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MCB55,
Fully absorbing the company and transferring the assets is just one option for a buyer.
Another option is to operate Hurricane as a subsidiary.
There are plenty of legal options, and plenty of past examples.
But if HUR is generating $50-80m of free cash flow in 2020 and 2021 and even beyond, it is a potential silver bullet for quite a few otherwise underwater year end financial statements.
Good CFO’s will be drawing up board papers that include such options.
Stu,
The real block to any takeover is that as the new Licence holders any NewCo will have to be committed to a credible plan, involving billions of expenditure, to develop the assets or the OGA will not approve the transfer of Licence!
Bugs Bunny ...
Mazik and Stu, unless Hurr pull a rabbit out the hat, which I feel some are implying, especially with NICs posts.
Stu very much so, cash generative compared to others heavily debted oil producers like nog, still feel that Hur is prime to be taken over due to its interim state of affairs..imo
^ fully agree. hostile take over is a risk.
however what minimum price will be acceptable to Kerogen (and others) ?
You are all missing the point.
HUR won't be snapped up for the geology, or the portfolio of prospects, it will be snapped up because of their cash at hand and because they have strong cash flow in 2020 and 2021.
Lots of oil companies are cash flow negative right now.
Even Shell and BP are cash flow negative in their last quarter.
Lots of oil companies are not interested in adding more production when production is barely making a profit. That is why hardly anyone is drilling right now.
Everyone is trying to strip out cost, so that their business can survive.
But another age old oilfield move, is to take out the cash rich guys. You buy their cash with your shares.
e.g. OilMajor issues 5% extra shares and offers Major shares in exchange for HUR shares.
HUR debt is then absorbed into the much larger debt of the Major where it is easily refinanced, because the Major is well diversified.
Geology was important last year... now it's all about cash.
^ exactly. Kerogen didn't stay invested this long to dump the company for 7p a share. Only once we have technical report / new CPR will it be possible to discuss take over value.
Patience required
Kerogen have a blocking stake, so essentially up to them as to whether an offer has reached an acceptable enough level.
@slift : you have no idea what my average is.
however that is entirely unrelated to what the true value of the company might be.
Surely we are due another RNS to give us an update very soon ! as in this week
@JAdam,
Sure, it's up to you whether you want to believe that the glass is half full. But I think it's half as big as it needs to be.
@haggis_trap,
Very nice, you've had 6 years to average down then. Can't complain :)
@JAdam : correct.
The new board have done a great job at creating significant uncertainty with recent RNS releases.
They now must answer the questions they have asked in Septembers technical review. I am happy to wait and see what that brings.
After that information is released I fully expect the new CEO to start engaging with the market and investors.
Right now she is in hiding without even having the courtesy to introduce herself.
@slift
> I don't think you understand the risks.
Been invested here since way back in 2014.
Know more about this company than you might imagine ;-)
haggis_trap,
I said that the "initial" offer would probably be at 50% premium.
I don't think you understand the risks. This is a high risk high reward play.
I'm neither an optimist or a pessimist. I'm a realist.
@slift : you have clearly bought in for 5/6p and are hoping for a quick pump and dump profit.
that might keep you happy - happy it ignores what the true value of the company might actually be.
the board have moral / legal duty to act in shareholders best interest.
Haggis_trap,
I think you're forgetting the $230m bond and the future prospects.
LTH have had the opportunity to average down.
Well I don’t know how much your total wealth is Sunshine but on 100k I would try to stay hopeful.
I agree with haggis trap, the board now need to protect the interests of shareholders. What I’m concerned about is the BOD giving up due to fatigue. HUR will be a difficult job over the next few years. They’ll need to stick it out and prove that the water is manageable, if possible get to 20k a day and this can easily sustain, refinance the bond, Halifax, it’s a full itinerary. But time might be on our side. Funnily enough, it may be in our interests as LTHs that there be concerns on the the water cut, it might just protect us from a cheap takeover. If we can just get back into shape, quietly and efficiently, then hit the damn shorters with news that proves long term sustainability and low water then we’ll be back.
A take over at 7p with be based on cash on bank alone and assumes Lancaster about to run dry. I don't believe that is the case and firmly expect new board to set sights higher.
The value here depends entirely on the technical report and 2021 cpr. Even with a shallower OWC there are most likely reserves & cash in bank to justify 20p share price. True value of HUR is either 0p or much more.
A quick 'smash and grab' sell out at 8p might delight recent investors, however it would be an absolute crime against longer term holders. If it happens then integrity, and motivation, of new board will come under the spot light. Classic corrupt AIM stich up - as it's unlikely true value is somewhere in middle.
Either the water is manageable, or its not... If water can be dealt with (which I believe likely) then company clearly has considerable value.
Still unsure about a production update Monday or Tuesday, if production hasn't recommenced, then the update could have been issued already, if it has recommenced the numbers are going to be less surely?
Think we could see update tomorrow or Tuesday which will say good news send it up to 6p
I agree the value here is 7 to 10p Not selling until then
One very important thing about the share price being this low is that daily traded volume is huge compared to when HUR was 60p.
At the moment 200 million HUR shares are traded each week. There are a huge number of shares now that were purchased for sub 10p.
If this continues another week or two (which of course it will). Then it’s going to be extremely difficult to block an offer of 10-12p, so bidding might start at 7p.
But the 200MA is still up at 18p so wait for that to drop further, but everything is converging on an all share transaction and I think the commitment wells are the only sticking point.
These will disappear and the Hurricane portfolio will find itself into a much larger balance sheet.
"Given the traumatic last 6 months I think many might reluctantly accept 20p."
I think you'll find that many might accept even 8 or 9p.
Any initial takeover offer right now is likely to be 7.5p (at 50% premium).