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Nighthawk clings on

A difficult year for the group, but the outlook is more optimistic
June 8, 2016

It has not been an easy few months for companies operating in the oil and gas sector, and Aim-traded Nighthawk Energy (HAWK) has had a particularly tough time of it. Aside from the plummeting oil price, the group, which operates in a 300,000-acre catchment area in Eastern Colorado, has had to contend with five dry wells in its Monarch joint development area and a delay in getting the go ahead for a project to improve the efficiency of its wells.

IC TIP: Hold at 0.89p

Financial news has been no easier to stomach. The 38 per cent fall in revenue has been largely attributed to the falling oil price, but the group has also racked up non-cash impairments of $75m, up from $20m in the previous year, which caused pre-tax losses to widen to $70m (from $5.7m in 2014). The group had to repay $4m to prevent it from breaching borrowing covenants, and is currently negotiating with its lenders to alter the terms of its banking facilities.

A glimmer of light in an otherwise fairly miserable update is that the group began the year with significant hedges in place. This helped to mitigate the effect of the falling price of oil and the hedging programme contributed $7.8m to revenue during 2015. Additionally, oil production was actually higher than had been previously anticipated, although gross oil sales did fall to 653,431 barrels from 703,414 barrels in the previous year.

Despite the difficulties of 2015, chairman Rick McCullough is looking at the current financial year "with a good bit of cautious optimism". Management is hopeful that pricing will provide a better backdrop to the year and the water flood pilot project to improve well efficiency is finally on the cusp of starting its pilot study.