RE: Buy tip in Sunday Times7 Apr 2019 10:56
Hurricane to whip up a storm in Shetland
The arrival of Aoka Mizu in the choppy waters north of Scotland cheered investors in Hurricane Energy late last year. After a few false starts, the oil and gas processing and storage ship was hooked up to Hurricane’s Lancaster field in late March.
The AIM stock Hurricane is reaching the stage where it needs to prove itself. Will its maverick boss Robert Trice confound the doubters and strike big oil, boosting the flagging North Sea industry in the process? Or will he go the way of plenty of AIM dreamers before him and fizzle out?
There are plenty of reasons to be sceptical. Trice, an industry veteran with 30 years’ experience, founded Hurricane in his garden shed in 2005.
He is trying to do something that has not been done before in British waters:
extract oil from the fractures in hard, brittle rock on the sea bed, known as basement reservoirs. The process is risky and difficult, although it is used on the Norwegian side of the North Sea, and in other parts of the world.
Hurricane has huge potential. It has built up licences covering a possible 2.3bn barrels of oil and gas — the largest undeveloped resource base in the UK. These are in Rona Ridge in the west of Shetland area, an increasingly competitive spot where majors such as Shell and BP are starting to cluster. Yet the question remains: how effectively can it get that oil out?
All eyes are on its Lancaster field, which is expected to begin producing within months. Trice is under pressure to prove his
prediction that crude oil will be able to flow freely to the surface for sustained periods, despite the brittle rock. BP is said to be watching closely. Hurricane hopes to produce 10,000 barrels of oil a day from Lancaster, gradually ramping up to 20,000 a day.
Analysts at the stockbroker Cantor Fitzgerald believe the shares could soar this year. They have a target price of 96p, more than double its Friday closing price of 44.9p.
In a big boost last year, Hurricane struck a partnership with Centrica’s oil and gas business Spirit Energy, netting Hurricane $400m (£306m) in exchange for half its Lincoln and Warwick licences. Analysts believe the deal will help it speed up activity.
Its bosses are also positioning the company for a premium stock market listing. Trice, 58, who has reportedly compared himself to George Mitchell, the late billionaire father of the US shale drilling boom, is not one to be put off easily. Trice said of the naysayers late last year: “I’ve stopped arguing with them. They’ll see.”
Only a pessimist would bet against him. Buy.
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