Hurricane Energy Share Discussion Threads

[luckyjoe999] 16/11/2021 17:03

Follow on Post taken from lse bb today:

wellsite
Posted in: HUR
Posts: 761
Price: 4.65
No Opinion
RE: Couldn’t be better…….16 Nov 2021 13:10

it's actually reservoir physics. The lowest pressure shall be at the crest, therefore that's where gas shall come out of solution first. The aquifer shall help keep the free gas away from the wells. The trick shall be to balance the oil supported from the gas cap expansion with the oil being swept by the aquifer - as long as they do not get greedy the gas should keep away from the ESP. When a secondary gas cap is forming the water-oil ratio plot shall flatten/ decline and production shall flatten/increase. Today P6 is seeing over 67 million barrels of mobile oil. Being attic the the shallowest perforation the gas cap expansion shall allow production of up dip oil, i.e. the wells shall start draining more than the 67 million barrels it currently is.
It might be water injection is not the best option for economic recovery if they can get a good solution gas drive going
WS

[kooba] 16/11/2021 17:03

Something like 50p a share tax losses off the cuff...which could give a UK producer £1b of tax free earnings.To be verified but the scale of the tax opportunity dwarfs most scenarios right now...company should be clarifying position and seeking to provide a corporate solution to massively enhance shareholder value.imho.

[luckyjoe999] 16/11/2021 17:00

Posts taken from lse bb today:

wellsite
Posted in: HUR
Posts: 761
Price: 4.85
No Opinion
RE: Couldn’t be better…….16 Nov 2021 08:13

The place where the reservoir pressure shall go below bubble point first shall be at the crest of the reservoir.

As it looks like P6 is draining the Cretaceous and Jurassic formations are being drained by P6 a secondary gas cap shall form in these shallower formations first. The net result shall be attic oil shall be driven to P6 as the gas cap expands. That is, oil production shall either increase or stop declining with similar reduction or stabilization in water production. There may be an initial drop in produced gas-oil ratio as the reservoir physics sorts itself out. This should be followed by a small increase in GOR as more localized (small) gas volumes appear and are produced.
Bottom line, don't worry about it, in a world of secondary gas cap drive P7 may be restarted as shall start to produce more oil from this secondary gas cap drive.

HUR have poached a good senior reservoir engineer from BP Clair this year.......... in safer hands now

[kooba] 16/11/2021 16:55

The bonds are only entitled to the money that is owed to them..very limited upside especially on 90c offered i last heard.The equity on the other hand does indeed have downside if production ceases ( as do the bonds as i type) however with a fair wind the equity would have 4m barrels of (hopefully) recoverable in the ground continuing Well6 ..licences in key UK exploration area and a rather large tax loss position on its books.There is only 10% upside in the bonds if repaid ..whereas there potentially is far greater upside ( and downside) in the equity.Risk reward.

[fat frank] 16/11/2021 16:45

What's this??? An RNS from HUR that only results in a 2.6% drop in the share price???


Heady Days indeed!!!!

And how strange that the Bondholders still seem to be desperate to hang on to this worthless company.......

[ngms27] 16/11/2021 16:42

Wbodger, production going down and water cut creeping up at a faster pace.
As of 14 November 2021, Lancaster was producing c.10,150 bopd from the P6 well
alone with an associated water cut of c.37%.

Then they mention:
Previously the Company announced that it anticipated the well gauge pressure
would reach the bubble point by the end of Q1 2022. While uncertainty remains,
analysis of the most recent trends indicates that this point is now
anticipated between late December 2021 and mid February 2022.

They have previously stated that bubble point could force an end to production. The risk maybe low but its real and present danger.

We haven't even mentioned potential ESP failure yet.

There remains a risk that production could cease at any moment and over time that risk is getting greater.

[nicholasblake] 16/11/2021 16:38

The problem with this thread is that most posters are looking for black and white when there remains significant uncertainty.
If things continue as is, it seems highly likely there will be a Bluewater extension, the Bonds will be repaid and the various contingent assets may be converted into actual assets.
However, a serious production problem now would render the above moot, and could lead to insolvency in May.
In strictly financial terms the ordinaries are best thought of as an option on the former.

[officerdigby] 16/11/2021 16:36

ngms2716 Nov '21 - 16:24 - 30823 of 30824
0 0 0
kooba, it could be that the Bond Holders thought there was real money to be made from the tax losses rather than production? Maybe they even had a buyer lined up? Private Equity?


Well they we being sold the restructure plan - by Powerpoint.

Now its yes well we got more money than ever but you know and really its not our money and the plan we had it might not work.. And were daren't plan for the future like we did on the Powerpoint! Even though the Powerpoint was based on $65 oil and everything has over performed...
.

..LOLOLOL

[wbodger] 16/11/2021 16:29

October's production was 10,420 bopd.
It doesn't matter how frequequently liftings happen. HUR will continue to pay their bills when due, receive payment for shipments whenever they happen and the Net Cash will grow on paper. The figures show there is a substantial cushion of time, so the continuation of trading is not in doubt. That's the point.

No one is being unreasonably optimistic, do the math.

[ngms27] 16/11/2021 16:24

kooba, it could be that the Bond Holders thought there was real money to be made from the tax losses rather than production? Maybe they even had a buyer lined up? Private Equity?

[kooba] 16/11/2021 16:15

I believe there could be some playing for time on agreeing extension firstly the attitude of bondholders secondly being able to gauge the impact and likely mitigating factors needed to keep producing once bubblepoint is hit.If one remembers the whole basis of the unlawful restructuring proposal was the company and bondholders view that by extending the redemption date date the bonds could be paid their model showed production continuing to end 2023. Now the bond holders may be idiots but if they really thought production would stop at bubble point ( then anticipated before the end of this year I believe) then they were throwing $20m of their own money down the drain to secure the restructuring....why would they? They obviously believed production would continue past existing contract.I also doubt that Bluewater would be that keen on extending contract if they thought the well uneconomic in the very short term..they get the cancellation fee i guess but far better a contract that runs its duration surely.

[ngms27] 16/11/2021 15:54

The liftings look to be every 7 weeks or so now rather than 6 and will likely spread further out as production wanes like the Covid Vaccine.

Also this is what they actually said:
It should be noted that the net free cash is calculated as at the
balance sheet date and does not take into account future liabilities that the
Company is already committed to but have not yet been accrued. As such, not
all of the net free cash would be available for repayment of the Convertible
Bonds at their maturity in July 2022.

So I know you expect me to say this, but say it I will that you are being very optimistic that the next two liftings will cover the CB's, they won't. The third or fourth likely will if production can be maintained above 9k.

Todays RNS to me suggests there are serious doubts on both sides that the Bluewater contract will be required to be extended past contract expiry and it's likely both parties won't want to commit until the fat ladies singing.

[steve73] 16/11/2021 15:50

Not much point securing a BW extension once the well has given up, either watered out or bubble point.... and a "next" producer is a long way down the road, perhaps 2023 unless it's already planned for next year..(i.e. LLI's and rig contracts)

Whether producing or not, I'd expect the AM would cost perhaps $8-10MM per month just to keep it on station.. and if it's let go, then it may not come back.

Good point on the tax losses though... This is probably where much (if not all) of the residual value post bonds lie.

[kooba] 16/11/2021 15:23

Cash comes from offloads not per month..i think every 6 weeks ..Laserdisc the expert.So if offload not till Dec ..Nov will be a dry month for cash..but obviously offload due shortly and the next mid end Jan i guess.By then should be getting close to a level where the funds for redemption are almost to hand, with a few more offloads due on existing contract. This should give the financial flexibility to secure Bluewater extension. Fingers crossed.

[wbodger] 16/11/2021 15:00

Net free cash 31/10: $99 million
Bond repayment on 30/6/2022: $152 million.
Shortfall $53 million.

Between September 30 and October 31 net free cash increased from $73 million to $99 million. At that rate the shortfall would be made up in two months plus a day from 31/10. If Santa gives us a stonking oil price it could be in the bank account by Christmas! Ho, ho, ho.

Or by Hogmanay anyway.

Of course the final coupon on the bonds has to be met, and I have read the notwithstandings and caveats in the RNS, but isn't even going to be close. It should be sorted by end-January, with or without bubble-point problems and/or increased water cut. There are five months of production available as cushion. This will be a well solvent trading business in July so most of the net free cash will be available to the CVB repayment account.

[kooba] 16/11/2021 12:05

Think the huge accumulated tax losses are likely worth more than the oil and licences. Either for Hurricane to get taken over by a North Sea producer who can fully utilise the loses against the super profits they are currently generating or for Hurricane to be used as a vehicle to buy discounted producing North Sea assets and theres plenty up for sale.As far as i can tell there is absolutely no reason the tax losses that CA mentioned are not accessible as the company is a going concern.There have been large N sea asset transactions in the past where the large part of the consideration represents tax loss acquisition. Many companies carrying tax losses have now used then up as the POO has jumped and i understand a potential valuation would not reflect the scarcity of such losses.CA Link https://storage.googleapis.com/crystalamber-com.appspot.com/_downloads/monthly-net-asset-value-2021-10-26.pdfLosses of over £1b ? 25p in the £ interesting 50p in the gets very interesting!

[officerdigby] 16/11/2021 11:19

YEs yes Ayato - the essential problem here is... Positive RNS's from SH'er and rather pessimistic ('and now what!..' type).. RNS's from the company...

It's annoying that the bubble point has moved nearer for the first time. But as Kooba and NGMS are saying it might simply be bc they have opened the taps...

It would look silly if they caused the pressure loss and then can't produce below bubble w/o extra gas...

Successfully past BP must be a rerate. Failure post bubble point..

[ayatollahhighrollah] 16/11/2021 11:11

i also believe that it will be possible, post bondholder payback, to utilise a clever "hive down" to syphon out a substantive part of the accumulated tax losess into a new subsidary co. which can then be sold as a new entity to a 3rd party who can benefit from the same and thereby monetise that "asset" for HUR in the short term in order to provide a chunk of liquidity to help ameliorate the actual cash raise element for the costs for further Lancaster development in 2023.

[ayatollahhighrollah] 16/11/2021 10:52

Ok - so the "bondholders plan" post 95% grab was (in the short term):-

(taken from "proposed Financial restructuring"


Field Development Plan Addendum for the Lancaster Field

Amendment to the Lancaster EPS Field Development Plan is required, which will need OGA approval, for the Lancaster field to produce below bubble point

The company is confident it will obtain FDPA approval providing the Company with a rolling 3-month consent to produce below bubble point, subject to quarterly review of operating procedures to ensure gas liberated in the reservoir is not produced


presumably therefore, and having been educated above on the gas issue, the bondholders believed (short term) that producing below bubble point was viable... and that they could prevent gas being liberated.... whilst they went about organising a new P8 well and Water Injector...

So in our case therefore, until Bonds paid back we cannot raise for P8 and WI - but can likely get debt free by end Q1-2022 and then continue to produce net cash during 2022 (on lower output levels / higher prices and on a win win extension with Bluewater)- and then post Bonds paid off (late 1st Quarter 2022) could then action the fundraise Q2-2022 to do P8 and WI in 2023 window and at a joint cost of circa £ 180 million cost - or individually P8 £83 or WI £ 87 - with circa 9m seismic.



Appreciate of course - risks - but that is the name of the game... surely.

All other assets available for whatever deals could be done etc)

[ayatollahhighrollah] 16/11/2021 10:34

thanks for the clarifications everyone. much appreciated.

[easybrent] 16/11/2021 09:57

The company isnt allowed to produce any additional gas to surface as a result of reaching the bubble point. Its very clear in the 17th Jun 2021 RNS.

"In line with the FDPA, the Company will ensure that no incremental liberated gas is produced to surface and commits to choking back or shutting in any well which may produce incremental gas liberated due to below bubble point production."


hxxps://investegate.co.uk/hurricane-energy-plc--hur-/rns/lancaster-field-development-plan-addendum-approval/202106170700081689C/

[ngms27] 16/11/2021 09:32

kooba, I agree they are going hell for leather to try and get the capital to pay back the bonds

[ngms27] 16/11/2021 09:31

They are already flaring during production. The OGA will set strict limits on the volume of gas allowed to be flared should bubble point produce more gas. This means that they would have to peg back production if required to stay within the limits.

[kooba] 16/11/2021 09:27

"This approval, whilst not having any immediate impact on the reservoir performance of the Lancaster field, will assist with longer-term reservoir management, enabling us to optimise the field's performance."Approval now, while we still have some months before we reach bubble point, will allow both us and the OGA to establish baseline performance and to test the three-month approval process".https://www.offshore-energy.biz/hurricane-gets-approval-for-lancaster-field-development-plan-addendum/

[kooba] 16/11/2021 09:22

I don't see it as that bad ..the increased production but increased water cut may well be that the company is maximising production ( less throttle back?) while prices are attractive and looking at amassing the necessary readies to wave goodbye to the bondholders...its what i would be doing.Maybe they have put their foot on the accelerator for now not the brakes?