Hurricane Energy Share Discussion Threads

[bocase] 18/12/2020 21:16

Yes it is far from over for HUR. US production will be constrained with many shale producers going bust and Biden's anti oil policies with ensure US output remains low with no drilling on Federal land and pipeline permits hard to come by.

A huge amount depends on the oil price. HUR's future is highly leveraged to it.

I think the final negative paragraph in the RNS was the start of negotiations with the stakeholders, ie cooperate or lose it all. Otherwise why would you conclude and RNS with such a negative tone when there was much before that was positive. You wouldn't!

[fat frank] 18/12/2020 21:09

And, bocase, add into the mix that there has been hardly any Exploration/Appraisal/Development drilling in the past 3 years and oil is going to be in short supply. Any fields that are actually producing, with regular deliveries to refineries, will increase in attractiveness.

[fat frank] 18/12/2020 20:54

My middle name is 'Conservative'.....!!

[bocase] 18/12/2020 20:47

I agree with you there Frank. Energy will be the trade of 2021. There will be a production shortfall and surging demand and oil prices will spike and stay high with supplies constrained. I think $60 plus is ultra conservative.

[mhin2] 18/12/2020 20:38

There is too little information from todays announcement. The bod promised completion of Tech Review by year end...todays RNS was not it! Lets see if the BOD deliver...

Todays RNS said little from what was already anticipated...although to think of water injection in 2022, new well in 2021 was good news...it remains touch and go...lets see what happens.

[bocase] 18/12/2020 20:36

ngms: "Here's my stab at what finances will look like in June 2022 assuming the success case"

ngms, would you like to re-work those calculations using Hannam figures of 11K bbl/day for 2021 and an oil price $10 higher than now, ie at $62bbl rather than your guesses at production figures and an oil price lower than it is now!

The figures come out very differently.

[ngms27] 18/12/2020 20:32

1 year? That's optimistic. Only poo will save it.Current decline is 4.5% per month

[thegreatgeraldo] 18/12/2020 20:28

PPCEH
18 Dec '20 - 20:10 - 22173 of 22175
0 2 0
What’s changed since last update?

Water cut up a bit but next quarter will give us a better idea of whether this is a short term problem.

...HUR will know what's happening with the water....all we know is that water cut is up, production has been reined back a touch & they've moved from natural flow to ESP..... They need another year from well 6 with production at worst covering all costs... & in an ideal world, chipping in some free cashflow.

Of course, if they do decide to sidetrack 7z, they need it to work & churn out useful, sustainable cashflow...... in a year's time well 6 seems likely to not be bringing much to the party...... so they'll be very reliant on the ST........

....the company can survive, how much of any success current equity holders participate in is, of course, what should be of interest to current holders

[mhin2] 18/12/2020 20:25

ngms...that surely depends on whether Amber and Kerogen have moved to bonds..or am I missing something?

We still dont know whether 7z can perform, what is happening to Lincoln, and it ignores rising POO. I dont like the situation of HUR riding on one well...but it is a good producer, POO is going up, and spirit are back on the market (so might get some news on Lincoln) eventually. We also dont have the technical review, nor CPR...in fact we have been told very little on the operational, a lot on the corporate.

[ngms27] 18/12/2020 20:16

Just to quantify that's 50c doing nothing, D4E to try something

[ngms27] 18/12/2020 20:14

Agreed best case currently for bond holders looks like 50c to the dollar with equity wipeout.I suspect it will be a D4E with equity effectively wiped out.

[ppceh] 18/12/2020 20:10

What’s changed since last update?

Production has confounded the doomsayers who thought sub 10K by now. Water cut up a bit but next quarter will give us a better idea of whether this is a short term problem. Hopefully the contribution from the sandstones is an increasing % of declining production

Only other news was side track, first choice of all the analysts. Whether this is a positive or a negative we don’t yet know. Restructuring was the share price killer today but this was always most likely outcome. Aside from a takeover, the only possible outcome.

The big equity holders are now in negotiations with Bondholders. Equity has to cough up some cash but only if Bondholders give something back. Without a restructuring Bondholders are going to take a significant haircut best case, assuming no oil price miracle salvation.

As with Brexit, it’s in everyone’s interest to deal.

[fat frank] 18/12/2020 19:51

This is a repeat of my previous post of the Hannam statement this morning, which I apologise for, but I don't believe people (both Bulls & Bears) have read properly. Todays update held no surprises for Hannam and their comments were published LESS THAN 2 HOURS AFTER THE RNS so don't tell me they haven't been involved.

Read it carefully as it takes all of the emotion out - unlike some comments on this board, my own included.



"Lancaster development proposed and funding options being considered
Hurricane released an operational and corporate update today. As expected given the major reserves downgrade earlier this year, Hurricane has flagged the possibility of equity dilution or even the wipe out of equity value if no agreement on the funding of its development plans can be agreed with stakeholders. However, we continue to see considerable value remaining in the Lancaster asset if funding for further development of the field is forthcoming. Hurricane currently has US$87m in available cash (versus a market capitalisation of US$114mm and outstanding convertible bonds of US$230mm) plus we estimate ~US$50mm in restricted cash. The company is also free cash flow positive at current oil prices and production levels. HUR remains very geared into oil prices: at current production rates of 12kbbl/d, we estimate US$40mm of incremental cash flow if oil prices move up $10/bbl (35% of the current market cap for just one years production). Also, if it can boost production by 5kbbl/d, over the course of a year based on a US$50/bbl realisation, this would add ~US$90mm of revenue with little incremental opex.

Further development plans for Lancaster have been refined
Over the past few months, since the release of the technical review, Hurricane has carried out a significant amount of work to revise the technical interpretation of the Lancaster reservoir. The objective is to deliver production levels which ensure resilience in a volatile oil price environment, as well as to achieve optimal further development of the Lancaster field to maximise stakeholder value. The first development solution is to bring on a new production well through the re-entering and side-tracking of the 205/21a-7z well, to add a significant amount of incremental production starting in Q4 21 and at an estimated cost of US$60mm. This could potentially allow production to get back up to 20kbbl/d in 2022. The other project mooted is the implementation of a US$75mm water injection scheme in the NW of the field in 2022, which on our estimates could add 10mmbbl of 2P reserves (from 2C resource) and at US$60/bbl Brent would be worth US$231mm or 9p/sh unrisked (we carry 5p/sh risked in our NAV). A pilot well to derisk the feasibility of this could be drilled relatively cheaply (~US$10mm in 2021) if the side-track takes place.

Current production of 12kbbl/d with a 23% water cut
Hurricane remains on track to meet its production guidance for the final four months of 2020 of 12-14kbbl/d, albeit at the low end of the range. Relative to October when the 205/21a-6 well was producing at 14.5kbbl/d with a 19% water cut, the production has been choked back to 12.3kbbl/d with a slight increase in the water cut to 23% (similar on an absolute basis). The water production level is well within the handling capacity of the FPSO but the well production rate has been choked back to manage the reservoir and avoid water coning issues. In 2021, we expect production of 11kbbl/d, a moderate decline, which may be partially offset by a Q4 bump from the 205/21a-7z well re-entry.

Valuation: no change to our risked NAV of 10p/sh
Our risked NAV is 10p/sh (US$43/bbl Brent in 2020 and US$60/bbl flat long term; 10% discount rate). Our core NAV only includes the value for the 2P reserves (worth 10p/sh risked) and including the liabilities gives a core NAV of 2p/sh. Even with the heavily downgraded contingent resources, we have a value of >40p/sh unrisked for the 2C resource, which on a risked basis is worth 8p/sh. The US$459mm net asset value held on the balance sheet for Lancaster implies a value of US$8/bbl for the remaining 2P reserves and 2C resources, totalling 57mmbbl. Assuming 11kbbl/d of production in 2021, we expect Hurricane to generate between $45-125mm of EBITDA between US$40-60/bbl Brent. We expect non-discretionary capex of only US$6mm net in 2021, relating to the abandonment of the well on the Lincoln field."




I honestly believe this is a very good overview of both the hopes and the risks.

[mhin2] 18/12/2020 19:46

My understanding of the RNS is that if there is any value in Hur (and I think there is lots), its going to the bond holders....thanks for all the research/work (did something similar not happen to GKP?)

[fat frank] 18/12/2020 19:41

ngms27: just where on earth else would Bluewater want to put the Mizu? They are far more likely to shave their rate and leave it on Lancaster to the bitter end. Like drilling, the FPSO market is in tatters.

[leoneobull] 18/12/2020 19:40

Re final paragraph of RNS, if the bondholders dont sanction investment go ahead, they would be cutting off their nose to spite their face IMOV. Therefore, it comes back to how much equity dilution in exchange for sanctioning the investment, and over what timeframe.

[sbb1x] 18/12/2020 19:30

Could Brent be 65$ in March. Hell yeah.

[mhin2] 18/12/2020 19:03

Ngms, debt refinancing may have made sense, but that does not seem to be the way the bod are thinking...I dont think the BOD have the same belief and commitment as Dr T had...Dr T committed but he was not wrong, but neither was he right...the current BOD are corporates without passion for project.

Considering the RNS was unnecessary in terms of technical review (after all no decision made, and certainly no information of substance provided), it served one purpose...that is to inform us of where the BOD are taking this in terms of ownership.

I bet if Dr T was brought back the share price would rise (oh and who is to say he wont be when the bondholders acquire control)

[ngms27] 18/12/2020 18:56

One thing no one seems to discuss is that the FSPO contract expires in June 2022 and needs the extension sanctioning before June 2021 to go beyond that date under the terms of the contract.

The problem is at this point HUR won't have a scooby whether they can save the day, Bluewater may have other eggs in the basket if HUR cannot commit.

[mhin2] 18/12/2020 18:53

Good on you hiddendepths....well said. However, I think Dr T proved what is possible, and across the license there will be good/better wells. Unfortunately, cant see HUR being in a position to build on all the knowledge, analysis and experience...somebody sometime will pick up all the work on the cheap, and make it work (thats assuming oil is in vogue and price is sufficiently high).

I presume CA has acquired a sufficient number of corporate bonds (not least by trading Hur). I assume Kerogen have done the same....now the BOD is about to execute the old adage `he who pays the piper plays the tune'

[ngms27] 18/12/2020 18:49

Here's my stab at what finances will look like in June 2022 assuming the success case

Oil Price 50
Current Cash 87000000
Decline Rate (Monthly) 4.50%
Break Even 400000

Production Profit Oil per Day
Jan 12000 200000
Feb 11460 173000
Apr 10944 147215
May 10452 122590.325
Jun 9981 99073.76038
Jul 9532 76615.44116
Aug 9103 55167.74631
Sep 8694 34685.19772
Oct 8302 15124.36382
Nov 7929 -3556.232547
Dec 17000 450000
Jan 17000 450000
Feb 17000 450000
Apr 17000 450000
May 17000 450000
Jun 17000 450000

Total Profit Oil 108597468.1

New Producer 60000000
Injector 75000000

Cash June 2022 60597468.06

I've assumed that the 7z sidetrack works and puts production at 17k from December 2021

Using the assumptions shown above unrestricted cash would be $60.5m but they still have the $230m bond liability.

That would mean equity would need to raise $165m, the debt refinanced or equity taking a rather large haircut. Remember this is the success case.

Given these projections I cannot see Bond Holders sanctioning this work without equity bearing lots of pain.

[charlie88888] 18/12/2020 18:43

LOL, says ths man ramped up ICON for days and days and BANG suddenly said its a bad share....Mark my words, this clown belongs in arcade.Thanks,Different World, Dw

[datait] 18/12/2020 18:20

I know for sure its not easy to cut and run but for sure you will make money elsewhere.

Take your money and build it back up in other stocks only glad this is one I got right for once.