Great post by hiddendepths29 Sep 2018 13:57
Great post by hiddendepths over on ADVFN,, I hope he doesn't mind me sharing it on here.
In my decades in the industry and analysing it, I have encountered the type of caution displayed by the industry contact over and over again. Risk aversion is prevalent. When I was at BP, I found it so frustrating that it was a factor in my leaving the company. As far as I'm concerned, it's all a question of risk versus potential reward. If you have no appetite for risk, then Hurricane is certainly not an appropriate stock for you. But if you want to invest in something that has a good chance of going up severalfold inside a year, then HUR is one of the best.
The key to this type of investment is an assessment of the risk and and an assessment of the potential reward. For a professional investor, this can be fairly quantitative if you have enough information or it can be more judgmental if you have adequate experience in either the sector concerned or in oil investing.
When I published a BUY recommendation on Tullow at 12p (the first written by anyone), we were not the company broker and it was a genuinely objective note. The case must have been fairly good as the share price rose 50% in a matter of days. But the point is that Tullow at the time had some fairly flaky assets in Sierra Leone and nothing else apart from dreams. And Aidan Heavey. I met Aidan (in a pub) for several hours and LISTENED. He was dynamic, had passion, ambition and vision. He also had true faith in what he was doing, a real understanding of oil exploration and development and a mastery of finance. He could make the case for the company brilliantly. So I bought into the idea. I knew it was incredibly high risk - maybe a one in 20 shot - but I was convinced that the chances of the stock multibagging were considerably better than that. I was not really surprised that it was better than a hundredbagger in the end despite a lot of inevitable dilution along the way. And my firm's clients, those who took the chance, many of whom were large investment funds, were happy bunnies.
Now HUR several years ahead of its flotation had a lot in common with early Tullow. A man with a dream and passion. A man with excellent credentials determined to follow his steadfast belief in a concept born of expertise. The company has come a long way since then and the concept is already derisked to a significant extent by exploration success. For sure things could still go wrong. But in my view those risks are well and truly in the share price. Yet the potential upside is not. If, as seems likely, the company becomes significantly cashflow positive early next year with the promise of more, far more, to come, the shares will fly. To my mind, the biggest risk, far greater than technical failure, is that the company will be taken over by a big player way too early for investors and we'll get only £2 or so a share rather than the £10 or more which proving up the reserves and their producibility would be like
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