 5:52 pm

Hi ap8889,

Likewise ! Lots of helpful clarifications/confirmations, eg likely RNS-flow etc and some interesting comments re oil majors' mentality (buy it all, rather than piecemeal - if they can); life post farmout/sale, etc ('the FB world is our oyster' , to paraphrase), etc.

I was interested in Dr T's comment/slip that drilling options were all contingent on 'having revenue in the early part of next year' - no doubt mindful of the cash squeeze experience that is widely held to be responsible for the warrants issue.

There must be a reasonable lead time involved in the cycle from 1st oilflow, to filling up the 600,000bbl capacity Aoku Mizu (60 days at avge , 'slow ramp-up' 10K bopd, cet par 40 days at 15K bopd), then offload and sale via BP.

Surely 'revenue early part of next year' is only consistent with FOIL by / before end 2018, is it not ?

ATB

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Re: Hurricane Energy (HUR)

#148701

Postby NigWit » June 28th, 2018, 7:38 pm

It was a good interview but RT clearly said “if the reservoir performs as we expect”. I think that’s a huge “if” that investors should take seriously. I doubt if anyone on the message boards will mention it, especially if things go wrong. I hope and expect that all will be well but the share price tells another story so I think that those who have staked everything on Hurricane Energy should pause for thought.

I’m still in but not so nearly so heavyily I’ll as once was the case. I expect a small steady rise as things progress but, in my view, it will take serious corporate action before the rewards many dream of are realised.

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Re: Hurricane Energy (HUR)

#148768

Postby NigWit » June 29th, 2018, 9:27 am

I see the folks over on LSE have talked themselves around to the view that success is certain. I find this psychology fascinating. There have been lots of studies into this type of dangerous group-think starting with one concerning a movement called ‘The Seekers’ who formed in the 1950’s and believed they would be saved from a cataclysmic flood by aliens. They’re still around today.

https://en.m.wikipedia.org/wiki/When_Prophecy_Fails

I’m certain to be outcast for this but that doesn’t mean I don’t have confidence, just that it’s wise to maintain a level perspective, which starts from understanding one’s own psychological frailties.

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Re: Hurricane Energy (HUR)

#149889

Postby feste » July 4th, 2018, 9:56 am

Hi NigWit et al,

Crosspost from 'hiddendepths' on ADVFN on the strategic significance of the BP swap, which suggests that BP are coming around to the belief that 'there is value in them there WoS basements. Note too that BP reference the Clair field as a 'complex FRACTURED reservoir', which I think is a first for them...

…"This is an asset swap and can provide a rough handle on BP's assessment of its valuation of Clair. The deal seems to work strategically for both parties so I imagine that both believe they have a good deal; it doesn't appear that either party would be the prime mover.

BP are including their 38% of the Kuparuk pipeline, which adds more value to the Alaskan side of the transaction.

"The 39.2% interest in Greater Kuparuk Area had proved reserves associated with it of 190 million barrels of oil equivalent at the end of last year and produced 38,000 BOE a day, according to ConocoPhillips. The 16.5% interest in the Clair Field had 40 million BOE of proved reserves associated with it and produced about 3,000 BOE a day."

It is a bit of an eye opener to me that BP seem to equate the value of the share of Clair reserves of 40Mb with 190MB in Kuparuk and Clair's 3k b/d with Kuparuk's 38k b/d.

If these numbers are correct, and I haven't checked, it suggests to me that BP have totally bought into the fractured basement story and are assigning exceedingly high value to its West Of Shetlands acreage. I know that Clair has long been a large but problematic resource, which means it might be the field rather than the acreage where they see most value. But let's not forget that Clair is our Rona Ridge neighbour to the north. And its oil is not as good as Lancaster....

On the basis of this story alone, I am inclined to raise my target price for HUR by quite a way. I am convinced that BP plans to take out Hurricane once they have established that the concept works. But waiting ensures that they will have to pay a premium price. BP is rather risk-averse and it has long been their way to pay up when they're pretty sure of what they're buying into rather than pay a fraction of the price when they perceive a little more risk. (btw many years ago when working in Planning in BP, this approach drove me crazy as I saw opportunity after opportunity slip by.)…"

ATB

Moderator Message:
the relevant press release can be found at https://www.investegate.co.uk/bp-plc--b ... 00035043T/

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Re: Hurricane Energy (HUR)

#149891

Postby dspp » July 4th, 2018, 10:04 am

feste wrote:Hi NigWit et al,

Crosspost from 'hiddendepths' on ADVFN on the strategic significance of the BP swap, which suggests that BP are coming around to the belief that 'there is value in them there WoS basements. Note too that BP reference the Clair field as a 'complex FRACTURED reservoir', which I think is a first for them...

…"This is an asset swap and can provide a rough handle on BP's assessment of its valuation of Clair. The deal seems to work strategically for both parties so I imagine that both believe they have a good deal; it doesn't appear that either party would be the prime mover.

..........

On the basis of this story alone, I am inclined to raise my target price for HUR by quite a way. I am convinced that BP plans to take out Hurricane once they have established that the concept works. But waiting ensures that they will have to pay a premium price. BP is rather risk-averse and it has long been their way to pay up when they're pretty sure of what they're buying into rather than pay a fraction of the price when they perceive a little more risk. (btw many years ago when working in Planning in BP, this approach drove me crazy as I saw opportunity after opportunity slip by.)…"

ATB



Interesting. I don't know enough about Clair to comment greatly. Can you provide any links to public-domain technical literature that I can read and think about ?

regards, dspp

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Re: Hurricane Energy (HUR)

#149893

Postby PeterGray » July 4th, 2018, 10:29 am

Crosspost from 'hiddendepths' on ADVFN on the strategic significance of the BP swap, which suggests that BP are coming around to the belief that 'there is value in them there WoS basements. Note too that BP reference the Clair field as a 'complex FRACTURED reservoir', which I think is a first for them...

No that's not really true. Clair has been known to be both complex and fractured for a long time - which is why it's taken so long to develop. However, it is not a fractured BASEMENT field, as Lancaster is. It is the reservoir rocks overlying the basement that are fractured. I know of no suggestion that BP have reported recovering oil from the basement - or shown interest in doing so - so far.

There may well be a case that BP's increasing interest WoS makes a potential future bid for Lancaster (once proved) more likely, but at present I see no indication that they see the reservoirs as similar (other than being fractured)

Peter

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Re: Hurricane Energy (HUR)

#149909

Postby feste » July 4th, 2018, 11:13 am

Hi Peter,

Thanks for clarifying, I'd missed the 'not so nice' distinction between 'reservoir' and 'basement'. My bad !

ATB

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Re: Hurricane Energy (HUR)

#149912

Postby dspp » July 4th, 2018, 11:17 am

I think there is more to it than that, but it is a long time since I have read papers on Clair (hence request). The main issue is Clair oil is heavier and the sedimentary formations (that are the existing producers) are tight and fractured which makes things tricky.

Whether the underlying basement is also fractured I do not know, but if it contains similarly heavy oil then it would still not be comparable with Rona Ridge which is a light oil and (probably) a good water drive.

If there are links to good public papers on Clair I would appreciate them as my day job does not leave infinite time to hunt internet.

regards, dspp

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Re: Hurricane Energy (HUR)

#149914

Postby feste » July 4th, 2018, 11:18 am

Hi dspp,

..."Can you provide any links to public-domain technical literature that I can read and think about ?..."

I'll have to ask 'hiddendepths' to oblige, if he can. Geology is a closed book to me, Im afraid - as my reply just now to PeterG rather demonstrates ;-<

ATB

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Re: Hurricane Energy (HUR)

#149936

Postby hiddendepths » July 4th, 2018, 12:02 pm

hi dspp.

I've seen nothing technical on Clair for quite a while. Presumably you read the Bob Dudley speech from last September? I don't know how to post links on here but searching for Bob Dudley speech Offshore Europe will find it.

And the summary of what thy're doing with Clair at present is on their website under: upstream-major-projects/major-projects-2018/clair-ridge.html

Other than that, there have been plenty of allusions to its potential but nothing tangible or technical that I've spotted. My understanding is that a small amount of the Phase 1 oil was from basement but that was definitely not the prime target.

Sorry not to be more help! BTW I'm not a technical guru, just a retired oil analyst!

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Re: Hurricane Energy (HUR)

#149940

Postby dspp » July 4th, 2018, 12:08 pm

hd,

Thanks, but it was more SPE papers that I had in mind or similar. Old ones are just as helpful in this respect. They don't have to be BP ones as other parties worked on Clair issues for many years as well. It took 20-years to get it to the stage of an approved project and into very halting production.

Ditto I am interested in technical papers on Foinavon and Schiehallion as I feel I need to read around the area.

regards, dspp

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Re: Hurricane Energy (HUR)

#150014

Postby FredBloggs » July 4th, 2018, 5:14 pm

Thanks for the interesting comments and thoughts. My feelings from a semi lay person's perspective (downstream engineering) is that a direction of travel is emerging here. Shell's fairly recent licencing acquisitions are pretty much surrounding HUR's assets. Now we have BP pretty clearly having a change of heart regarding the future of their UKCS business in parallel to Shell's apparent re-thinking on the UK business. And just to the North at Clair Ridge we have these two super majors plus Chevron on board. Chevron themselves seem to be having a change of heart too, having taken down the for sale signs from their UK assets. I am probably adding 2+2+2 and coming up with 9 here. But I think a consortium bid and major full field development projects being steadily funded over the next decade here. Only remaining question now for me, is whether Dr Trice wants to keep a toe hold in the assets, or will he sail away into the sunset to develop the ideas he seemed to be brimming with recently when talking to Malcy?

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Re: Hurricane Energy (HUR)

#150033

Postby NigWit » July 4th, 2018, 8:36 pm

Hi dspp and others

I’m no Geologist either and, although I’ve read and absorbed most of what the company and Dr Trice have written and was at last year’s Crystal Amber conference where David Craig of Novus conducted an informative presentation, I concluded that ultimately Rob Trice is the expert with the best knowledge and so this investment inevitably comes down to trusting him.

The element of building trust that gives me pause is that there’s been no farm out or other corporate action yet all the majors have studied the data. I’m sure that’s what’s behind last year’s schism and board disagreements. If one believes that Trice is a hard bargainer who has eschewed low ball offers then trust in him follows and the investment is compelling but what if, on the other hand, the data just wasn’t convincing enough?

I’m sure the share price will rise as matters progress and it might even get overheated, (although I suspect the convertibles are impeding it now) but if you don’t have blind faith (and perhaps more dangerously if you do) then I agree with you that it’s just another hole in the ground project. It could reach Stifle’s fully de-risked price of nigh on £6 per share (@ Brent = $60) or, if the reservoir is unpredictable, it could be worth any number less than that, including nil.

I’ve not a lot more to contribute right now save to say that I heard on the vine that Richard Bernstein has become excited and started buying again. He tweeted as much anyway. He’s keen on monetisation so that may be a clue about why but I really don’t know.

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Re: Hurricane Energy (HUR)

#150075

Postby FredBloggs » July 5th, 2018, 7:46 am

Anyone else joining up the dots and seeing a picture emerging? Could be an interesting couple of days heading into the weekend.

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Re: Hurricane Energy (HUR)

#150078

Postby NigWit » July 5th, 2018, 8:08 am

There’s also a mention in the business section of The Times this morning and RB has tweeted. Maybe I was on to something yesterday.

If it’s proved that there have been takeover discussions then that would go a considerable way to alleviating any concerns about the quality of the reservoirs.

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Re: Hurricane Energy (HUR)

#150086

Postby feste » July 5th, 2018, 8:53 am

Hi NigWit,

Forgive me, am not understanding !

You write …"discussions ….. would go a considerable way to alleviating any concerns about the quality of the reservoirs..."

The oil hasn't flowed for Statoil, AFAIAA, how do 'discussions' address the concerns re 'groupthink' you were voicing a few days ago ?

Surely all that has happened (if, indeed it has) is that someone has seen a sufficient asymmetry of risk/reward to be willing to take a view.

Isn't that what we all (try to) do as investors ?

ATB


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