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Hurricane Energy (HUR)

dspp
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Re: Hurricane Energy (HUR)

#94717

Postby dspp » November 10th, 2017, 1:06 pm

Forsi,

If it helps this sort of stuff used to be my day job in some of my jobs. However I have not built DCF models for these fields with all the normal stuff one would put in them. So I have formed my opinion based on my knowledge of how such models perform, without doing it on this occasion. HUR has obviously built these models in order to make the statements they have made, including the p22 statements.

Basically the economics look good IF they get the well productivities they anticipate and IF they get the recovery factors they anticipate.

In my opinion the biggest downside risk is no flow, i.e. technical reservoir risk. Other technical risks (flow assurance stuff) are relatively trivial (with the caveat that HUR might not have the $$ to fix them, but I think nonetheless they are not that significant). Build costs getting out of control aren't too great a worry.

If the wells do not flow at the anticipated rates because of poor reservoir performance then the economics of all of these reservoirs are put into an entirely different zone. What that zone would look like would depend on how bad the performance was, and what it indicates.

At the currently anticipated well productivities the project appears to be robust to a fairly wide range of oil prices (down to $37 for breakeven per p22). Again I have not built and run the models to prove this, but I have seen sufficient in the various HUR info to form that as an opinion of the work they have obviously done.

It is probably not possible to drill deeper into this without building DCF models. Are you intending to do that ?

regards,
dspp

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Re: Hurricane Energy (HUR)

#94722

Postby dspp » November 10th, 2017, 1:37 pm

forsi wrote:From the Energy Voice

"The chairman of North Sea oil firm Hurricane Energy has quit in a disagreement over the firm’s future direction.

Hurricane announced yesterday Robert Arnott had resigned “with immediate effect”.

Senior independent non-executive director David Jenkins has taken over as interim chairman, while the Surrey-based company’s new listing and governance committee (LGC) hunts for a permanent successor to Mr Arnott.

The departed chairman has spent more than 30 years in the oil and gas industry, and a further 10 in investment banking.

A spokesman for Hurricane said: “It became apparent that there wasn’t an alignment of views between Dr Arnott and the rest of the board on certain aspects of the board’s processes and proposed changes.”"

Any thoughts on what the disagreement might be?


Re the Chairman issue it is unclear to me.

1) The board have been a very tight ship with no leaking. So the mis-steps so far (re the latest finance round) may have arisen as a result of views put forwards which the board accepted at the time, i.e. not necessarily as a result of the people who subsequently fronted those views to the external world and who have copped the public part of the blame. That is one line of enquiry.

2) If it becomes necessary to walk this path alone for longer, then you need a Chair who can simply be present for it. Who knows what the personal now & future situation of RA is. That is another line of enquiry.

3) And going down the later FO route also means moving to a different listing. That in turn may require a different skillset. And that is another line of enquiry.

My personal guess is a chunk of all three. But they have been a sufficiently tight ship that good evidence is lacking. Which is as it should be. But in any case I think they have collectively done a good job so I am not complaining.

regards, dspp

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Re: Hurricane Energy (HUR)

#94761

Postby PeterGray » November 10th, 2017, 4:03 pm

My semi-ignorant take on HUR is that the risk is all about the fractured basement and how it behaves. It might boil down to if you hit the sweet spot you have a bonanza on your hands. If you don't, you have next to nothing

The risk is certainly about how the fractured basement behaves. However, I don't think it's quite as simple as bonanza if you hit a sweet spot and nothing otherwise.

The two wells that will be produced from in the EPS are both horizontal wells, covering a significant cross section of the reservoir. They have also drilled two other vertical wells that have flowed. The evidence is that it's not too hard to get flow from the Lancaster reservoir, and the use of horizontal wells ensures that you can hit a good cross section so you should hit both areas where there is good fracture development as well as a sample of those that don't. I don't think HUR have much doubt that the initial flow rates will be good. The big question is going to be how those rates hold up - which will tell a lot about connectivity and mobility within the reservoir - and in turn how many wells will need drilling to extract a reasonable proportion of the oil there.

Peter

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Re: Hurricane Energy (HUR)

#94766

Postby NigWit » November 10th, 2017, 4:30 pm

https://www.ft.com/content/26e9d110-c61 ... 86f39ef675

So is Mr Arnott is the first to run bleating to the press or an honest whistle-blower?

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Re: Hurricane Energy (HUR)

#94822

Postby dspp » November 10th, 2017, 9:11 pm

I think this fits within fair use & quote policy, from your FT link
https://www.ft.com/content/26e9d110-c61 ... 86f39ef675

"The oil industry veteran who this week resigned as chairman of Hurricane Energy has accused the company of falling short of the governance and leadership standards expected of a publicly listed group.

Hurricane, the oil explorer that claims to be sitting on the biggest new discovery beneath UK waters s........

Mr Arnott, a former investment banker with more than three decades of experience in the oil and gas industry, said in a statement sent to the Financial Times that his efforts to urgently improve standards in governance and the company£s leadership culture had £failed to succeed due to a reluctance to implement immediate change£.

He added that £a substantial gap still exists between the company£s current standards of governance and leadership culture, and those expected of a publicly listed company£. This prompted his decision to resign, despite having only joined the board last year...... etc "
very little substance to back up difference. Surely more meat to it than this.

regards, dspp

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Re: Hurricane Energy (HUR)

#94827

Postby Nimrod103 » November 10th, 2017, 11:03 pm

dspp wrote:I think this fits within fair use & quote policy, from your FT link
https://www.ft.com/content/26e9d110-c61 ... 86f39ef675

"The oil industry veteran who this week resigned as chairman of Hurricane Energy has accused the company of falling short of the governance and leadership standards expected of a publicly listed group.

Hurricane, the oil explorer that claims to be sitting on the biggest new discovery beneath UK waters s........

Mr Arnott, a former investment banker with more than three decades of experience in the oil and gas industry, said in a statement sent to the Financial Times that his efforts to urgently improve standards in governance and the company£s leadership culture had £failed to succeed due to a reluctance to implement immediate change£.

He added that £a substantial gap still exists between the company£s current standards of governance and leadership culture, and those expected of a publicly listed company£. This prompted his decision to resign, despite having only joined the board last year...... etc "
very little substance to back up difference. Surely more meat to it than this.

regards, dspp


I would interpret that statement as meaning he found himself by-passed on key decisions. But what do I know?

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Re: Hurricane Energy (HUR)

#95084

Postby forsi » November 12th, 2017, 9:11 am

"If the wells do not flow at the anticipated rates because of poor reservoir performance then the economics of all of these reservoirs are put into an entirely different zone. What that zone would look like would depend on how bad the performance was, and what it indicates.

At the currently anticipated well productivities the project appears to be robust to a fairly wide range of oil prices (down to $37 for breakeven per p22). Again I have not built and run the models to prove this, but I have seen sufficient in the various HUR info to form that as an opinion of the work they have obviously done.

It is probably not possible to drill deeper into this without building DCF models. Are you intending to do that ?

regards,
dspp[/quote]

Hi Dspp,

I do not intend to build a DCF for the moment. My aim is to make sure they do not tell us "lies" or they do not omit anything relevant.
Most of us are interested in HUR, and this creates a positive anchor which can be dangerous (we also know that many investors have actually lost money with HUR).
In the case of the illustrative economics of the project, the management's figures are pretty good.
But as you know, this is just a "communication" with a long disclaimer, it is not a regulatory announcement.

That is why I am asking if there is anybody here who has taken the time to really analyse these numbers.

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Re: Hurricane Energy (HUR)

#95098

Postby dspp » November 12th, 2017, 11:07 am

@ forsi,
If you look at the last CPR which is dated 2 May 2017 it analyses the economics for the EPS and is on the HUR website. When I read it my opinion was that they have done a thorough job. If you go to shareinvestors.co.uk you can also find a DCF analysis (hurricane-model-shareinvestors1) as a pdf that you can then replicate as a spreadsheet and fiddle with greatly.

@PeterGray & FredBloggs,
Similarly if you look at the CPR it goes into the fault mapping processes used. In a FFD the wells would be planned so as to optimally intersect the faults. At least that is the theory - it of course depends on whether the many assumptions that go in to that process are correct. If a well is not as productive as hoped then it is not necessarily the case that you 'just' drill them longer.

regards, dspp

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Re: Hurricane Energy (HUR)

#96211

Postby NigWit » November 16th, 2017, 2:25 pm

The warrants, the raise and the press

Last week the Dr Rob Arnott, the chairman resigned and then wrote a statement condemning the company’s corporate governance to the FT, who published it.

https://www.ft.com/content/26e9d110-c61 ... 86f39ef675

Then Richard Bernstein of Crystal Amber spoke with the The Times and they published an even more critical article on Tuesday.

https://www.thetimes.co.uk/article/stor ... -kbnrkdwwh

The majority of posters on the internet believe these actions to have been self-defeating and motivated by nothing but spite. Few are prepared to look past the messengers and at the messages so I have and here’s my take.

Firstly some background


All the drilling was great and there was no cause for concern until the warrants issue in May. There was never a good explanation for the warrants. The explanation in the RNS did not explain how the company found itself short of £12m having already raised money for long lead items. The warrants caught the attention of hedge funds, in particular Marshal Wace. At one point in June 20% of the stock was sold short according to Richard Bernstein (who told me at the Crystal Amber Conference at the end of June). The hedge funds realised that if the company needed £12m urgently it must be in distress.

Now my doubts


I think that the warrants were very possibly caused by the board, lead by Rob Trice, walking out of some farm-out negotiations at the last moment after they’d already committed to further long lead items for the EPS in expectation of the farm out funds. Leastways no-one has provided a better explanation that I have heard. Crystal Amber say they are baffled. I would be very happy for my conspiracy theory to be disproved.

Now we hear that the board of directors is so split that the chairman felt that he had no option but to resign. He has risked career suicide by writing to the FT so he must think something will emerge in the coming weeks to vindicate him. Clearly he did not feel listened too. Check his CV. He has been engaged as a NED on many companies and is a successful banker as well as a geologist.

https://www.linkedin.com/in/robert-arnott-49689412/

Like others I first thought that Arnott had stomped out in a huff over a trivial matter but then Richard Bernstien made his similar complaints in The Times. I know people who know Richard Bernstein and I have met him and, in my view, he is not a hot-head who would do this without a clear, positive agenda.

Crystal Amber’s recent newsletters all state that they are actively involved with management to release value for shareholders. At the AGM (when I sat directly behind Richard Bernstein) he asked Rob Trice if he would sell Lincoln for £0.5bn to fund the EPS. Perhaps he had a buyer.

Instead, the company diluted all the holders who supported them through the drilling. Their only concern was not for those holders but to fund the EPS but, due to the shorting, the loss of momentum and the dilution, the share price has not recovered even though the price of oil is near a two-year high.

If you look at the Q3 presentation it suggests that there are ongoing discussions with farm-out partners and that there may be more appraisal drilling next year if a partnership comes about. This is all absent from the Q4 presentation published last week.

I may be jumping to conclusions but I strongly suspect that Richard Bernstien and Robert Arnott had been working on a farm out agreement that the others rejected in the last few weeks and that is the cause of the divisions.

The time value of money works both ways. Money now from a farm out is de-risked and can be put towards more exploration providing the company with another strategy to run in conjunction with the EPS. It might be worth considering what the share price would be today had Lincoln been sold instead of raising so much money at a discount.

If there are any problems with the EPS there is nothing else to fall back on. Do others here think this is wise or too risky? I am uncomfortable, especially if there are ways to mitigate the risk that we have been denied.

At the very least if there was an offer I think that, as a substantial shareholders, we should have appreciated being asked to vote on it.

I don’t mean to stir. I didn’t join up for that but the press-releases have caused me genuine concern that I did not anticipate.

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Re: Hurricane Energy (HUR)

#96227

Postby dspp » November 16th, 2017, 3:08 pm

NigWit,

I have been watching the handbag waving as well.

Your summary is a good one, except that you are then building a hypothesis based on a partial knowledge of what has happened. It is important to remember that RB of CA's interests are not necessarily aligned with HUR PI shareholders' interests. There is an alternative hypothesis, for which there is equal evidence, that RB is trying to panic PIs (and other IIs) into prematurely accepting a low-valuation exit, or partial exit. The wider board have quite probably done the sums of all the different pathways (which will be the mother of all spreadsheets) and concluded that the RB's proposed path leads to a lower risked valuation than other pathways, and hence should not be chosen. There is a good deal of subjectivity in such evaluations as they depend on the preference function of A for X vs B for Y, and so it is possible for good analysts to come up with equally valid recommendations for different things. RB has a fairly high probability of job loss if CA has a down year, and so wants to shake the HUR money tree into solving his downside risk, this very much exposes his preferences. If I may say so that should not be HUR's problem. Try not to become part of the problem.

If I may say so it is a little bit late in the day for any single PI to start having doubts of this nature. It tends to imply that they have not done their homework as to what can happen, and do not understand the context in which they are investing. That context is not just technical; it is also corporate and governance is part of the corporate equation; so too are many other aspects.

Personally this is the first time in maybe 15-years that I have invested in a minor oil explorer and a considerable part of my caution over those years is because I have seen bad things happen to the little people who are taken for fools too often. Ditto any other hole in the ground type stock. It was only 18m ago (?) that I thought HUR had passed the necessary threshold for it to become a reasonable risk. I am very happy to see the events of the last week as it tends to support my view that the grown ups are in charge with a clear understanding of where shareholder value truly lies, and how to access it, and with a proper understanding of their duties.

Some quicky points:
- never fall in love with a stock
- RB is not on the board, so it would have been wrong for RA to share any privileged information with him
- likewise even if (say) a farm-in candidate spoke with RB/CA and then RB spoke with RA about a stitch up, then it would be wrong for RA to consider this without reporting to board for direction
- if RA did either of above then that would be a resigning matter (<<< and he has ......)
- a lot of majors will be trying to pressure HUR into low-ball exits
- nice to see OGA staying quiet in public all through this
- I could be wrong in many ways, do not take comfort from anything I say
- HUR is still a very high risk play that could have a very binary outcome, do not put in more than you can afford to lose
- RA is a failed expl geologist who has then done the rounds in London, he sufficed but no more
- don't let anyone pressure you into thinking that 'their' man/woman is the right one for the job
- also don't get hung up on DrT being there: I think this company is now at a stage where DrT's existence is not absolutely critical (but very value-adding and so I don't want to see him go)
- lastly this is not a shareholder voting matter

regards, dspp

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Re: Hurricane Energy (HUR)

#96232

Postby dspp » November 16th, 2017, 3:26 pm

On a slightly different HUR topic I worried that I had the wrong number of fully diluted shares in my post of October 28th, 2017, 1:15 am that yielded 2,402 mln.

Having done a bit of digging around I have the following update that so far yields 2,434 mln:

issued shares = 1,959,210,336
convertible bonds = 442,307,692 (issued 30 06 17)
options = 901,000
PSP rights = 8,930,354 (as of 31 12 16)
warrants = 23,333,333 (held by CA, exercisable at £0.20)
KER top ups = ??? (I have yet to dig into (see below)
===================================
total (fully diluted) = 2,434,682,715

Various notes:

1. In addition to the options, there are also the Performance Share Plan (PSP) rights held by certain directors and employees. There were 8,930,354 outstanding at 31-Dec-16 (see page 59 of the 2016 annual report).
2. Note that my option figure is also as of this date 31-Dec-17 .
3. Through the year there will be portions of PSPs and options that lapse etc and the next update to the market will be in the 2017 annual report.
4. Note the VCP which is described in the annual report.
5. Re the warrants held by Crystal Amber. They can subscribe to up to 23,333,333 new shares at a price of £0.20/sh. This is detailed on page 58 of the 2016 annual report.
6. Re Kerogen there is a top-up right held by Kerogen to subscribe for shares at the same price as Crystal Amber upon exercise of the aforementioned warrants (see page 18 of the April 2016 prospectus on HUR website).

As you can see it is a moving target. It is quite possible I have mistakes in this list. If anyone fancies please correct me and/or dig into the Ker top-up rights as I have a day job to look after right now.

regards, dspp

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Re: Hurricane Energy (HUR)

#96236

Postby PeterGray » November 16th, 2017, 3:46 pm

Interesting points Nigwit, but I think dspp's overview is pretty close to my views.

I can't speak for RA's abilities, or otherwise as Chair. However, I think PIs have to be aware that RB's interests are not necessarily aligned with theirs. Firstly, he is the fund manager who went very overweight in HUR, no doubt expecting/hoping for a quick return, which hasn't happened. He has to justify his investment decisions to his investors, and clearly if he can do that in a way that tends to emphasise any issues at HUR, rather than in his own decisions he will do so. Secondly I suspect that he would be a great deal happier with a quick, but not necessarily large, return from a quick sale or farm out. Many/most PIs would probably take a different view.

Your hypothesis may be right - that there have been disagreements about acceptance or rejection of deals - whether on the scale or type that you suggest we have no way of knowing. But what is clear is that HUR has changed rapidly, and will change a lot more. Under those circumstances there is no surprise if many of those on the board do not have some of the skills and experience that is increasingly needed in terms of governance. That may likely also include RA.

The company now has set up a committee to review exactly that issue, and conveniently also has a vacancy for chair. As an investor I currently see no reason to suppose that they do not intend to carry out a serious review. I suspect we will see some significant changes.

Peter

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Re: Hurricane Energy (HUR)

#96237

Postby NigWit » November 16th, 2017, 3:50 pm

Thank you for your thoughtful replies DSPP and Peter. I find it is good to hear other views so I am grateful.

I understand that Richard Bernstein has his own imperatives but I am not sure why anyone thinks he is vulnerble. His fund is heavy in Hurricane but I found him to be very committed to them and it has been successful investment fund up 80% in 5 years. Crystal Amber's holding in Hurricane does not appear to have changed recently either and he has been silent for 3 months. This is conjecture but is it not possible that he was invited to help broker a deal and has been working inside the company only for his proposals to be re-buffed except by Arnott? That is consistent with his statements about working with the company to release value for holders.

I understand your comments about Arnott too. My response is that his imperative would not be the same as Bernstien's so why would he say the same things? This is the core of my doubts. We should not forget that Crystal Amber have their own geologists (who I have also met and spoken with) and their view of the value (which is published by Crystal Amber) is very positive.

Whilst I do not profess to be a seasoned oil investor, because of the risks you underline, I have taken every step to understand everything about this investment. That leads me to my alternative suggestion which is that Richard Bernstein and Rob Arnott wanted to mitigate the risks by taking some money out soon with a JV. I understand that this might not suit Robert Trice but it might suit me and other shareholders.

Lastly, I agree with DSPP's comments about Robert T. He is a charming person and a brilliant technician I am sure but rather driven in my view. I saw him step out of line and stick his neck out unnecessarily regarding funding at the AGM. That surprised me since I was not expecting him to make himself a hostage to fortune like that. Few experienced business people would risk being so outspoken before a formal announcement to the market. I agree he is not indispensable and would be happy to see him moved sideways. Moreover, his boldness gives rise to my strong sense that Richard Bernstein's comments about him wanting to control the whole train set are accurate.

I would not be surprised if more comes to light and may well start to unwind my holding after the CPR depending on the outcome of any activist intervention, which at the present time I might be minded to support.

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Re: Hurricane Energy (HUR)

#96257

Postby HURfan » November 16th, 2017, 4:36 pm

Very interesting posts from earlier, so much so that I will continue to hold more than my fair share.

I continue to be impressed by our knowledgeable posters and sometimes get the impression I'm reading a detective novel or trying to unravel a chess problem.

chessman

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Re: Hurricane Energy (HUR)

#96499

Postby forsi » November 17th, 2017, 1:45 pm

Dspp,

thank you for your excellent posts.

I wonder if RT is to some extent a temporary creation of CA. When I look back into the biography of RT I see a lot of technical work, but I do not see a man who has managed a company or a quoted company. I would not be surprised to see CA drop him.
Alternatively I can see CA and Kerogen choosing a strong and qualified chairman, which in my humble opinion would be the best thing to do because HUR is RT's dream and toy.

One more area of "study" is related to the main shareholders. I admire CA, but I do not think they are O&G specialised investors. I have tried to find the performance of Kerogen's investments but I have not succeeded.

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Re: Hurricane Energy (HUR)

#96557

Postby NigWit » November 17th, 2017, 6:06 pm

Kerogen are almost completely inscrutable. Their fund has a value of £2bn which seems a lot to me but is not much in oil. All I know about them that is not on their website comes from what Richard Bernstien told his investors conference in June (on the day the fund raise was announced and Trice didn’t show up to do his presentation). He said that he had frequent meetings with Kerogen and that their attitude is that everything will be alright if Hurricane execute their strategy. I think that’s a fair analysis too.

It’s true that CA aren’t oil experts but they do hire external O and G analyst. One of their team stood in for Trice at the conference (with zero notice) and there is a video of his presentation on Crystal Amber’s website here https://vimeo.com/223760753.

I hadn’t thought about Robert Trice being Richard Bernstein’s puppet. They spoke highly of one-another, although perhaps not this week. I find the suggestion plausible but perhaps a little too John Le Carré. I think it’s more likely that RT’s inexperienced management caused the rush to the warrants and that has lead to calls for his head.

I think the company has been accident prone since the Halifax DST and a change of management would be appropriate but I beileve that Robert Trice is still a valuable individual who has a role.

There may be more news soon though. It depends on whether or not Crystal Amber are be ready to let things rest with the new governance committee.

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Re: Hurricane Energy (HUR)

#96837

Postby dspp » November 19th, 2017, 2:23 am

Reading around I see some supposedly long term holding shareholders really don't get the numbers here (I except short term traders who have a completely different view of life).

If a FO was to be done today, then if I were negotiating on the buy-side, all I would be putting on the table is (max) £0.37/share. That's tops and I would be chiseling that down even further every time I put 5-mins on the clock. So that's the starting point on any FO negotiations and as-of-today it only gets lower. *

Any of you could have done that calculation at any time since the Halifax well was drilled and RNS'd. You don't need to be in the data room to do a complicated calculation. Just see my post October 28th, 2017, 1:15 am [***] for how to do the maths one way (there are other ways).

So any shareholder who thinks a FO should be done now, and lovingly gazes at a higher price is either:
a) revealing they have a lower discount rate in their heads than that which others are assuming;
b) revealing that they always throw 6; rather than the 1/6 probability most of us on planet earth use.

Which suggests that any shareholder who wants a FO now made a bad decision when buying this stock. It means they completely misunderstood the time-horizon in play around progressing these reservoirs to full valuation, or that something has changed in their own internal position (excluding the stock) such as they realised they had a big divorce bill to pay they had not expected or whatever, or that they thought they understood these reservoirs/prospects differently and now have changed their mind**.

When I look around the bulletin boards I see PI's who really did not get any of this stuff who seem to think CA et al have a point here. To the extent that CA have a point it is because CA suffer from both a) and b) above. This is especially true of CA because they have a significant amount of stock (which makes it difficult to offload in one lump) and some particular value associated with hanging on to it (excepting legal manoeuvrings to strip off their added value); neither of which minor PIs have to worry about. Any PI who thinks that the BoD are making a bad call on this should simply sell out, not whinge. CA can't sell, so instead of being happy for their good fortune they whinge.

I am aghast at some of the stupidities I see being regurgitated on the bulletin boards, even by people who really ought to know better.

Talking down the current BoD is absolute nonsense. None of us on the outside know the full facts, but from what we can see they have in the main trodden a tricky path, made trickier by the upside that each well keeps bringing to the table. If the resources in play were only 100 mln bbls or so and in only one reservoir, and within only one block boundary then life would have been a lot easier and a FO could have been much more easily agreed by now. Instead they are facing multiple potentially much larger accumulations, straddling multiple block boundaries, each of which could reasonably take two majors to co-invest in to take through to FFD. So ideally that is four majors, making a co-joined investment for optimal development purposes, with a lengthy appraisal programme upfront. The BoD can see this and think through the game-theoretic implications for FO negotiations. I have hinted at these implications in my various notes. Everyone in the industry knows that an EPS is vital to derisk and properly value the reservoir (and as nimrod has pointed out, the better the drive mechanism the longer the EPS needs to flow to yield meaningful data) and that is the path that HUR is on, courtesy of its BoD as a team as it is the critical next step to delivering a valuation re-rating. The outcome may be upwards, or downwards, but it is a logical progression from the work that has been carried out amongst the options that were available. So wait patiently, the ideal is no news and boredom for 12-months.

Trying to characterise individuals within the BoD is nonsense. I know from personal experience that the person you see in an open meeting delivering and defending pathway A, may have the day before been advocating pathway B in a closed meeting of the board. But the board decides, then the board as a whole goes and works down pathway A. To then pot shot at an individual for following pathway A is to make a category error in understanding what is going on.

A well known Sun Tzu quote is "If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle." I think some could usefully go and take a good long look in the mirror.

regards, dspp


* If I had the data room at my finger tips I might yield to a different starting position, but I don't, and as a result I await the next CPR with interest. By the way anyone who thinks a major needs a CPR to put together a FI offer really does not get this game.

** Or there were some other constraints in their position. (I fit in this category as there are limited moments when I can trade for personal reasons.)

*** [edit] see viewtopic.php?f=16&t=796&start=60#p91293

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Re: Hurricane Energy (HUR)

#97242

Postby NigWit » November 20th, 2017, 3:58 pm

“The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet these it either neglects and despises, or else by some distinction sets aside and rejects; in order that by this great and pernicious predetermination the authority of its former conclusions may remain inviolate.”

Sir Francis Bacon

———————

All

Those are very interesting posts that I enjoyed reading.  I find it refreshing to be presented with such polite and thoughtful arguments and I do understand that some posters, including me, may appear to have released a genie on the bulletin boards but it was Crystal Amber in The Times and moreover, Rob Arnott in the FT who rubbed the magic lamp that Hurricane forged in their own furnace. 

In response, firstly let me say that seeking to undermine those who put forward challenging points is not going to succeed in alleviating their concerns.

That said I do agree that when we lose confidence in any company it is best to exit.  That is what I am weighing for myself now.  As I consider the matter I think it is better to agree that we should all prefer to invest in a well run business even though we may each believe in different ways forwards. I do not believe that anyone wants Hurricane to fail.

To deal with some of the other points raised.

Assuming it is correct, which I doubt, then 37p per share would be much better than the 32p placing price or the 26p current share price, which is 42p below the 68p high reached lat May on rumours of a farm out.  Crystal Amber are often criticised but let’s be reasonable, does anyone suggest that Crystal Amber are responsible for the 42p drop? It can’t be blamed on the oil price.  What does anyone suggest the share price will be after FOIL?  More or less than 68p? It’s not clear, or even easy to predict but it is clear that something’s badly wrong, Crystal Amber are right about that.

No, it was not Mr Bernstein in his office with the hotline to The Times who murdered the share price, it was the current board at The Wharf with insufficient acumen, who let the company get held to ransom for a measly £12m.  Crystal Amber (who would have provided the money had they been asked) stepped in to rescue the company from that crime of incompetent governance by underwriting the offer at 50p.

It is easy to undermine Crystal Amber since they are not well understood nor trusted much by bulletin board posters generally.  I will return to them but for now how do we tackle the concomitant comments made by Rob Arnott via the FT other than by undermining him or convincing ourselves, having no evidence, that he was Richard Bernstein’s glove puppet?   Can anyone tell me why he resigned?  I haven’t seen anything but unkind personal judgements concerning him so for critical analysts all these hollow indictments fail to address the substance of his sudden departure.

Moving on. If the company executes the EPS and extracts, being generous, 20,000 barrels a day it would take 137 years to extract one billion barrels of oil.  So, setting aside all the hyperbole and speculation about the CPR or other measurements, it is not a matter about if the company will have to farm out but when and on what terms. I don’t believe this is contentious.

Right now Hurricane Energy’s shareholders are carrying all the business risk.  Until now the company has said that the data room is open and that it is in discussions but I can only think that those discussions have not been concluded and that is what split the board.  So far I have yet to read a more compelling alternative suggestion and the company has not explained itself completely.  So if holders like me who have unresolved concerns about this are met with insinuations that they did not do enough research or that we are impatient and have overactive imaginations then we may respond by saying that we were lead to believe in a farm out that no longer seems to be in the company presentation.  I’d value some clarity on this so I can decide what suits me next. Anything wrong with that?

Now returning to Crystal Amber.  It is in their interests for the shares to rise in value so that they may be sold at a profit.  That is what l want too so their motivation is of no concern to me. Frankly, it may well coincide with mine.  Please forgive me if I sound mercenary but after all profits are why I invested and I don’t know why anyone would appreciate a lower share price. Anyway, anyone can calculate that Crystal Amber would make the most money by tapering down their position slowly as the shares appreciate and not by dumping them in one go at a discount to their eventual full value.  That is what I think many would prefer unless they intend to wait for a huge sale price. But, however paradoxical it may sound, I fear that the assets may not be worth much because they are so huge. I don’t seem to be alone in this concern.

I believe everyone will understand the principle of the white elephant. I am sure Richard Bernstein does, he employs a team of oil and gas experts and he is pointing at the FTSE 100 for the blue sky answer to feeding the herd of pampered pachyderms that have consumed the green grass of Godalming, at least metaphorically.  I find the conjecture about the FFD involving four majors interesting because of this.  I am not sure Hurricane will find a way to extract full value from those majors since they may align themselves together and we shareholders can therefore not rely on an honest auction to find us true value.  Indeed Hurricane may already be marooned on its bountiful rock in a very hard place. That would explain recent performance but we haven’t been told, which is why we speculate. Richard Bernstein may be just the scarlet pimpernel we need to find a viable strategy and extract the right price. Perhaps he knows a bigger backer than Kerogen. Meanwhile, his coterie of tweeting shareholders are browned-off. What’s he up to?

As I say I find this all very interesting and I don’t really know how it will turn out but my sense is that an opportunity has been missed for dubious reasons and that consequently I should be cautious.  Presently I tend towards the belief that there will be a better time to exit than now so long as the company makes no more mistakes, which, on recent form, I can’t rely upon but I don’t think there’s any need to panic either.

Appointing a significant person to chair the company and steer it to the main market is the very least reassurance I am waiting for though. And I presume Sir Francis Bacon saw plenty of storms pass over too but right now Richard Bernstein’s reputation and the oil are the only reasons why I continue to hold.

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Re: Hurricane Energy (HUR)

#97253

Postby PeterGray » November 20th, 2017, 4:19 pm


No, it was not Mr Bernstein in his office with the hotline to The Times who murdered the share price, it was the current board at The Wharf with insufficient acumen, who let the company get held to ransom for a measly £12m.


I'm not clear why the $12m was needed and raised, and probably will never be.

However, it's a mistake to see price moves in isolation without looking at where they came from where they ended up. There's a good argument that at 68p, or any near it, the SP had got well ahead of where it should have been with the whole issue of EPS funding pretty much completely unaddressed. There's also a good argument that 30p or so, with $500m in the bank to move the EPS forward - without reliance on external suitors looking for a good deal, represented a sensible SP.

You could argue that the people who murdered the SP were those who bought it up to 68p which was far too high for any sensible equity raise to takeplace from. Whether the warrants issue was a plot to bring the SP down to rational levels for what was needed, or had some valid purpose and the SP fall was just a side effect I don't know.

The end result was that the company is fully funded for the EPS and trades at a price that can be justified by valuations such as those dspp has done. I certainly wouldn't argue under those circumstances that management had "murdered" the SP, though it might be the case, if we ever knew the full story, that it could have been handled better.

Peter

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Re: Hurricane Energy (HUR)

#97308

Postby dspp » November 20th, 2017, 7:22 pm

NigWit wrote:That said I do agree that when we lose confidence in any company it is best to exit.  That is what I am weighing for myself now.  As I consider the matter I think it is better to agree that we should all prefer to invest in a well run business even though we may each believe in different ways forwards. I do not believe that anyone wants Hurricane to fail.....

Assuming it is correct, which I doubt, then 37p per share would be much better than the 32p placing price or the 26p current share price, which is 42p below the 68p high reached lat May on rumours of a farm out.  Crystal Amber are often criticised but let’s be reasonable, does anyone suggest that Crystal Amber are responsible for the 42p drop? It can’t be blamed on the oil price.  What does anyone suggest the share price will be after FOIL?  More or less than 68p? It’s not clear, or even easy to predict ........



1. Being fairly blunt, the company is executing its business plan pretty much as it said it would, risks included. Nowhere in its business plan does it set out a future share price graph (correct me if I am wrong). Therefore since the company is doing what it has said it would do, if you have lost confidence in it then probably you did not read the business plan carefully enough, and are only now beginning to appreciate the risks. And others like you, since it is the sum of all that makes a market and so there are others out there selling/shorting given the price.

2. There are other agendas out there that would like a low share price at this point. Surely you realise this. One of the reasons I bothered to invest in this stock is because I considered that there is a reasonable probability that its shareholder mix was capable of seeing off such a play. We will find out if I am right or wrong, but at least I recognised that risk up front in my considerations. RB/RA/CA et al definitely are culpable in the newsflow that is part of the (?a) reason for the shareprice.

3. I've bothered to do the sums for three shareprices (viewtopic.php?f=16&t=796&start=60#p91293), for three stages in the company's intended development. Including the post-EPS one you are asking someone to hazard a guess at. Rather than asking for someone else to make more guesses may I suggest you pull out a calculator and make your own estimate of these three , explaining how you come to it. That would allow you to declare your own assumptions and form a view as to whether the current share price represents a buying opportunity or a selling opportunity. I take a similar approach to my daughter's math's homework: see one, do one, teach one.

4. Regarding four majors, as I have said before there are many games to be played in FO/FI discussions and negotiations. But my observation is that they like company so as to share the risks. Historically in the UKCS they tend to be in pairs, or threes. So either one pair takes GWA and another takes GLA, or perhaps a trio takes both GWA+GLA. So roughly 3-4 majors. Now odd things do happen and maybe something different will come to pass (and I have sketched one way something very different could come to pass) but absent something odd there will likely be multiple majors all playing footsie with each other and that will have been going on for years, and will continue until someone(s) make a sufficient offer. There is a real risk that four majors (of the say six-eight who might be interested) all go on a buyers strike for an extended period (as now, but they have an excuse right now) to try and starve HUR out. I have pointed out this risk before, and solutions, and implications. And I did that before making the decision to buy in to HUR as it is one of the biggest risks. These sort of things should not be coming as a surprise to anyone who is a longer term investor in shares such as HUR and one needs to think through the dynamics and timescales carefully. The worst thing for realising full shareholder valued is for some useful fool who is scared of losing his own job as a fund manager to try to take over on the cheap, then sell out on the cheap. Fortunately there are defences against this, we will see if they are sufficient.

5. I am content with the current board's actions. For sure I have question marks and blank areas, which is to be expected as I am not sitting on this board, but the last thing I want to see is some heavy-hitter brought in. The ones who are there are doing a perfectly adequate job and could usefully do without the character assassination that is currently being foisted on them.

6. And above all else remember there is significant risk here + never fall in love with a stock + do not rely on anything I say as I am often wrong.

regards, dspp

PS - I bought some more today. In due course we will see if that was a sensible decision.

PPS - if you know someone(s) with £50m send them in my direction as I can see a interesting angle to be played on this.


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