Member Info for haggis_trap

Think of the 'deal' board are trying to do as similar to getting a large mortgage on buy to let property (at a time when house prices are cheap but likely going to go up in future)

1. The finance raised would be 50:50 mix of debt / equity raised against production. You are correct that has risk. Price of oil and production needs to remain high enough to repay debt

2. This is not a risk free investment. It is speculation board will negotiate a deal and decent financial terms for existing holders to go alongside. Looking at their history they have good chance of achieving that. But it's not certain

Exactly : the reason to be invested here is belief LBE board will soon do a deal and raise £50-100 million combination of equity / debt required. The initial 9 million funding simply allows them to do due-dilligence on potential deal

Great question... We can only speculate. The hope / reason to invest now is future equity would be raised above current price. This is what RRE did.

Such raise would also give the initial and investors (such as BlackRock) opportunity for profit or free carry in future. The initial list of investors is credible, presumably for good reason.

Plan for LBE appears to be using combination of debt and finance to purchase existing north sea assets. I can see why in current environment that would be considered lower risk, and faster, than exploration. It is certainly worked amazingly for RRE : so the business model is valid.

The advantage of investing in LBE now is that a 10 million market cap company could quickly be worth 100 million assuming the board do a deal and raise finance. However until deal done (which I believe it well) then it's speculation

I am in for modest amount @£1.04
This looks like a speculative investment with opportunity for longer-term reward.
If the team do manage to secure a deal then those getting in early will likely benefit when shares are re-floated.

Here is why I am in for now.

- The current low oil price environment will likely work in their favor when trying to buy assets.
- The board have a history of securing finance and a network of contacts in the north-sea.
- Recent jump in share price suggest market may think news is coming ;-)
- Recent RNS awarding the board options if they double share price is promising.
- List of initial investors (BlackRock et al) is credible.

Interesting.
Though for now it remains pure speculation until board deliver.

It is crazy isn't it. £150 million in bank plus £100 million a year in revenue. Yet entire company valued at £120 million.

For sure there are question marks over the reservoir : however outcome is unlikely to be binary. The EPS just needs to generate enough data to prove Lancaster / fractured basement works then someone with deeper pockets can drill more holes.

Generally positive RNS. At 15K and current oil price I see little risk of the bonds not being repaid.

There remains longer term risk from the reserves being material down-graded. However we already knew that on 8th June. Medium to short term the future of the company looks much more certain this morning.

> Flying will be fair value at 15-20p

Correct.
Interestingly RRE produced ~20K barrels per day.
Their final market cap was £240 million (balanced against £300 million in decommissioning costs)

So doing some fag packet math's HUR is certainly worth ~20p assuming no more issues with the reservoir.

> pence not pounds.....

correct, excuse my typo.
I am too used to seeing HUR in single figure pence :-(

Yes, RRE was a well run company.
Thinking about it : The reason I didn't invest is because their share price was quite high at that moment in time.
So the maximum upside I could see was x2 (~£1000 -> previous high of £2000).
As it happens they got taken over at £1800 / share - which some share holders are complaining is cheap.
Not least given the company was set up specifically for low oil price environment.
Looks like their board folded at first offer. The offer price is less than cash in bank.
Though RRE did have £300 million in decommissioning costs hanging over their head (for market cap of £240 million).

If HUR release positive production news then we should also see a +100% re-rate here.

RRE been taken over!
Hence the rise....

Good on them.
I am almost sold 50% here a few months ago to put into RRE.
Wishing I had now. Would have helped reduce the loss here.
However easy to be wise with hindsight.

^ with benefit of hindsight company should just have focussed effort and finances on Lancaster. They shot for moon and missed. However easy to say that knowing the Lincoln / Warwick results

Interesting article below with quote from Spirit Energy :
"He also described the results of its drilling campaign with Hurricane Energy on the Greater Warwick Area, west of Shetland, as “ambiguous” and the cause of “internal rethinking”."
https://www.energyvoice.com/oilandgas/north-sea/249839/spirit-energy-reaches-crossroads-at-north-sea-field/

I think it is clear Lincoln / Warwick is no not-happening.
However Halifax may well be worth another look.
Possibly even the potential hidden jewel in crown?

Incidentally the new head of investor relations used to work for Genel Energy. Not the kind of appointment a company going down the tubes would make.

Well : there seems to be lots of new faces at HUR from board level down. I am assuming that is a company taking longer term future view (rather than going bust as recent share price suggests!). There seems to be lots of uncertainty but the best long suffering PIs can do is sit tight and wait for news. Still seems be a binary bet here based on reservoir performance. However it seems more likely HUR shares are worth 30p+ longer term than 0p. Therefore I remain invested.

No bother. FWIW I called the company last week to speak with new head of investor relations.
Expressed my concerns about recent share prices slump and departure of Dr T.
He was happy to give me the time and day and comment.
Message was very much that the company has experienced head winds.
However team is working hard to resolve them. Didn't feel like he was hiding anything.
Top priority is being in position to repay the bonds by increasing production (and minimising costs).
So : Now I guess we all need to wait and see.....

@adoubleuk. How about I send a carrier pigeon with message?

Correct : HUR have new head of investor relations.
Has been in job for 2-3 weeks (obviously appointed by the new board).

daltry / adoubleuk : what is the easiest way to PM / email you ?

HUR will almost certainly be a take over target in future.
Problem is that the company is either worth 0p or >30p (depending if 6-well continues to produce, or not).
Selling out at current prices would shaft longer term holders and result in huge loss for Kerogen.
Only by proving the reservoir performance will fair value be achieved.