Hurricane Energy (HUR)

[PeterGray]

I agree, HA. Clearly a few weeks ago we would all have wished for a fund raising at a higher price. However, I suspect they would have struggled to get it away when the price was 50p+ without a much bigger discount than has been achieved today. The end result may not be very different, even though things have looked pretty messy over the recent past!

I made a small further top up today - (my last I promise myself). Funding concerns over, unless they hit major technical issues with the EPS I'd expect a significantly higher valuation in a couple of years. And we could quite easily see a farm out, or even a buy out before then.

Critically, HUR have been able to go ahead with the next steps of a massive project alone, and not had to accept a poor value farm out. Having done that I would think that some potential farmin partners, or even purchasers, may need to reconsider their positions. Of course, they may well choose to sit it out for 2 years till the EPS is up and running to see what happens, but they will have to pay more then. Either way HUR is now in a position to move forward and I'm happy with the outcome.

Peter

[santy]

In the RNS release regarding bond offer it says -

"The Bonds will be issued at par and carry a coupon of 7.50 per cent. per annum payable quarterly in arrear in equal instalments. The Bonds will be convertible into fully paid ordinary shares of the Company (the "Ordinary Shares") with the initial conversion price set at US$0.5200, representing a 25 per cent. premium above the placing price of the Concurrent Equity Placement, being £0.32 (converted into U.S. dollars at a GBP/USD 1.30 rate).
Upon conversion of the Bonds, the Company may elect to settle its obligations by way of delivery of ordinary shares, payment of a cash alternative amount (calculated by reference to the volume weighted average price of an Ordinary Share over of a specified period) or a combination of the two."

what does this mean - 7.5% coupon to be payable quaterly.

Also are the bonds different than buying shares on the market ?

[PeterGray]

coupon of 7.50 per cent. per annum payable quarterly

Means that they get 7.5% ANNUALLY, split into 4 quarterly payments.

If you buy the bonds - and I expect there may well be a significant minimum quantity - you get the interest, but you also convert at a price 25% above the current SP - what you could buy shares for today. The interest over 3 years is approximately equal to the extra that you would pay over what the shares would cost you now. There are other differences - the company has the right to pay you in cash at the time of conversion instead of issuing shares, if they choose.

Peter

[dspp]

Updated HUR presentation Q3 here
https://www.hurricaneenergy.com/communi ... sentations

[Clitheroekid]

My take on it is that in theory the shareprice should stay near 32p until both the main placement ($300m) and the CBO ($220m) and the PI follow-on ($5m) are all confirmed which I am reading as being the Admission date of 24 July.

The $5m pre-emptive offer has now been pulled - http://www.proactiveinvestors.co.uk/com ... 81823.html

[PeterGray]

The $5m pre-emptive offer has now been pulled

Unless the price recovers sharply in the next few days!

[dspp]

That boils down to "RTFM". Good boys. Tight ship. Rightly or wrongly I topped up recently. Irrespective of formal FID and RNS they are cracking along with the critical path activities on the EPS. regards, dspp

[dspp]

If the prospective reserves estimates in the Hur areas of Rona Ridge are correct then I think there will be enough there to form a hub in its own right. That in turn means Hur is a one stop shop for any other major wishing to set up WoS for the long term. So I don't take it as a given that BP have any particular advantage in farm-in or acquisition talks. Indeed one can posit that BP are disadvantaged. That in my opinion is part of the reason why Hur has ended up on the go-it-alone pathway at this point.

Agree tucked away with big recommend to myself to ignore as much as possible !

regards, dspp

[dspp]

In case you missed it HUR put out an RNS saying FID has been made and all is proceeding on track
https://www.hurricaneenergy.com/communications/regulatory-news-service

· Lancaster EPS remains on schedule for first oil in 1H 2019
· Hurricane has taken the Final Investment Decision on the development of the Lancaster Early Production System
· Agreements now effective with Bluewater Energy Services for upgrade, lease and operation of the 'Aoka Mizu' FPSO vessel
· 'Aoka Mizu' now on tow to Dubai for upgrade work
· Rig contract signed with Transocean to complete already drilled EPS production wells
· Fabrication orders placed with TechnipFMC for SURF and SPS
· Development and Production regulatory approval expected shortly

"The Lancaster EPS is not only an essential step in planning for the full field development of the Company's Rona Ridge assets, but also represents a substantial development in its own right, with planned production of 17,000 barrels of oil per day.

[dspp]

Yes FB, I agree in this day and age the reality is that newsflow management is party of a board duty on an AIM-sized company. Irrespective of whether there is an underlying reason, which is a real shame but is the new reality. One has to be aware of the risk of a cheeky takeover bid, however slender.

I think that phrase "The Lancaster EPS is not only an essential step in planning for the full field development of the Company's Rona Ridge assets, but also represents a substantial development in its own right, with planned production of 17,000 barrels of oil per day." is meant to lay down a marker that (assuming the success case) the EPS puts HUR into a cash-generative stable position where the only people who can pressure them to hurry up on FFD are the OGA. Speaking of which there appear to be some unresolved permits " and once regulatory approval is obtained.""

Tucked in my sock drawer now.

regards, dspp

[dspp]

RNS out today https://www.hurricaneenergy.com/communi ... ws-service re listing of the Convertible Bonds as per the plan ....

regards, dspp

[dspp]

No, nothing new, just saying FID announced, bits on order, work being done, long term value, short term awkward, yada yada .....

[Clitheroekid]

There's a video on Malcy's blog featuring HUR, but I can't get it to play, sadly. Anyone listened to it and care to post anything of interest?

Well for me, as a relative newcomer to HUR, it was an interesting – and encouraging talk. Some of the key points were (and excuse me if these are already known, I’m not familiar with the detailed history):

1. They are fully on target, and fully funded through to first oil in the first half of 2019.

2. They’ve announced a rig contract and the fabrication orders have gone in.

3. There is estimated to be at least 1 bn barrels of oil, and he thinks nearer 2 bn.

4. He thinks the SP will be £1 `in the longer term’ (unfortunately he didn’t specify what he means by `longer’).

5. He thinks the reason the SP has been depressed is that many punters were hit hard by the recent capital raise at 32p and by the earlier warrant issue, and that they’re suffering from `indigestion’.

6. Overall he described HUR as an “absolute pot of value”. At the current SP the entire oilfield is valued at just £150m, which apparently equates to the anticipated annual profit on Lancaster alone.

I’ve been following HUR for a while, but like I suppose every `adventurous’ investor I’ve burned my fingers from time to time with small oil companies. However, I’ve read and heard enough now, and this talk was the final factor in persuading me to invest.

[dspp]

Yes CK, but Malcy knows no more than any of the other E&P professionals here, many of whom are in HUR. Malcy was pushing this at 60p and pushing this at 30p and everywhere in between. Malcy's job is to be a talking head. What Malcy does not go over is - what Nimrod has quite correctly pointed out here before is the risks, so be warned re hubris. For the record here are a few to ponder on:

TECHNICAL RISK
- The EPS is not finished & plugged in and the data has yet to be gathered. There is plenty of time for things to go wrong, and HUR doesn't have infinite cash to resolve problems if they do occur.
- Fractured reservoirs, be they basement or conventional, can go very badly wrong. That is exactly why there is an EPS required. I have personally seen fractured reservoirs basically not work.
- That last well didn't clean up properly in the time available. There may still be a mud issue to be resolved.

FINANCIAL / OWNERSHIP RISK
- Unitisation of four fields into (likely) two would be required before a conventional farmout, but that requires appraisal drilling which is not funded. Tricky.
- The fields may be so %^^&* large that HUR cannot develop on its own (I know they don't want to but hold on) which means they must develop with others, which means that a buyers strike can occur if there are too few others. Basically that is what happened in the last year and it can happen again.
- To which is linked regulatory risk.

MACRO
- Sentiment towards oil stocks is changing
- Sentiment towards UK sector can change
- Stuff happens

Don't get me wrong. I think this is a sufficiently good prospect and there is an awful lot I like about this that I have taken a (for me) big exposure. But it is one to be careful over. Good luck to us all.

regards, dspp

[dspp]

Two new HUR RNSs out this morning:
https://www.hurricaneenergy.com/communi ... ws-service

1) Change of advisor to Stifel
2) Interim results which, to my eye, say nothing new but restates the current situation tidily, except
3) Change to $ reporting going forwards

regards, dspp

[CaledoniaMan]

You have to smile, listening to Malcy this is a sure thing. Not a hint of downside risk.

Why are the likes of BP who have a FPSO 30km away and by first oil will have the ullage capacity to accommodate production from these new fractured basement fields, not jumping on board now?

BP are on record as saying they will wait and see how the EPS works out. With no extended well tests having been carried out they are not yet confident that there is sufficient pressure support for sustainable production.

There was an interesting 2 page write-up on Hurricane in the Upstream industry newspaper a few weeks ago. In it, BP's North Sea regional president Mark Thomas is quoted as saying "I am not confident in the results of Hurricane yet. We are not going to base anything on some very simple tests that have been carried out thus far. They all look good but time is the determining factor. Show me an extended well test then I might get interested in things, but right now I will just wait and see." http://www.upstreamonline.com/hardcopy/1334991/bp-sticks-to-watching-brief-on-lancaster (paywall)

Of course, BP has the luxury of waiting and seeing while Hurricane de-risk the project and while no one else is showing any serious interest.

[dspp]

Regulatory consent received for the Lancaster EPS from OGA:

https://www.hurricaneenergy.com/communi ... ws-service

regards, dspp

[Clitheroekid]

Tucked up nicely a couple of pence today.

Indeed - I think I owe Malcy a drink!

[dspp]

HUR have certainly got the message re must issue more news to placate punters.

RNS out today that FPSO arrived Dubai to start refit works, plus buoy fabrication.

https://www.hurricaneenergy.com/communi ... ws-service

[PeterGray]

Except the typo saying half a million bbls recoverable instead of half a billion bbls makes it look a look less positive than it is