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Hurricane Energy (HUR)

NigWit
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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)

#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)

#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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Re: Hurricane Energy (HUR)

#150089

Postby NigWit » July 5th, 2018, 8:59 am

Happy to clarify Feste. Had the likes of Statoil, who will have seen the data, not been in discussions then that would imply, to me at least, that they didn’t like the data. On the other hand if offers have been refused that would at least imply that there was sufficient confidence in the data to invest and that confidence would go some way to alleviating concerns about the reservoirs.

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Re: Hurricane Energy (HUR)

#150232

Postby Clitheroekid » July 5th, 2018, 2:59 pm

I know it's only the Mail, but ...

http://www.thisismoney.co.uk/money/mark ... arget.html

I was very interested to hear that Statoil had actually been in acquisition talks, that's the first time I'd heard of it.

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Re: Hurricane Energy (HUR)

#150402

Postby PeterGray » July 6th, 2018, 9:53 am

Clearly we don't know the timing of this, but it's interesting to speculate whether the breakdown in talks with Statoil had some connection with the somewhat messy fund raising last summer, in particular the May warrant issue, which seems odd in hindsight given they then raised far more cash a month later. Did they suddenly find they needed cash quickly for long lead time items they had expected Statoil to be worrying about?

Peter

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Re: Hurricane Energy (HUR)

#150404

Postby dspp » July 6th, 2018, 9:57 am

Two new RNS from HUR this morning:

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, is pleased to announce the appointment of Morgan Stanley & Co. International plc as joint corporate broker alongside its existing nominated adviser and joint corporate broker, Stifel Nicolaus Europe Limited.

and

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, is pleased to provide an operational update in relation to the Early Production System development of the Lancaster Field ("Lancaster EPS").

Well completion operations for the Lancaster EPS have concluded, and the Paul B. Loyd Jr. rig has departed from the field. Both production wells for the development are now ready to be tied-in to the subsea infrastructure.

These operations were one of three main elements of the installation campaign for the Lancaster EPS planned to take place during the summer 2018 weather window, the other two being the installation of the mooring system for the FPSO and the installation of the SURF. The installation of the mooring system is currently ongoing and will be followed by the SURF programme. These elements remain on schedule to take place prior to arrival of the FPSO at the field, and first oil remains on target for 1H 2019.


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

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Re: Hurricane Energy (HUR)

#150409

Postby NigWit » July 6th, 2018, 10:18 am

Of these announcements I think the one concerning appointment of Morgan Stanley is the more important. Personally, I hope it indicates that Stifel will depart since it was they who managed the near-death warrants last year.

On that subject I agree with Peter. We can't know for sure but I have long suspected that the only plausible explanation for last year's events, including the warrants, the cheap fundraising and the governance issues was that a deal fell through unexpectedly.

Anyhow, the market seems to be recovering it's poise at last and the shares are fast approaching the peak price of early May 2017 so most investors will now be in profit. Nonetheless, I do hope some of those who have clearly bet everything and who seem to listen the least, pause to think. The message boards are full of pauperized investors who got carried away on the last dead-cert so I remain convinced that nothing should be taken for granted.

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Re: Hurricane Energy (HUR)

#150429

Postby dspp » July 6th, 2018, 11:12 am

NigWit wrote:Of these announcements I think the one concerning appointment of Morgan Stanley is the more important. Personally, I hope it indicates that Stifel will depart since it was they who managed the near-death warrants last year.

On that subject I agree with Peter. We can't know for sure but I have long suspected that the only plausible explanation for last year's events, including the warrants, the cheap fundraising and the governance issues was that a deal fell through unexpectedly.


If I recall that last Malcy interview with RT, did not RT state that HUR had never received an offer ? Yet in the Mail article it states that Statoil made an offer that was turned down. I accept that there are a range of degrees of "making an offer" ranging from a brief conversation to a formal written proposal, but nonetheless there is something of a disconnect between these two items. Then one needs to ask where the Mail sourced their story. The fact that they could source it shows that there is a level of information washing around in some quarters that is not available to the average private investor, which is a bad thing. The two most likely origins for such a tale are quite obvious in my opinion. If one further thinks through the implications then, in my opinion, it tends to confirm my previous thoughts as to why RA departed. All credit to HUR for holding a steady and professional course as a team through that period in every respect, and becoming even tighter with information control.

I don't think Stifel did a bad job at all. I don't think that Morgan Stanley's appointment should be taken as any slur on Stifel, merely as a sensible beefing up of the team for the next few years of action, which of course could play out very quickly at any moment, or could take as long as four years in some scenarios.

I continue to think that the best defence against being taken out too cheaply is for HUR to have in their back pocket a credible go-it-alone pathway through staged development of Rona Ridge, using a non-conventional contracting strategy (via what I term IFD). Simply by working up such a strategy they are least likely to have to use it.

In the Malcy/RT interview RT indicated the thought processes that they would use in picking the next drill/appraise, and perhaps produce targets. Essentially they are ranking on $/$, i.e. $ NPV proved-up in the 50/50 case, versus $-spend. I think I have posted about this sort of thing before (I may insert a link here, later[**]), but the way RT was talking indicated to me that the ability to tie-back and flow to the AM-FPSO was relevant, which I have likewise suggested, as this enables them to get a step-change in reserves valuation each time they do it. If you follow that chain of thought you could easily end up in 2-3 years time with six 20kbopd wells connected to a 30kbopd vessel. If that is not halfway to an IFD then I don't know what is, and again I have sketched that pathway out before.

Similarly in the Malcy/RT interview did RT not say that they would not be looking to proactively farm-out for about 18m or so (when I add up the timelines)*. In the 50/50 success case that is plenty of time to get some of those wells in and proving up partially (or at least until they get an opportunistic bid offer). However it will give some interesting well design issues, and critically long-lead item timing of orders issues (ESPs, flowlines, production trees) so as to never be out of cash again. My sense is that they will make decisions in well-pairs, and do staged drilling of each well. For example (Warwick) vertical to OWC, log, pull back, sidetrack horizontal, cleanup & well test, suspend; then following year re-enter, install prod completions with ESPs, flowlines, hookup. My guess is that they will place long lead orders for a pair in second half of CY 2019, but drill two in mid-2019. My bets are Lincoln + Warwick next up for various reasons.

They know that they have to work quickly to prove-up value (upwards) across all the reservoirs before someone comes forwards with an offer that is low-ish, but still attractive enough to tempt sufficient (unprofessional) shareholders to accept. Therefore they will be seeking to frenetically drill & complete & test & tie-back and run with low cash reserves as they do so, but never too low. KER are the best defence against premature takeout if you are a long-term PI in this one, imho.

regards,
dspp

* 07:50 onwards in interview https://www.youtube.com/watch?v=QGF_G-U2qtk (as I tot up the months)

** yes I have posted about VOI and IFD before:
- #131784 Postby dspp » April 12th, 2018, 9:14 pm
- #148494 Postby dspp » June 28th, 2018, 12:04 am
- #132941 Postby dspp » April 17th, 2018, 11:00 pm
- #131866 Postby dspp » April 13th, 2018, 9:35 am


[I have exercised my mod privileges so as to put the ** items in, as I knew I didn't have time to dig them out earlier]

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Re: Hurricane Energy (HUR)

#150714

Postby FabianBjornseth » July 7th, 2018, 11:55 am

I work as a reservoir engineer, but have no experience working with fractured basement reservoirs. I was initially intrigued by Hurricane simply because of the volumes involved. After doing some studying this winter, I found the project to be both technically fascinating as well as potentially profitable, and decided to take on a moderate (for me) position. I've done some economic analysis which doesn't go much further than to sense check the Edison analysis from last year. I've been impressed by the quality of discussions on this board and the level of civility on display.

Other posters have highlighted the OIP estimates as a major uncertainty, as it depends on the fracture connectivity, density and sizes. The estimates from Hurricane are as I understand it based on wireline coring and log data (Neutron porosity, bulk density, spectroscopy), as well as the distribution of Fault Zones to Fractured Basement, which is based on well log data, drilling parameters and seismic. My question would be whether the EPS will actually limit the solutions space much, as pressure transient analysis solutions are very often non-unique? I would be very interested to hear someone with experience working fractured basement plays (hi dspp) comment on this.

Rapidly increasing GOR has also been identified as a risk / potential production constraint. Wouldn't this be closely tied to the risk of fractures closing during extended production? The well tests produced at the same rates planned for the EPS at very low constant drawdowns and above the bubble point pressure. As long as the drainage area is sufficiently large and the well stays connected to it, I would expect the producing pressure to stay above the bubble point.

My last question would be on the water cut. With wells placed high in the structure, hundreds of meters away from the OWC, and a modest drawdown applied, is it realistic that early water breakthrough could occur? If all the production originated from a single fracture, I guess I could see it happening (and we've actually seen such an inflow distribution from the vertical well 205/21a-7 DST, but still...). If anyone has seen this occur on basement plays with similar deep OWC, I would be very interested in reading about it.

Generally, I'm here to get my assumptions corrected and my understanding more informed, so please dissect my post to your pleasure.


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