IC AIM 10027 Apr 2018 17:05
And in at number 26 on this years chart it's Hurricane Energy...
"As analysts at Cantor Fitzgerald recently noted, the hydrocarbons sitting under Hurricane Energy�s (HUR) licences equate to as much as a quarter of the UK continental shelf�s recoverable resources. Of course, �recoverable� does not mean �profitable� � or even that these barrels will be recovered. But what Cantor�s estimate highlights is the scale of Hurricane�s potential, and the curious disconnect with its market valuation. Indeed, it is the latter point that dominates industry chatter when it comes to Hurricane, which is hoping to pioneer the successful drilling of a fractured basement reservoir in UK waters with its Lancaster early production system (EPS). With first oil a year away, the countdown has begun.
To Cantor, the scepticism surrounding the company is overdone. Hurricane�s ability to make money from its asset base � which if the EPS works should generate annual operating cash flows of $152m at $50 Brent � should be assumed, not doubted. The perception that the reservoir play will stutter (or worse) �has been largely debunked by the successful well tests to date, given the basement wells demonstrating world-class productivity indices�, say the analysts.
But Hurricane cannot rest on others� past successes in Indonesia and Vietnam, nor the apparent disinclination of supermajors and large independents to farm-in to its acreage on the cheap. That explains the move to prove the concept through the (fully-funded) EPS, which should generate lots of newsflow before the floating production storage and offloading (FPSO) vessel arrives in the North Sea in the second half of 2018. As project milestones are reached, and assuming the oil price holds above $60, it would not be a surprise to see Hurricane�s shares move well above analysts� core risked net asset valuations.
However, the proof won�t come until next year, when we can expect either chief executive Robert Trice or the broader industry to be on the end of a few �I told you so� missives. To many, the geology is untested and very risky. But if Lancaster ramps up as smoothly as Premier Oil�s Catcher field, Hurricane�s valuation is likely to catapult the company towards the top of next year�s Aim 100. That�s assuming a leap to the main market isn�t made before then, thereby answering the questions apparently raised by former chairman Robert Arnott, who quit in protest over corporate governance standards last year.
For now, we are happy to sit in the cautious camp, especially with so many heavily discounted UK oil and gas stocks for sector investors to choose from. Hold."
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