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Hurricane: watch from a distance

The fractured basement reservoir specialist has a make-or-break year ahead of it
April 10, 2018

First oil from Hurricane Energy’s (HUR) Lancaster field is a year away. At just $50 (£35) Brent crude, and assuming an initial production rate of 17,000 barrels of oil per day (bopd) from its fully-funded early production system, the maverick North Sea explorer expects annual operating cash flows to quickly hit $152m for at least six years. In turn, log data will point to the best possible route for full field development, and kick off the phased development of 2.6bn barrels of contingent resources. If all goes well, the door has been left open to a sale or farm-out.

IC TIP: Hold

Or so goes the thinking. For all the momentum that is starting to once again build in the shares, there remain doubts about Hurricane’s preferred geology, fractured basement reservoirs, will produce the goods.

Major institutional funds, and any potential acquirers, appear content to watch from the sidelines. The resignation of non-executive chairman Robert Arnott, apparently down to concerns over corporate governance standards, won’t have converted the doubters, and indeed sparked a sell-off in the shares in November. But with oil prices on a surer footing, and judgement day approaching, sentiment towards the stock has turned bullish in recent months.

HURRICANE ENERGY (HUR)  
ORD PRICE:37pMARKET VALUE:£720m
TOUCH:36.7-37.2p12-MONTH HIGH:68pLOW: 24p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:34.8¢NET CASH:$124m
Year to 31 DecTurnover ($m)   Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2013nil-33.4-6.9nil
2014nil-14.9-2.4nil
2015nil-8.44-1.3nil
2016nil-6.370.1nil
2017nil-7.00-0.5nil
% change----
Ex-div:na   
Payment:na   
£1=$1.42