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Good point Genghis. CB coupon st 7.5% is another $17.25M p.a.

Free cash flow for 2020 is likely to be in the region of $277M (Opex $22, 20k bopd, Brent at $60). Cash to hand by year end is likely to be in the region of $160M, giving a total of $437M.

It's worth noting that Opex includes Bareboat Charter, Ops& Maintenance and G&A.

Major costs for 2020 look to be $46.9M (25% of $187.6M total cost) for the GWA tie-back and $52.5M (50% of $105M total cost) for a 3 well drilling campaign on GWA, giving a grand total to HUR of only $99.4M.

So, plenty of free cash floating about for some drilling on GLA and even taking a view on whether to redeem the CBs early.

WW was on the money with his post earlier today "Relax, the oil is flowing out and the cash is pouring in. Do the maths."

So, that's the maths. EPS flying (otherwise HUR would have to issue an RNS) and drilling on going throughout 2020.

Lincoln came in big time and can be tied-back to the AM and with 500M barrels at Lincoln alone there is the FFD option with Spirit sorted out, even if the rest of Warwick is a duffer (unlikely but we will know soon enough).

Everybody got hammered today. HUR down 3.63% but PMO down 4.61% and flavour of the month ECO are down a whopping 6.1%.

Ignore the ****wombles.

GLA.

The rout continues....

Another way to view it is a bit of consolidation after a bounce off the 52 week low and a 4.5% rise yesterday.

A better way to view it is not on a daily basis, as that way lies madness.....

GLA.

Bloobird,

HUR has stated that they require 6-12 months solid state production to prove up FB in the WOS.

Fair enough, as it is a new type of play in UK waters, albeit hugely successful globally, without the decline rates associated with the Permian.

However, there is no real similarity between FB WOS and Fracking in the Permian. They are two totally different plays and should not be confused.

Hopefully that helps.

GLA.

"at any time on or after 14 August 2020 at par plus accrued interest if the value of the Ordinary Shares underlying a Bond (calculated over a specified period) shall have been at least US$300,000"

The $300k directly relates to the 78 cents price the SP needs to be at or over for HUR to buy back the CBs at par.

You don't seem very well informed on this subject.

GLA.

IJWT,

HUR can take the CBS out at par plus accrued interest come August 2020.

You are incorrect to say “at market value or par whichever is greater “

See my post earlier today with the link attached giving you all the relevant info.

Suggest you read it !!

GLA.

"So I take it a loan to buy out the bonds is better than allowing the bonds to run, come Aug 2020!?"

Only HUR can answer that one and it depends on a lot of different factors but my understanding is that they would like to remove the CBs from the equation as soon as possible.

From memory, if all the CBs are converted into shares, then this would equators to an extra 550M shares.

On the plus side, HUR's balance sheet would be $230M to the good, as the debt would have been paid off.

I will look back and check the exact number or perhaps somebody else has it to hand.

GLA.

There is also another option the CBHs have and that is to forward sell.

In essence, they short (borrow shares and sell them) HUR at 60p ( for example) and lock in their profit.

Then at any stage in the future as long as the SP is above 52 cents, they can convert their bonds to equity and return the shares they have borrowed (sold) at 60p.

Sooner or later and as long as the fundamentals remain strong, all this ****ing around with shorts, CBs will cease and the SP will be able to flourish.

All IMHO and no idea when this may or may not happen.

GLA.

Correct. 78 cents is the magic number.

The actual SP will vary though depending on the SP at the time. At the moment it would be 63.9p (£1=$1.22).

GLA.

I have had it confirmed by HUR that 78 cents (64p at current FX) is indeed the level the SP needs to have reached for HUR to redeem the CBs at par plus accrued interest.

This can take place at anytime between 14th August 2020 and 24th July 2022.

The conversion ratio is fixed and has no bearing on the SP.

They would need $230M plus accrued interest to do this but would not necessarily need to use up hard earned cash from the EPS as they could very well decide to take out a loan instead.

I agree WW, the sooner the CBHs are gone the better. No good has ever come from having CBHs floating around in the background. Just need to look at PMO to see that (although that was a rather extreme example).

I'm done.

GLA.

Hi WW,

No. We can expect some bond action before August 2020.

As long as the SP is above 52 cents (42.6p) the CBHs can decide to convert all or some of their holding into equity.

To date none of them have but this is not surprising as they will want to see the EPS proven up first and probably no drilling in the near future. These guys don't like uncertainty.

As we get nearer to August 2020 and the SP is at or above 78 cents (64p) and the prospect of a forced redemption at par plus carried interest arises, it becomes very likely that the CBHs will decide to redeem their bonds for shares.

If things are progressing nicely with HUR at this stage, I cannot see how they can possibly hope to keep the SP under 64p for two whole years between August 2020 and August 2022 when the bonds will be redeemed for shares or cash (or a combination thereof) by HUR. It just wouldn't make any sense for them to even attempt it.

Whilst the CBHs have established short positions on HUR as part of a CB arbitrage play (google it), I personally don't believe it is the CBHs that are shorting HUR down when the SP spikes (for reasons already covered in my last post).

I think it is just opportunistic institutional/professional traders taking advantage of a great trading opportunity. Whilst there is still some doubt about FB WOS and there exists a lack of support by current holders and a lack of new investors, they are easily able to do this. Take out a big short selling into the news (FOIL/Lincoln drill result) and just need to short it a little bit more at strategic prices on then way down and let the nervous PIs do the rest.

The sooner the CBs are gone the better. It's never a good thing for equity holders to have CBs floating around in the background in my experience. Having said that, HUR would not have got the 2017 finance package away without including them as part of the package. Needs must and all that.

I have asked HUR to confirm my understanding that the magic number is 78 cents but I'm pretty sure this is the case.

This is all just my opinion and I'm not stating it as gospel but it goes a long way to explaining a few things.

GLA.

Hi WW,

That's not true. The number of shares awarded at conversion is down to how many CBs are held and has no relevance to the SP at that time.

What is VERY relevant is the SP in August 2020. If the SP at that point is above 78 cents (64p @ £1=$1.22) then HUR have an option to buy out the CBs at par.

This would not suit the CBs as not only would they lose their 7.5% coupon but they would also lose the option of getting their dirty mitts on a load of HUR shares.

Nearer the time, they will have to decide whether to try and keep the SP below 78 cents or convert to equity. I'm not sure they will have the fire power or the desire to do this if HUR have proven up the EPS and drilled a few more successful wells.

The short positions on HUR stock held by the CBHs in the CB arbitrage play are a different matter altogether, as they are only there to achieve a delta neutral position and collect the 7.5% coupon risk free.

Even when the SP has risen dramatically, it is noticeable that the Polygon short position doesn't change much. SP goes from 40p to 60p Polygon short changes by say 0.1% to 0.2%.

This is because once the CBHs have taken out their original short position when they purchased the CBs, they only need to make small adjustments to cover the relative difference in the CB price and share price. In most normal situations, when the CB price rises, so does the SP and vice versa.

Whether or not its the CBHs or other institutional traders (or a combination thereof) that are shorting the share when it spikes up (FOIL and the Lincoln drill result), I have no idea.

It would appear that somebody certainly is and with the lack of new buyers, or support from current holders, it is easy for them to do so.

Hopefully once the EPS is 100% proven and maybe with some more drilling success the balance of power will change.

These are interesting times and it does no harm to reflect on the fundamentals of the HUR investment case and try and switch off from all the noise.

HUR's fundamentals are strong. Little debt, low Opex, great assets and steady/increasing cash flow.

GLA.

http://ir1.q4europe.com/IR/Files/RNSNews/18985376/Hurricane2018tf_13636627.pdf

All you need to know about the Convertible Bonds.

"The MMs are slowly but surely building up a nice huge stockpile to sell into when this SP takes off. That could be 6 months, or a year away. I don't think that most people realise the tenacity or the cunning of the MMs." so says daltry.

What a load of old tosh.....as I said not a ****ing clue.

GLA.

daltry,

I think it's safe to say that you haven't got a ****ing clue how this all works have you ?

GLA.

Absolutely right Genghis15.

FOIL and FGAS for the GWA TB currently scheduled for Q4 2020 to Q1 2021.

Expect GWA TB FID to slip by a month or so, but only as a result of delay in the current TOL drilling schedule. No big deal.

GLA.

I would be very surprised if Kerogen were to sell anymore shares now the Lincoln tie-back and FFD are on the table and the EPS is progressing well. They covered their initial investment stake with the last sale and the HUR investment case looks to be pretty much underwritten by early 2020 if things continue as is.

CA haven't sold a meaningful chunk of HUR shares for a very long time now. It looked like they sold about half (10M) of the shares they received as a result of the warrants and have settled around the 5% level. CA do not short as such anyway.

The real shorting is done by the institutional traders and tends to kick in after a major event such as FOIL, where they sell into the good news big time and then tickle the SP down at appropriate points over the coming months before reloading again for rinse and repeat. This is more difficult in the middle of a drilling campaign mind.

However, this will not last forever and once the EPS is proven up, the opportunity to short the SP down (if it is still sitting at such a low level) becomes more difficult to achieve and the viability of this trade will diminish.

The temptation for the professional traders then is more likely to be to run the SP up the flag, much as they did with HUR back in 2017, when the HUR SP rose to an artificially high level of 67p, valuing the company at nearly £1B.

Imluvingit summed it up pretty well the other day with this post "As for the SP fall, it happens every time and if you have not done the trade unlucky. However one-time the trade will not be there and the SP will forge ahead."

GLA.

You haven’t got a ****ing clue have you ?

Although sometimes I don’t think HUR sell themselves as well they might, I think they are scrupulously honest when it comes to reporting on operations and assets.

GLA.