The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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chablard
"It talks about the zone being "thick" not the oil."
You're right .... my mistake.
Ah ha!
It talks about the zone being "thick" not the oil.
During the presentation i seem to remember that they did say they would be speaking to stakeholders etc about future plans etc . I assumed this was JV partners , bond holders and large holdings...
interesting watching the price today - initial drop on rns - probably to see if market had a bad reaction to it....after it didn't it is seemingly being kept below 3p ish. I wondrr if more holding notifications on the way?
Wasnt that mentioned in the recent presentation?
Ca quote the following.
"Moreover, the zone now believed to contain residual oil below the oil water contact is very thick."
I don't remember seeing anything about 'thick oil' in any RNS.
Are CA told things that we are not ?
Part 2)
The Fund finds the conclusions of the technical committee persuasive but not conclusive. Fractured reservoirs commonly exhibit rapid initial pressure decline and we note at Lancaster that the rate of pressure decline has in fact slowed. Moreover, the zone now believed to contain residual oil below the oil water contact is very thick, whereas we would have expected an abrupt change in oil saturation at the free water level. Therefore, the Fund believes that significant volumes of oil may be present below the revised oil water contact at 1,330 metres.
Following the publication of the report the shares are trading at little more than option money and the Fund has increased its holding. Despite these uncertainties, the company has stressed there are currently no going concern issues and it has ruled out an equity raise at this time.
Since investing in Hurricane, the Fund has realised profits of £43 million.
Part 1)
Hurricane is an oil exploration and production company targeting naturally fractured basement reservoirs in the West of Shetland. The Fund's previous annual reports include background information on this investment.
This was a very challenging year for Hurricane: its Lancaster Early Production System ("EPS") failed to deliver the targeted 20k barrels a day due to an increased water cut. The regulator rejected Hurricane's application to tie back an additional production well to its EPS vessel, which would have been funded by its JV partner Spirit Energy. As a condition to extending its licences, the regulator requested that it should drill two sub-vertical commitment wells over the next two years. Shareholders lost confidence in management as a result of perceived missed expectations and perplexing regulatory signals. The weak oil price environment, exacerbated by COVID-19, reduced operating cash flows and compounded negative investor sentiment. Despite its $106 million cash balance, investors continue to question the ability of Hurricane to meet regulatory commitments, undertake necessary remediation and appraisal work and address the maturity of its $230 million convertible bond by July 2022.
In June 2020, the CEO resigned. The company set up a technical committee to re-examine the full range of possible geological and reservoir models for the Lancaster field which reached initial conclusions in September. These suggest that the oil - water contacts at Lancaster, Lincoln and Halifax are significantly shallower than previously determined. Estimated recoverable reserves, assuming no remedial action, have been reduced from 37.3 million barrels to 16 million, of which 6.6 million have already been produced.
The Fund is pleased with the appointment of the new CEO, Antony Maris, who brings relevant experience in developing and operating fractured basement reservoirs.
In the second half of 2020, production is expected to continue from a single well at a range of 12,800 to 14,200 barrels per day. A number of remediation options are available to increase the EPS' production. However, in the current oil price environment and with a reduced production outlook, cash generation is expected to be insufficient to both fund additional well stock and to repay the bond. Nevertheless, as the convertible bond now trades at less than half its repayment value, there is currently an opportunity for Hurricane to utilise some of its $106 million cash to buy in some bonds in order to materially reduce its indebtedness.