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Cairn will struggle with forecast CAPEX costs with Brent at $35.
09 January 2020, 14:30Source - SMW
Barclays Capital today upgrades its investment rating on EnQuest Plc (LON:ENQ) to overweight (from underweight) and raised its price target to 40p (from 21p)
https://www.sharesmagazine.co.uk/news/market/6740979/Broker-Forecast-Barclays-Capital-issues-a-broker-note-on-EnQuest-Plc
More broker upgrades to follow.
Just need POO to pay ball...
Based on the strong debt paydown the MCap is now cheap versus peers with much greater debt leverage.
At 31 October 2019, net debt was reduced to $1,561 million (30 June 2019: $1,638 million)
nm
Next 12 months simply undervalued here compared to peers.
Upgrading JP Morgan’s rating for EnQuest, to ‘overweight’, Thompson said it may see the most dramatic positive impact.
He provided commentary around what he emphasises is a “catalyst driven” sector, saying: “Most dramatically, the improvements made by EnQuest now allow it increase drilling activity which underpins stronger NAV and CF outlook, this drives our u/g to OW.
https://www.proactiveinvestors.co.uk/companies/news/910348/cairn-energy-named-top-pick-as-jp-morgan-says-it-is-bullish-on-oil-eps-910348.html
Traders will jump on it pushing it towards 30p
– I find it hard to see that not being developed in some form, despite the disappointments at Warwick, as Lincoln still looks good. On top of that it will also be generating significant amounts of revenue from GLA, even prior to the full field development, as daily output reaches the targeted initial capacity. At the current share price I see a lot of upside for anyone look to invest longer term, and for new investors, you will be buying at a level similar to that which those who got in early five years or more ago paid for their shares, but without many of the risks that they have had to take.
This horizontal well produced light 43API oil but only achieved a maximum stabilised rate of 1,300bopd, and although that was an improvement on the non-commercial result at the Warwick Deep well earlier in the year, the market seems to have been spooked by comments relating to the impact that this outcome could have on the development of the Greater Warwick Area as a whole. Hurricane and its 50% joint venture partner, Spirit Energy, which farmed into Lincoln and Warwick (combined these form the Greater Warwick Area) last year in return for a total carry of $387 million, will now have to assess what impact this has on its plans to begin development on GWA next year, as well as on the estimates of how much oil is present. This certainly doesn’t mean the end of GWA though and most likely just a change to its plans, as Lincoln has proven to be a big success, with the most recent well, completed back in September, producing a maximum stable rate of 9,800bopd, and with no formation water. Even on its own, Lincoln has 2C resources of 604mmbbls, and that is based upon the RPS Energy assessment back in 2017.
Given that Warwick was always far less certain, and that no resources had been booked – it did have large best estimate prospective resources though of 935mmbbls - I think that the drop of around £260 million in market cap was vastly overdone, even if it does mean going back to the drawing board on the GWA development. The market cap here may still sound high, but if you consider that Lancaster alone has 2P reserves of 37mmbbls, plus 486mmbbls of 2C contingent resources, plus the upside potential for the whole of the Greater Lancaster Area from the Halifax licence with 1,235mmbbls of 2C resources, then it isn’t hard to see it going higher than the current valuation.
The GLA area alone has plenty of further development planned over the next couple of years, with gas exports to solve the current production constraints on the FPSO, due to flaring rules, and a Final Investment Decision on the full development of the GLA is expected by the end of 2022, with first oil from that by 2025. As you would expect, the company has been making a loss, but now that production from the FPSO has started to ramp up, that should soon be producing substantial amounts of free cash flow, and once it reaches 17,000bopd that should yield in excess of $200 million in operating cash flow per annum, at a $60 Brent price. At the end of June the company had $81 million in the bank, with $230 million in convertible bonds which become due in 2022 and have a conversion price of $0.52/share.
Barring a collapse in the oil price, I can’t really see many reasons not to invest at these levels, especially given the sizeable free carry that it has for the potential development of GWA, via Spirit Energy – I find it hard to see that not being developed in some form, despite the disappointments at Warwick, as Lincoln still looks good. On top of that it will also be generating significant a
Hurricane Energy looks to offer a long-term investing opportunity, and without the risks that existing holders have had to take!
By Gary Newman | Friday 6 December 2019
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from *************). I have no business relationship with any company whose stock is mentioned in this article.
Hurricane Energy (HUR) is a company that I have been bullish on ever since first covering it as a buy back in June 2014, but things haven’t worked out particularly well for anyone who has been invested since that time. This is rather unfortunate, as from an operational point of view it has performed amazingly well, better than anyone could really have hoped for, and is an example of how an AIM oil explorer can sometimes succeed and take a large discovery all the way through to production. Unfortunately for longer term holders though, that has proved costly in terms of dilution to enable to company to retain 100% of its Lancaster field...
This is now producing oil at a significant rate, as it ramps up to a targeted rate of 17,000bopd from its Early Production System, via the Aoka Mizu FPSO. Back when I first covered it, the company was in the middle of its Lancaster horizontal appraisal drill and the shares were trading at 28p, and given that they are now trading at around 33p that doesn’t exactly constitute a great return for anyone who took the risk on back then and has continued to hold. What is very different though is the market cap, which was around £175 million in 2014 compared to circa £650 million today, and it just goes to show that with natural resources companies, even if you pick a winner in terms of operations, there is no guarantee that the share price will also perform well, especially if large amounts of dilution are required to reach the production stage, whilst retaining all, or a large percentage of, the asset.
With the benefit of hindsight you would of course have avoided investing in this one, but I believe that it is now at a stage where the risks are significantly reduced, given the amounts of oil it is producing - 11,000bopd as at the last update at the start of the month, and in line with guidance. But there is also still enough potential upside to make it attractive, and if all goes to plan I can still see this growing into a much larger outfit, despite the level the market cap has already reached. The share price has plummeted from around the 40-45p area, where it had been trading fairly steadily for a few months, following news at the start of the week on the testing of its 204/30b-4 well at Warwick West.
This horizontal well produced light 43API oil but only achieved a maximum stabilised rate of 1,300bopd, and although that was an improvement on the non-commercial result at the Warwick Deep well ear
A case of joining the Warwick dots and what do you get!
The connecting net pay motherlode...
Could be?
GLA
Let’s see...
GLA
Oil type not fluid type think you read the wrong RNS.
Standard to give the oil API type.
Confident statement they expect it to flow.
The Company will provide an update on initial results of the well, including flow rates and oil type,
Hurricane Energy plc
("Hurricane" or the "Company”)
‘Warwick West’ 204/30b-4 Well Update
Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, provides an update in relation to the 204/30b-4 (“Warwick West”) well.
The Company confirms that drill stem testing on the Warwick West well is expected to begin today. The Company will provide an update on initial results of the well, including flow rates and oil type, following completion of the testing phase.
Warwick West is the third and final well of the 2019 Greater Warwick Area drilling programme on Hurricane’s Lincoln and Warwick assets. Hurricane has a 50% interest in the Greater Warwick Area following Spirit Energy’s farm-in to the P1368 South and P2294 licences in September 2018.
I do recall your constant gloating on the PMO sp bb whenever the SP went down. And incessant negative posting about PMO. I dont recall your sympathy for holders there, in fact you kept posting bits and pieces from the bond prospectus to suggest pmo going bust.
What goes around comes around and you my friend will have it back in spades.
Explains last weeks price action.
Cairn is still valued at over $1 billion for circa 24,000 boepd.
I understand Enq have debt but at 70,000 boepd the market cap value doesn’t make any sense. Major disconnect.