Hurricane Energy Share Discussion Threads

[nigwit] 30/5/2021 17:21

Why would CA be so vehemently against the restructuring if they hadn’t been wrong-footed?

[ghhghh] 30/5/2021 17:05

I've been through several restructurings as a BH and been amazed by all the crazy conspiracy theories put out by unfortunate equity holders

I'm again a BH here, albeit small, but for the first time I'm thinking something does not smell quite right. CA without doubt believe there to be substantial value somewhere (I can't see it) and CA are not stupid and have access to expert advice well beyond anyone on this Board.

So can CBs see it?

My guess is yes but there appears to be no funding in order to unlock it at this time. Hence can claim no value now.

Remember the Judge asking why are CBs so seen to get hold of 95% of worthless equity?

And on the day of the restructuring I sold a large number of CBs at 57 cent with no problem. And the buyers still want more, spread currently 57 - 59 cents.

Why do they want them at this high price? Risk of ESP failure, water cut etc. High risk unless decent potential upside?

And who are the CB holders? This is a very big question. Will they fund the 'upside' if restructuring goes through?

[loglorry1] 30/5/2021 15:36

Ok thanks. I thought it was less definitive when CA bought. Could CA have just assumed that limited value would be returned rather than no value and that limited value was with pursuing?

[jacks13] 30/5/2021 14:52

The first CA will have known of the Lock-up agreement would have been 30th April when the Financial Restructuring measures were announced. Worse still for CA, by entering into the Lock-up agreement the board has triggered an Event of Default. That admission of default is safely tucked away in the bondholders' armoury awaiting deployment at their discretion.

CA would not have known any of this when they bought their latest 55M shares. The recent changes to the Companies Act may have wrong-footed CA who would have expected to pursue the familiar paths to gaining control. Even if CA were aware of the changes to the Act, and given their activist leanings they almost certainly would have been, they might not have expected them to be deployed here.

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Event of Default

As a result of entering into the Lock-up Agreement, an Event of Default (as defined in the Trust Deed) has occurred pursuant to the Condition 10(F) of the terms and conditions of the Convertible Bonds. As the Company's ability to repay the Convertible Bonds at maturity is dependent on the implementation of the proposed Restructuring, a Potential Event of Default (as defined in the Trust Deed) has also arisen. The Company has provided notice of the Event of Default and Potential Event of Default to the Trustee as required by the Trust Deed. Noting that approximately 69% by value of the Convertible Bonds are held by the Ad Hoc Committee, and the Lock-up Agreement contains certain forbearances and an agreement not to take or encourage any action which would, or would reasonably be expected to, delay, frustrate, impede or prevent the implementation or consummation of the Restructuring, the Company does not expect the Ad Hoc Committee to take action in relation to the Event of Default while the Lock-up Agreement is in effect.

RNS 30 April

[ghhghh] 30/5/2021 13:50

Tim

HUR CPR outline summary on 7th April

The Company continues to engage with an ad hoc group of its convertible noteholders over the Company's forward work programme, strategy, financing and balance sheet recapitalisation. It should be noted that there is a risk of significant dilution to existing shareholders from a possible restructuring and/or partial equitisation of the convertible bonds and of potentially limited or no value being returned to shareholders.

If no agreement can be reached with the Company's stakeholders on additional development activity at Lancaster, the field could continue to produce from the P6 well before reaching its economic limit, the timing of which would depend on oil prices, actual production levels delivered and the level of cost savings achievable. The field may then be decommissioned, with potentially limited or no value returned to shareholders.

I think that's pretty clear! And, again, this was announced at the same time as CPR summary.

So CA had a very clear idea of the direction of travel. Yet they immediately bought another £1.4m at 2.5p. Why?

There is absolutely no doubt that, at the time, they thought they could see a route through this minefield. A route that kept CBs whole at the same time as funding appraisal/development of their claimed upside.

Any shorter who completely dismisses the possibility that this route still exists is an idiot!

[nigwit] 30/5/2021 11:08

Trice had what I call 'walk on water syndrome'. Apt in this case. I've seen it in many business leaders who are in the middle of their first success before it hits the buffers when they become over-confident and haven't understood their limitations. It's sometimes referred to as The Peter Principle. There's a Wiki about it here



In a nutshell the principle states that people rise to their level of incompetence. That it to the first rung of the hierarchy where they don't have the knowledge or skills to cope.

It's when I recognised this that I sold. I recognised it when Arnott, who was more experienced, resigned.

Paradoxically, Trice may now have learned from his failure. If so, he would be a far better person to back second time around.

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I see my reputation has spread ahead of me onto LSE this morning. For clarity, I don't post there or use any other pseudonyms. I'm busy, I have no need and I'm really not that exercised about things.

[tournesol] 30/5/2021 10:53

In fact Trice reminds me of the captain of that Italian cruise liner that ran aground a few years ago because of his spectacular incompetence. You'll remember the captain abandoned ship leaving passengers and crew to their fate.

Nobody blamed the poor bloody officers who were suddenly and unceremoniously handed a crippled and sinking ship and who were unable to save the day. It's the captain at the time of the shipwreck that rightly took the blame.

[jam2day] 30/5/2021 09:46

objection - supposition

[loglorry1] 30/5/2021 09:38

I'm sure the BoD didn't want pesky shareholders trying to remove them. Nobody wants to back a board that puts out such terrible news. I can imagine after what Trice told everyone it is very painful for shareholders to hear. They must have been fearful for their jobs and thus remained tight lipped.

I would argue therefore that the state of play is probably if anything optimistic.

I think CA bought more stock because they simply didn't believe things were as bad as they are. They are not oil ppl and probably reasoned that things might be worse than expected but by averaging down they'd end up coming out ok. I think they bought prior to the recent CPR (I may be wrong) so that does explain their misplaced optimism to some extent.

[kaos3] 30/5/2021 09:36

over my garden I switched on my child brain and saw a simple Q - why are both sides fighting for the equity - if it is worthless?

it is not -

there is a fight who will get it for next to nothing

as simple as that

[agnabeya] 30/5/2021 09:11

hxxps://www.ogauthority.co.uk/media/5108/oga-suspended-wells-guidance.pdf

[ghhghh] 30/5/2021 08:56

Tim

And re lack of communication, HUR could easily have answered CA. IMO the bottom line is that HUR didn't want CA calling an EGM.

[ghhghh] 30/5/2021 08:54

Tim

I think you miss the elephant in the room.

If I was short I'd be worried about why did CA cough up £1.4m at 2.5p a month ago days after HUR warned that equity faced wipe out?

Why did CA previously accuse HUR of under promoting the value of the assets?

Is there significant value that can be realistically materialised pre year end now that market conditions/oil price improving. These assets were unfundable Sept 2020 to March 2021 but now?

Is emergency legislation being used to unfairly disenfranchise equity?

Is this premature?


And I assume your absolute nightmare would be say Spirit or the like, perhaps backed by Private Equity. Why did CA cough up that £1.4m unless they had some sort of silver bullet alternative? My guess is that whatever this is/was, it involved waiting for another > $50m of cash flow to reduce the debt to a more manageable level.

Don't get me wrong. I wouldn't touch equity with a barge pole and I suspect your short will do well. But you can't sleep at nights until we hear from CA, especially since equity will bounce irrationally on any half decent news.

[tournesol] 30/5/2021 08:51

It’s bizarre that so many posters here are criticising/attacking the BoD and calling them crooks and incompetents when the real culprit responsible for the Hur train crash is clearly Dr Trice.

He was wrong about the prevalence and productivity of fractures. He was wrong about their location. He was wrong about drilling locations. He was wrong about the Spirit JV. He was disastrously wrong about the OWC depth. He was wrong about perched water. He was wrong about the issuance and terms of the CB's.

He was wrong about almost everything. And he was catastrophically slow and reluctant to admit it.

It's not the current BoD who are most at fault. Trice was on the bridge when Hur hit the iceberg (sorry for mixed metaphors). The poor BoD were left with a doomed ship. They might be useless but their task has always been hopeless. Maris clearly didn't realise that when he came on board.

[kooba] 30/5/2021 05:37

“They can't just shaft creditors because their shareholders would prefer it.”
But it sure works the other way round doesn’t it!

Point on the GM is I am fully aware of statues , however to the court the companys lawyer stated that CA had requested a GM be held before the sanction hearing which was to be the 11th June having been sent the requisition on the 18th May ..they said in court this was not possible due to the articles, which I do not believe to be true.They then proposed the date of the AGM as the 30th June and said it was proposed the GM resolutions be addressed at the same time.

It seems because of the court ordered shareholder vote they have moved their position again..
The AGM is the last date possible and it appears the GM will be on the last date possible..all to thwart shareholders.

Several directors are up for election as items having to be voted on at the AGM including the re-election of the Chair so I suggest shareholders can at least vote on some of the resolutions maybe before new stock is issued should this go through.

[leoneobull] 30/5/2021 05:06

dr R Trice has done more to combat climate change than any other oil CEO in history by converting billions of barrels of oil into water.....he ought to be knighted for services to capital destruction, including my own LOL

[loglorry1] 29/5/2021 23:20

The BoD are supporting the plan so of course they will push the CA resolutions back as long as possible and after a date where the plan is potentially passed.

I didn't watch the judge but did read his transcript. He concluded shareholders rights were affected by the plan and did not accept the opposing argument that they were merely diluted.

However, I think its wrong to conclude from this that the judge was siding with shareholders against the Plan. He merely said that this was one of the tests that had passed which enabled shareholders the opportunity to present an alternative, which he may dismiss anyway and allow the plan regardless.

As a general point the BoD are accountable to their shareholders as per the articles. If the request was valid there will be a vote. Your complaint is that its not sooner. That's not the rules however. Also the BoD have a responsibility to the creditors over the shareholders don't forget. We've done this already. They can't just shaft creditors because their shareholders would prefer it.

[philwalker36] 29/5/2021 22:06

Wow 3 postsSounding desperate

[kooba] 29/5/2021 22:01

I think the judge in first hearing made some very important points not least on timing of this action ( too early) , potential economic interest ( in doubt) but also on fundamental affects on rights , he was convinced they were impacted ..I thought he did better than any potential opposing QC ! CA decided to keep their powder dry correctly it seems from detailed consideration but must be extremely disappointed after the beating the company's lawyers took that somehow in stressed high court schedule the company managed to secure not one but up to a 3 day slot exactly in a tiny window they needed..how dat?? Also leaves virtually no time to challenge especially when they refuse to give information vital to trying to propose alternative ..ie the cost of all their and Ad Hoc groups advisors! Having said to the court that they could not convene a GM in 22 days because of the articles (BS) they convene a court ordered shareholder meeting in far less time with a few days notice ..they said to the court it makes far more sense to deal with CA requisition with the AGM . After the shareholder vote 'bombshell ' they have now worked out that a 3 day hearing could mean even if successful the new shareholders would miss the vote on the 30th and the board would be given their marching orders...solution decide what they proposed in court makes no sense and not to deal with the requisition on the 30th with AGM and be accountable to their shareholders. Not even honest with the court though they haven't been honest with their shareholders for months. This company has been run by the bondholders since end of Jan irrespective of this 'plan' ..it's not difficult to understand why they won't face their shareholders and be accountable.

[loglorry1] 29/5/2021 21:24

Maybe kooba. I think the judge saying "its upside down" just meant that you have to let equity propose a plan/have a say before he was prepared to sanction the BoD proposed plan.

It looked like the covid legislation circumvented this. I got this wrong. I think for the extra covid rules to apply there has to be urgency that requires it, and this doesn't apply here, there is time to here a proposal from equity.

[kooba] 29/5/2021 21:10

They could have responded to a request for board representation by CA ..one way or the other. If a representative was appointed they would have been deemed inside and wall crossed so CA effectively offered to be wall crossed months ago , replying to that request was not in itself privileged information. But the company dragged it out promising response and still to this day have not responded it seems..odd behaviour for a company wishing to engage and look at all the options.Personally I think things are better than they were when the company started down a road with no u turns back in sept oct..they probably thought they could do an equitable deal up until mid Jan ..by then oil production had stabilised and the oil price was up ..and has gone up a lot more. Something happened ..I guess the friendly negotiations with Ad Hoc turned hostile. The board wet themselves and through shareholders under the bus capitulating every demand and agreed not to do anything that might impede the plan! That meant holding information back to a strict timetable and refusing to talk with shareholder. The thing the told you so's are missing here is a rather large point on shareholders rights , information , voting or just allowing new legislation to wipe them out. Pwc ,the new CPR et all can all be skewed by the board to paint a picture supporting this action but with ability to challenge where might this leave shareholders? Bigger picture than just Hurricane here and I believe having attended the first hearing the judge is on top of it. The timetable offers little prospect for challenge but interesting to see how this pans out. So far the BoD is 1 nil down when should have been holding all the cards.

[loglorry1] 29/5/2021 19:47

So for equity to regain any significant value say above 2p what needs to happen imho?

Equity holders which means Kerogan or CA sicne PIs aren't really that organised first have to defeat the restructuring plan. This means offer up an alternative to the judge which has a realistic chance of implementation. This can't be what if the oil price goes to $100. All those sorts of what ifs have been considered by PWC and the judge accepted their validity.

I think that's nigh impossible but let's assume they do. Then the court may allow the plan to pass/fail based on equity 75% vote which will fail. That's a given really turkeys and Christmas.

At this point equity needs to avoid CBs putting hur into insolvency/prepack. I don't agree that means shutting up shop immediately and leaving oil in the ground. They can likely run it down in NFA but still take control.

Pre-pack looks feasible but CBs may want to keep a listing. I doubt they'd trade a listing for a CA controlled board. There may be other obstacles to a prepack eg the AM contract would be in breach and most other supplier contracts for to the insolvency. At this point CBs could sweeten deal maybe 10% equity? Still doesn't help share price.

Let's assume then that a pre-pack is avoided and the CBs allow a CA controlled board and agree to heal the default. Oh also CA need 50% to get new board. That might be harder than it looks.

At this point shares go higher say 2-3p.

CA controlled board might then be able to raise a bit of cash say $20m. Seems very very unlikely but at 2p market cap around $60m so perhaps a rights issue? They might be able to stipulate this is for a CB tender (again would CBs allow this?) and perhaps buy back $30m in a tender at 67c leaving $200m.

We then need CBs to either a) allow further drilling with the cash (they'd have to be mad) or b) strong oil prices, slow decline, OGA bubble point approval, slow inc in water cut, no pump failure to generate $200m by July 2022 (or close to it) to pay off the bonds. Say they got within $20m an equity raise or less painful D4E that might work at that point.

Only then there might be a bit of equity value left.

One other possibility is the board really are pulling a fast one and in cahoots with CBs to steal the company on the cheap. This seems ludicrous to me. Let's assume they are and the judge sees this. Not sure what the outcome would be but probably fast track to CA controlled board above.

All realistic paths lead to zero or near zero equity to me and probably quite quickly. However if you want to find a path there is one.

So what should bother shorts? A string of extremely unlikely events all happening. What would zero it quickly? Any of a bunch of likely events.

[loglorry1] 29/5/2021 18:23

Yes Paul I have a small short from higher up. It's an entertaining situation and I'm not really sure why I'm posting so much here. Just for fun really and I do still think it's important to point out just how dangerous it is to buy (or hold) the equity here.

I would normally have a bigger short but its a crazy market atm with stuff like AMC or GME defying gravity for no real reason.

I'm certainly not trying to bash down the shares. When I have more time I'll prove this by posting a list if things that should concern a short here.