Part of IC coverage17 Mar 2023 16:42
n the dark days of 2021, when its share price fell below 1p a share, Hurricane shareholders may have thought a 12.5p a share buyout was a dream. This was around the time the board had decided the hand the company over to debtholders. A court challenge saw this plan quashed, and higher oil prices saw the immediate risk of default cleared. As of 28 February, the company had net free cash of $140mn, and $60.7mn of cash and liquid investments within restricted funds.
The deal structure means Prax could take over for just 4.15p a share, although 6p is a more likely price. The other cash is split into a supplementary dividend, dependent on oil sales from next month's lifting, and the more questionable 'deferred consideration units', worth 6.48p each. This would be paid when the Lancaster field had produced 450,000 barrels of oil. It has so far produced 200,000 barrels of oil.
Hurricane said the deal structure "allows Hurricane shareholders to both receive cash today, as well as benefit from future upside through additional acquisitions". The potential acquisitions would help toward the deferred unit targets.
Crystal Amber Fund (CRS) has backed the deal after previously calling for Hurricane to be wound down. "Hurricane has one asset, which is a cash cow but has a limited life," Crystal Amber founder and investment adviser Richard Bernstein told Investors' Chronicle last year. Bernstein led the charge to stop the debtholder deal in 2021, and launched an attempt to sack the board in December but ended up cancelling the requisitioned meeting. In total, shareholders representing 45 per cent of the company's shares have committed to support the deal.
This offer is based on shareholders valuing the potential for two biscuits in a few years over one now. The Thursday morning share price move indicates some found a good middle ground however - sell now.
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