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Yes, that's exactly what I had said in my later post.
People are expecting very high takeover offers when share price is at 6p.
The share price is at 6p because market believes that is what the company is valued at. And any takeover offers AT THE CURRENT SHARE PRICE, will be between 20-50% at max of a premium.
I think there are a lot of long term shareholders here trapped at much higher prices. Whilst I don't mean to offend them, this is the reality. Obviously share price may re-rate again to 10 or 15p as some suggest, and yet again any takeover offers at that point will still be a 20-50% premium to that share price.
Whether BOD or shareholder majority accepts or rejects the offer is is up to the BOD and major shareholders, and right now following what's occured, you can't be certain about what they're after.
"anything less would be rejected by the BoD and major holders"
This is a strong statement implying they WILL reject, when they may not.
"35p takeover is very very optimistic.
Any takeover offers is likely to be a 50% premium to current share price. Assuming 7p, that'll be 10.5p, or £186m."
The main reason i suggested say 35p for a takeover is that anything less would be rejected by the BoD and major holders and thus it would have to be a hostile bid that is attractive enough to a majority, and once a low bid is in the public domain one would hope for a bidding war that would escalate the final offer to something reasonably solid. Yes the first bid may well be just 50% over current sp, but that would not be accepted by hardly anyone except a few pi's!, and would have to be raised to get any real traction!
If we see water cut stop increasing and steady production, there will be a case for re rating, at this moment in time with water cut increasing on the prime well a 3% per month while operating in the prime part of the reservoir the model is unproved. There will be no full field development, with this outcome there will be zero value. Pelham is bailing out as this is considered a probable outcome. Most of what we see discussed here is nothing to do with this oil project and what is happening West of Shetland.
haggis_trap17/23 In past these shares have gone to 55/60p, so on positive up date and crude going up, the shares would be over the price you quoted, without any take over. Ignore the gloom Merchants with their attacks on the positive thinkers to take out their loneliness or may be having had a down petty bet on the SP.
I theorem whilst I agree with what you are saying... The reality is that it is a buyers market at the moment.. Covid saw to that... So I doubt that the pi will come out on top other than the ones that are buying low at these prices.. Love to be wrong though.
If the new board sell company for any less than 30p a share they will be shafting long term holders
I’m not sure about 50% from here. It would be way too undervalued.
If a company wanted to acquire Hur, they must first be satisfied of the concept. IMO, you wouldn’t buy this accepting risk, after all, that’s what AIM PIs are for -carrying the burden of risk.
If this is sold, then it must be accepted on both sides, that the asset is viable. If so, I would expect a much higher valuation.
And at that point, why not keep the cash cow, and reward the same PIs who carried the risk in the first place?
fandg2 14/44, '' Hedging I believe is a future strategy, why think of the future if you're for an early out?'' Good positive factual thinking. When a share price goes up quite a bit, it does not sound a horn and it goes up suddenly in a burst. It just happens on some positive news as an excuse.
"They have already hedged 10k bopd at 35 dollars and can use the option in the event price of oil collapses...."
Part of the reason I was happy with the hedge (other than the obvious insurance against a low POO) was that it tell's me that the BOD is'nt looking for an early below belt offer. (if they were even looking for an offer). Hedging I believe is a 'future' strategy, why think of the future if you're looking for an early out? AIMHO
CaptainSwag, 13/35, Good realistic Post making good reading, I have recommended your post.
Agreed Captain, I also believe Pelham will be completely out within the next week or two I think they have and continue to close there position, and then I wouldn’t be at all surprised if they went long..!we've had serval weeks of a big seller and we’ve had good volume so they must be nearly out it will jump as soon as it’s cleared... I then feel sentiment will change it is so undervalued compared to every metric of value in the oil sector..
Agreed Ammu I was referring to the sentiment in general if the oil price collapsed again...not our sensible hedging position with our oil.
Dickbat - i agree that there could easily be an increase to 10/15p in september if the production were increased towards the 20k with stable water cut and the plan for lancaster is announced. i think we we will head towards 7p soon when pelham get to the point they want whether it is all out or a lesser stake..could be a further lift to 8/9p when near term production rate is announced in another week or so
we will also wait on news of lincoln...whether spirit are in or out and this could give a lift as well
£500m at 25p might not be unreasonable in that scenario - i think after the last few months that would be tempting for quite a few .
all guesswork - but i dont think unfeasible
Ammu123, 13.24, If true good info. Very positive sensible thinking. your post recommended. Ignore the miserable Posters.
Dickbat 13:17, Good logical Post, I agree with you. I have recommended your post. Many miserable people with agenda blowing their negative frustration here.
They have already hedged 10k bopd at 35 dollars and can use the option in the event price of oil collapses....
There is no way 10p would be acceptable to shareholders or the board ...It wouldn’t consider any of the reserves or production/profit of the company and future potential of the other fields... I would see a Mktcap of at least 400/600mil to tempt anyone, the share would have already rerated well before any buyer was rumoured to be making any offer...In my opinion this will rerate between 10/15p within the next three months... With the caveat of no big second wave of C19 and collapse in the oil price.
Yup! Completely agree that the sale sign went up then. It seems as though the company is working towards profitability rather than trying to further prove fractured basement concept. I'm kind of with the company here, no point proving it further when it's already viable. Though I would like to see a full field development to see how that plans out in comparison to the EPS.
Here's a possible scenario:
50% premium is offered --> Share rises to 10.5p on news --> BOD approaches major shareholders --> Major Shareholdes against offer --> BOD rejects offer --> SP rises further or declines --> repeat
But I don't expect more than 50% premium on "current" price.
10.5p...absolutely not !!
Been in HUR since Jan 16 when I got my initial tranche at 9.9p (for four years I was delighted to have bought those) but bought all the way up to 50p and a fair amount on the way down at 22p. 10.5p would creat financial problems for me......need a lot more
slift...as soon as trice went the for sale sign went up in my view. he would have been resistant especially to a low ball offer. I think that is why he had to go. it is why i think it is all guns blazing to get production up and make the company "shiny"" for any potential buyer
The company that took over RRE said they are looking at further acquisitions.....interesting times for HUR.
Will 10.5p be acceptable for long term holders ?
I doubt 10.5p will be acceptable considering loads here have a average of 20p++
I agree that the downgrade will be much less than 20%. The 20% was just the worst case scenario.
35p takeover is very very optimistic.
Any takeover offers is likely to be a 50% premium to current share price. Assuming 7p, that'll be 10.5p, or £186m.
The buyer will indeed have to invest millions more developing the assets, but Hurricane is also currently producing at a profitable rate from Lancaster EPS.
Unrestricted cash balance as at 1st April 2020 - $152m
Let's assume that on a worst case basis, for whatever unknown reasons 30% of it spent to end of June - $106m
I estimated that to end of Q2, Hurricane will have approx positive cashflow of circa. $40m (taking into account contingencies and best guess estimates).
Convertible bond due July 2022 - $230m
So a takeover offer of $186m as at end of June (to include the net debt of circa. $84m) would be in theory a $270m offer including the bond.
Going forwards, If we do have a second wave, and oil prices take a hit (and or production as we have seen in Q2) - cashflow to end of year would be around $80m for the year.
At the current cash generation from operational activities, the payback period for the buyer would be circa. 3-4 years if no investment made to develop fields. Ofcourse, if other fields are developed, likely more cash could be generated. I don't believe that money required to develop assets outweighs takeover cost @ $186m.
Hurricane is definitely a takeover target atm.
- Less than $300m required to offer for a takeover with a 4 year payback.
- No CEO present at HUR (which further improves takeover by a larger company)
- The Lancaster license for production was extended to 2022 (3 years) which makes up close to the 4 year payback
"A 20% downgrade as a worse case in Halifax, Lincoln and Lancaster leaves a total contingent resource estimates at 1861 MMstb. Which will definitely be a hit, but is it something that we should be concerned about? I'm not too sure as it's likely that the downgrade is much much less. "
Personally I don't see a 20% downgrade, just a view really!
The problem is that any sort of significant downgrade (say greater than 10%) will be seen by the market as a major negative, even though at the current sp there is zero value attributed to 2C reserves!!
Separately, on the potential takeover front, the issue for any prospective bidder, is that the money required to develop the assets far outweighs the likely takeover cost. Even an offer of say 35p (which just about everyone would jump at!) is only £700m, the bidder would need to invest billions more to go to FFD on both GLA and GWA.
I agree with Fred_Bloggs that quite possibly means GWA FFD is a dead duck. Maybe thats the problem with the OGA re-Lincoln, maybe they say you cannot tieback Lincoln alone without a commitment to FFD!?
Totally agree that they should go to another independent company to re-evaluate the assets (If they're going to do the re-work).
Ofcourse talk and feasibility studies are cheap, but they've already drilled, so the rework in the models seem odd unless there's something significant missing here from the models.
Sorry got carried away on my last post and hit send too soon lol
Meant to also comment on:
"What new evidence do they really have to justify all this rework?"
Back in the day, peer reviews use to happen all the time. Talk is cheap, making mistakes in design, cutting steel and drilling is expensive (relatively). So the rework might just be normal office processes