Hurricane Energy Share Discussion Threads

[dave19w] 26/4/2017 07:25

Hi Steve,

5-10 Billion is just such a wide figure, and of course the spend would be offset by earnings on the front end while they continue to spend, the fact is that even with those costs they stand to make a huge amount of money over a relatively short amount of time. Anyway we can debate that till blue in the face. The fact is that any super major with interest here will do what is best for them and dangle whatever carrots in front of the HUR management that they think will entice them to part with all or part of the company. This in my opinion may not happen soon but is likely to happen eventually.

The case you make for Shale is true it is cheaper than offshore, and less fruitful, but also much more expensive than conventional onshore drilling with more environmental concerns. I believe that it will peak eventually but in the meantime as the offshore reserves deplete this will far overtake any additional O&G produced from Shale. Don't forget that current global daily consumption of oil sits around 96 Million BPD and rising. Things can change fast. I don't think Renewables are too close to taking down the oil industry, there will be a slow introduction as the technology progresses. Some countries are still burning coal to power themselves and energy shortages are wide spread in India and all over the world. All IMO of course.

[ngms27] 26/4/2017 06:54

I entirely disagree. HUR will be taken out for greater than 200p per share before Santa makes an appearance.Majors need reserve replenishment following years of austerity.

[steve73] 26/4/2017 06:18

dave - my 5-10 Bn includes full field development cost for the entire GLA... my point being there's little benefit in buying out the company unless you commit to develop it to fruition.

Shale wells are relatively cheap and quick to mature to production (income) compared to large offshore developments. So all the while O/P is "fragile" then this is where the capital will go (IMO), even if the ROI is less than for the larger, longer time to fruition, offshore developments.

And in the much longer term oil may well be giving way to renewables/electricity, so it does rely on demand growing faster than shale can replace exiting declines.

[dave19w] 26/4/2017 06:02

Interesting comments Steve, You may well be right about the Loan as it would be low risk for both parties IMO. I do think 5-10 Billion for appraisal costs is a bit pie in the sky though..

A note on Shale, the actual costs and process are not very well covered by the general media, but they do love to tout it as the silver bullet for the oil price. It is worth noting that for a shale well they need to Frac the formation in order to collect the goods. These wells will yield well for about 3 months, then rapidly decline, at this point they will have to frac again to get more yield or abandon and start anew. The capacity for this does mean they can make money and they can ramp up quickly etc. But the yields they get comparable to the loss in offshore production that has been happening. The likes of Lancaster which will produce 17,000 bpd in the earliest stages are diminishing. A lot of wells producing 80 - a few hundred barrels per day will have an affect but to what level bearing in mind the losses of the larger producing wells.

Also on if OPEC extend the cuts for another 6 months (which it seems likely they will) and with the election in Iran coming in May (possibly followed by new embargo from USA). The market could be seen at a goof 60 USD a barrel price fairly soon. This would make any loans or farm ins or takeovers more attractive with an oil price firmly in the 60 + range. Based on the size and potential of the resources here the scale will make the assets retrievable at very attractive margins. IMO

[steve73] 26/4/2017 03:27

Good discussion last night... If I may add my tuppence worth..

Need also to consider the risk. It's one thing to farm in to the tune of 300 M for the EPS and then if it doesn't work as planned, to walk away.
Totally another to go for a full T/O at (say) 2-3 Bn, and then have to commit a further 5-10 Bn in more appraisal, EPS, and FFD costs.

What if Shale development can be operated even cheaper and the Oil Price crashes again? If OPEC give up trying to provide support and to let the price crash to take out another batch of shale producers... Given the current uncertainty over the long term O/P, I'd rather be in for a 0.3 Bn as a potential farm-in partner (allowing the full decision to be deferred a few years) than for a c. 10 Bn (total costs) as a predator.

Remember they've had problems before on a few occasions trying to get a farm-in partner - the market knows this and probably considers that a further equity raise will be the most likely means of funding the EPS - and this is what's currently holding back the share price

But since the EPS is forecast to be profitable & ultimate self-funding, perhaps they're considering a loan or bonds - secured on the assets.

[davidblack] 25/4/2017 21:31

Looks like CA have a home from their Hurricane profits STV where the CEO has walked tonight.

[russell250] 25/4/2017 21:04

hope you right rackers

[rackers1] 25/4/2017 20:05

People here russell250 with a lot more than that invested. Some of us have had 7 figures in shares here from pre 20p. Not sold 1 share.

[thegreatgeraldo] 25/4/2017 20:05

tournesol - add the Kashagan field to the list of major disasters!!

[russell250] 25/4/2017 19:43

you guys wishing for too much

I only recently got in - currently at break even

if I get 80 p be chuffed

that be 300k

[squiresquire] 25/4/2017 19:34

tournesol

Definitely agree with you on this, the idea of anyone finding the takeover money before anyone finding the farm in money just doesnt gel in the real world. Would love to be wrong but a farm in, i think, is the way this is definitely going to go.

It will be interesting to see how long this process takes, they are bound to have a lot of interest, we already have Malcys comment on a room of industry top rankers looking at the prospects. Who will be the first to break cover?

[tournesol] 25/4/2017 18:47

Adam

I should add that I'd be very happy to be proved wrong on this. I'd hate to have my Hur shares forcibly wrested from my avaricious fingers for as little as £1-20 but at the right price I'd be happy to sell and move on.

My expectation is that I will ultimately see my shares reach a price of £5 or more before there is a bid for the whole co. And I'd be very happy with that.

[tournesol] 25/4/2017 18:42

Adam

Anyone who has worked in an oil major can tell you that "once in a generation" opportunities come along much more often than once in a generation.

And they often go badly wrong.

Just take a look at the history of major projects in almost any of the majors.

I can remember back in the early 1980's listening to enthusiastic presentations of the new global strategy devised by my employer. I seem to remember that tar sands played a starring role. 40 years later, just a few months ago billions of barrels of "proven reserves" in tar sands were finally written off by my erstwhile employer after decades of prevarication and delay. I remember BP's strategic partnerships in Russia. I remember the promise of the Arctic. I remember the new paradigm of shale oil. I remember more "once in a lifetime" projects that were never in the public domain……. And most of them never came to much.

You don't get to run a major oil company without being a hard-headed, hard-bitten cynical person (I was going to say SoB but decided that's not politically correct) who does not readily buy into any new earth shattering idea. What you do is you dip a toe in and try it out. If it works you think about proceeding. If it doesn't you've only got your toe wet.

Major oil companies are like slow moving dinosaurs. When confronted with a sunlit upland of opportunity they do not frolic and gambol in innocent joy. They plod slowly and stolidly forwards, an inch at a time, testing the ground beneath their feet for pitfalls and quicksand. If they had the temperament to behave as you seem to expect then they would never have reached maturity.

[adam] 25/4/2017 18:41

We'll see who's right.my view is there will be an agreed bid. A done deal, but it won't be anywhere near what you guys think because the buyer is taking all the risks with reservoir disappointments, cost overruns, oil price, tax regime et al. I think double the current share price is all it would take. Say 120p.

[mrwaite] 25/4/2017 18:17

I can't see Kerogen accepting a hostile bid at any price near to the £1-50 mentioned in this thread. They have been the party which has funded and seen the assets increase in value and will know the potential all too well. There have been situations where a 30% party has rejected a bid along with the Board, but then engineered a counter which was eventually on acceptable terms. We live in interesting times, but in my opinion Kerogen are in the driving seat here.

[adam] 25/4/2017 18:11

tournesol. I did read what you wrote. I accept there's big company politics and in the run-of-the mill case - what you say makes perfect sense. But this is not run-of-the mill. We know for a fact (unless large porky-pies being told) that potential investors are putting serious manpower and time into this, so if Hurricane have what they purport to have then it is once in a generation stuff. Additional to which there is a 30% and 11% shareholder (with options) as well as management shares et al. The risk (to my mind) is NOT to bid because presumably things move very quickly indeed in such a situation if you have recommended bid with irrevocables

[crazycoops] 25/4/2017 18:07

Thanks for that post tournesoi- a compelling argument for a farm-in. I guess we'll know soon enough!

[sloppyg] 25/4/2017 17:44

.....tend to agree with Adam in that at some point one has to stop waiting for the asset to be de-risked further and take the plunge; after-all, even post EPS, one could still argue that the entire reservoir may not behave in a similar fashion and that we need 2 years of production history etc etc.....

The odds of recovering 1bn barrels across GWA and GLA must be very reasonable even at this juncture. Consequently a major could probably get an offer away at c.£1.50 per share now or wait for a further de-risk post successful EPS (which they pay for !) and then have to possibly pay up to £5 per share with other bidders involved ??

Everyone stood on the sidelines and watched HUR raise and successfully spend £70m to further de-risk the asset. The risk reward ratio at this point in time instinctively feels at its most favorable; a point that I am sure is not lost on the majors

[tournesol] 25/4/2017 17:44

"...it beggars belief that a major word not bid and leave that very same possibility open to a competitor…."

You did not read what I said earlier.

If you farm in to 20-25% or even more of Hurricane's core portfolio then you make it very unlikely that another player can make a move over your head.

I re-iterate that it is much easier for a tactical decision to be made at a level of £300 million than for a decision which has strategic impact and costs billions. If it is easier then it is more likely to end up being done.

[adam] 25/4/2017 17:33

This is, we are lead to believe, one of the largest undeveloped NS resource-cum-reserves

It's strategic if you believe the protestations of management

My argument, given the king-maker stake and the sheer size of the prize, it beggars belief that a major word not bid and leave that very same possibility open to a competitor.

I re-iterate : an agreed bid with irrevocables would see it sewn up in one fell stroke. Not doing so risks someone else will

Unless of course those Cuban cigars are for blowing smoke up your...

[bloodhound] 25/4/2017 16:57

"I can't see how it makes sense for them to spend $300m say and end up proving $10b of value."

Adam - It makes perfect sense to me given the proximity of their own acreage and what an EPS would prove up to everyone's advantage.

All will out in the fullness of time.........;-)

BH

[leeson31] 25/4/2017 16:31

true... i think a deal will done soon though , pre eps, and a major farm in with the caveat they get to buy in on additional assets other than lancaster... cpr will make for interesting read, perhaps this is why its been held back thus far in april.... we'll see :-)

[sheep_herder] 25/4/2017 16:30

BH, that's the argument. :-D