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Was hoping the dilution rubbish would have died a death over the weekend. Desperate derampers would do/say anything however ludicrous or comical. Change the record. New Investors this is ridiculously undervalued - just look at the sector as a whole.
I Suspect There’s Been Numerous Letters Of Interest ! Ready Made Oil Play In Place ! Infrastructure In Place ! A Multitude Of Data In Place ! Vast Region In Place ! Huge Tax Losses In Place ! Decent Cash Balance In Place ! Good Oil Price In Play ! Production In Place ! No Wonder Significant Value Is Increasing !
Anybody that has a business brain knows you don't hold down the share price for a dilution, more likely for a cheap takeover that needs to be justified. I betting now the price of oil since the last RNS Hur have option which includes long term self funded plans.
Both magnitude and speed of rise in the PoO since December has taken most (if not all) by surprise, resulting in serious amounts of unexpected additional net-cash for HUR so far and likely ahead. This huge tailwind has provided HUR CEO/BOD with increased options along with a unique timely opportunity which if utilised, can be a very positive game changer for the company going forward and should certainly not be ignored, especially at today's extremely low company Mcap where any other options here would not have sufficed. Naturally, HUR team are now likely taking full advantage of this massive opportunity along with the very bullish sentiment in the Oil price which is also driving major O&G M&A in the region and could be the reason for HUR updates now rolling into March when CPR here is also expected, DYOR.
Thanks all for your thoughts. Bit suprised with the views that the % of potential share dilution could be higher than 50%. Yikes. I would have put the downside risk here as much less with the net free cash flow from last TU and the headroom from the rising price of oil from the past average weighted price. Seems a bit excessive to cover circa $60m development costs but I guess that's why market hasn't rushed in as per TLW and just waiting till uncertainty all over. Cheers for your thoughts. GLA in interesting month few weeks
Dive - I am not sure that the current oil price eliminates the risk of dilution. However hopefully it has reduced the extent of any possible dilution. Regardless it will be the price of any placing that will determine where the sp goes.
That’s The Intrigue ! No One Knows ! Everything’s An Opinion ! Lots Of Different Scenarios CanPlay Out ! Take Over Boom ! Huge Uplift On Our Reserves Boom ! New Partner Boom ! Dilution Not The End Of The World !
My comment was intended as a response to your implied suggestion that dilution is a probability. Of course there is no certainty over the future oil price but at this moment in time things are certainly looking better than they were in December and poo remains on an upward trajectory. I’m not claiming the risk of dilution has vanished but you cannot deny that the improving oil price has altered the degree to which dilution can be perceived as a risk at this point in time. We also have 17 months to go before the CB’s are due and it would be utter stupidity to fund raise now at the current sp. IMO the main issue is the outcome of the stakeholder consultation and whether this will restrict or delay the company’s plans to maintain, and or improve production rates.
Regarding dilution, quite hard to say. In November 2020, the dilution would have been up to 80% IMO.
However, oil prices have improved and HUR's cashflow has improved slightly. Dilution is still on the cards, and following the next lifting, i'd say dilution is at approx. 50% of shares in circulation, imo.
Dive - but your figure assumes no drop in oil price? no guarantee that oil won't drop just because at the moment everyone is bullish. At the moment it is looking unlikely but if 2020 taught us anything it is not to take things for granted. for example opec decides that with higher oil price they want to produce more?
i disagree - i think it is very dangerous to assume there will no longer be dilution - do you have any evidence that the company has changed its position?
ultimately everyone has to make their own decision with their own cash. Personally i am out until the forward plan and how it will be funded is settled. i will return if it looks good.
i dont know if the prospects are looking better - the delay in announcing forward plans offsets any improved sentiment on oil price for me.
March will be the month - as CPR is expected by the end and the forward plan must surely be announced . GLA
Assuming continued production at 12k bopd the $15 increase in poo since the December RNS will itself produce an extra $103m for the period 2021 through to redemption. This also assumes there will be no further rise in poo. Whilst at the time of the RNS dilution was at least a possibility, if not a probability I think it is reasonable to assume that it is now an unlikely possibility. Clearly it all depends on the ability to continue to produce at the current rate and without any significant increase in water cut but IMO future prospects are looking much better now than they were in December.
DYOR - the company warned of the downgrade beforehand and boy was that some downgrade. none of us were expecting that much. so you ignore their warnings at your peril. Anybody buying /holding now cant say they werent warned that dilution was on the cards.
they need sidetrack and water injection - which they dont have enough cash to do both. i think if possible that the sidetrack should be self funded and got on with immediately . they can then use extra cash etc towards water injection. .etc....but who knows which route they will go
the positive on oil price is that it is delaying the bubble point.....fingers crossed that any water cut increase is slow
I think the BOD had a duty to point out the worse case scenario in that RNS, something which the HURs BOD have been good at in the last 9 month.
As @Cashking has noted the economics which drive everything has changed into a positive perspective if managed correctly.
Personally I don't think dilution is necessary at this juncture we have enough cash in hand and can generate enough to drill and develop the proposed FWP. Dilution if required would be better at a higher SP in 2022 when HUR are receiving greater production or secured prospects of higher revenue and before the CB's settlement is due, in that scenario, if that is needed to secure the long term future of the Company the counter positive affect on the SP may not be negative.
For me we are in the hands of the BOD to negotiate some good deals with stakeholders, we have the 2C reserves to explore and produce.
"It should be noted that there is a risk of dilution to existing shareholders from a possible restructuring and/or partial equitisation of the convertible bonds. Furthermore, if no agreement can be reached with the Company's stakeholders on additional investment, further development activity at Lancaster might not be possible. In such a scenario, Lancaster could continue to produce from existing wells before reaching the 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. "
The above from December's RNS indicates to me that there is a probability of dilution - they wouldn't mention it otherwise. Hopefully with more income generated through increased oil price if there is it will be to a lesser extent
I have taken a Long position here and looking to add through March with greater certainty. Oil stocks are not my field but my understanding is that the Competent Person's Report (CPR) covering the Company's West of Shetland assets should be delivered by the end of the first quarter in 2021 from ERC Equipoise Limited as its reserves auditor. This should confirm Lancaster reserves where the development costs are currently estimated at c.$60 million where a sanction decision is also expected early in the first quarter of 2021 and securing a suitable rig and equipment.
Apologies to BB but some newbie questions: 1) With year-end net free cash of $106 million (vs $87 million at 30 November 2020) what is the risk of dilution (% of shares in circulation) here if HUR decide to self-fund the c.$60 million Lancaster development costs 2) HUR realised revenue of $179 million from production: 5.1 MMbbls (average of 13,900 bopd) at an an annual weighted average oil price of $35/bbl . So with oil production for the period 1 September 2020 to 31 December 2020 averaging 12,500 bopd, how much do we think the production will increase within the guidance range of 12,000 - 14,000 bopd at what would be a reasonable average oil price and resulting revenue? 3) With the major risk being the restructuring and/or partial equitisation of the convertible bonds, when do we expect and update or resolution to this uncertainty?
Cheers and thanks for the patience in answering the Q's as oil stocks is not my field and have always had bad luck. Hopefully this is not a bad omen for the BB here. Looks like a lot of potential news here in the next few weeks so GLA