Member Info for RodneyT

Here is an extract from CA's RNS.

The Fund has concluded that in the continuing absence of a firm offer that reflects the value of Hurricane, it would be better served under new management that has a track record of delivering for shareholders. Crystal Amber has been in discussions with Tony Buckingham, the founder and Chief Executive of Albion Energy Limited and Franco Castelli, Managing Director of Albion Energy Limited. Tony Buckingham is the founder of Heritage Oil, which in 2014 was acquired for $1.6 billion. [Albion Energy Limited discovered more than two billion barrels gross of oil.] Tony Buckingham and Franco Castelli have agreed to act as directors.

The Fund has also been informed by Albion Energy Limited that it is of the view that there remains substantial potential within Hurricane's acreage and that under the right leadership, Hurricane could attract significant new investment to fund growth opportunities. In the event that Tony Buckingham and Franco Castelli are appointed directors of Hurricane, Crystal Amber understands that the remuneration packages for Tony Buckingham and Franco Castelli will be set by the ongoing Remuneration Committee of Hurricane but it would be supportive of the grant of options to Albion Energy Limited over 100 million Hurricane shares, equivalent to approximately 5% of the issued share capital of Hurricane at an exercise price of £0.001, being the par value of a Hurricane ordinary share, with such options vesting quarterly over the following 12 months. In addition, Crystal Amber would be supportive of Hurricane granting options over a further 200 million shares, equivalent to approximately 10% of the current issued share capital of Hurricane to Albion Energy Limited, at an exercise price of 10p a share. A vesting condition of such options would be that, by 31 July 2023, Hurricane raises a minimum of £250 million of capital to spend on a drilling programme within Hurricane's acreage. These options should vest quarterly in arrears over two years.

In the event that Crystal Amber accepts a cash offer from a third party that is declared wholly unconditional on or before 30 April 2023, Crystal Amber would give Albion Energy Limited the economic value of effectively having an option over 20 million Hurricane shares held by Crystal Amber at an exercise price of 7.7p a share.

Hurricane has announced its intention to return $70 million in Q1 2023. Crystal Amber is supportive of this capital return and would expect any new board of Hurricane to honour this commitment, in the absence of an offer that is declared wholly unconditional.
1. The basis of this offer has at its core a belief that significant RESOURCES remain within the assets owned by HUR.
2. HUR CPRs over the last few years have referred to substantial 2C resources 31.6 million stock tank barrels as at 31 December 2022 (Lincoln and P8 where significant resources remain but HUR failed to gain consent to develop should also be considered)

I quite agree.

CA have made around £45 million from their HUR activities I understand and have an average purchase price of about 6.7p. Bearing in mind they would like to wind CA up, theyhave doubtless made a decision based on their own needs and circumstances. It looks as though CA have made excellent returns already from their HUR investments so any additional returns from the DCUs will be icing on their cake. They already have a very large cake. What about our cakes?

That reads as financial advice Kever although I'm sure you didn't mean it that way? Financial advice is heavily regulated in UK as you know.

There seems to be a concern that, were the deal to proceed, resources that HUR owns but it not developing/producing from at present could be developed and produced from in due course at a time when current shareholders do not own them anymore. The resources in question are potentially very large indeed and are referred to frequently in HUR announcements issued over the last 36 months. At this moment in time, smaller shareholders should not lose patience. Go back to reviewing what the company owns and intends to sell. Patience is key as is making a decision based on a good understanding of the facts. Every vote will be vital at the GM. Boredom could set in as things drag on. Use that time to review the facts.

NSTAApologies if this has been posted already. Energy security seems to becoming incresingly important and at a rapid pace.It will be interesting to review anything HMG announces about EPL. https://www.nstauthority.co.uk/news-publications/news/2023/nsta-acts-to-speed-up-north-sea-oil-and-gas-production/

To recap, HUR was asked about HY Results and Technical Update 11 September 2020 in relation to this aspect where the report stated “'Re-evaluation of production test data, and updated mapping after reinterpretation of seismic and log data, suggest that significant oil volumes are potentially present in the Victory and Rona sandstones which onlap the Lancaster fractured basement on the flanks of the structure. An analogous structural setting has been documented at the Clair Field along trend to the north west of Lancaster. Further work is required to assess the size of these volumes'.
HUR reply stated “The work you highlight was performed at the time and the results have been incorporated into all the subsequent simulation model updates, and reviewed by the independent consultancy, ERCE, and incorporated into the subsequently published CPRs. The work has formed the basis for all the production forecasts issued by Hurricane since that date.”
Is this a sufficient explanation or would it be better to have the data and details of the work the company states was carried out back in 2020?
As a reminder, 2C denotes ‘Best Estimate of Contingent Resources’. NB: Not ‘Reserves’, Resources.
HUR stated 2C at 34.7 MMstb as at 31 Dec 2020, 35.7 MMstb as at 31 Dec 2021 and 31.6 MMstb as at 31 Dec 2022. 6.8MMbbls were produced during that period.
Over the last 3 years, HUR plugged and abandoned Lincoln in July 2021 having stated in March 2020 that it could not get regulatory consent to proceed. The 11 Sept 2020 Update stated Lincoln 2C resources at 45MMstb. Does HUR still own the Lincoln licence and, if so, is there a possibility that, due to a changed environment and different personnel i.e. Messrs Agostini, McKendrick and Dunn, amongst other, consent could be granted?
Could the same be true in relation to P8? HUR stated in September 2022 that it would not proceed with P8 as it was unable to gain regulatory consent. How much could production be boosted were P8 operational? Presumably, HUR still has a licence to do so although it does not have consent?
The licences for Warwick and Halifax were both relinquished by HUR in 2022. Do we know who owns these licences now?

"Chancellor Jeremy Hunt is expected to offer oil and gas groups the prospect of windfall tax relief as part of Rishi Sunak's bid to improve energy security. The move could come next week as the prime minister sets out measures that will also hit net zero targets. Ministers have been in talks with the sector about dropping a 35 per cent profits levy if energy prices fall below a specified 'normal' long-term level.' Will this development have an impact on the value of HUR's assets?

This is from a tax consultant. Please do not construe this opinion as advice. Please seek advice from a qualified person.
"The Deferred Consideration Units (CDUs) are stated as being ‘complex instruments’ and no application is being made for the Deferred Consideration Units to be listed or dealt in on any stock exchange. The DCU expire on 31 December 2026. The key point, therefore, is that the CDUs will not be ISA qualifying.

If the CDUs arrive in the ISA after the Corporate event , the requirement will be to remove the DCUs from client’s ISAs within the ‘usual’ 30-day period (either by sale or transfer)."

Further to my recent remarks about these sandstones in the vicinity of Lancaster, I shall email Mr Maris now with this query and will let you know if I get a reply and, if so, what it says.

Thank you for the clarification Senseman.

Section 5.4 of the March 16 2023 report includes comment on the 'perceived fragility' of Hurricane's oil production. It also notes the failure of the lower ESP in the context of the upper ESP being in operation for the last 2 years. During that period, did Hurricane, as part of its risk management activiites, attempt to repair or replace the lower ESP and, if not, why was that? Also, section 5.4 sets out a rather stark situation in the event of the remaining ESP failure backed up by remarks on page 66 from ERCE on Hurricane's instruction. Elsewhere on this forum, Mr Maris was quoted as being much more upbeat about ESP performance when questioned about this topic at the AGM by a shareholder. Which scenario is the more likely and more accurate one?

Crystal Amber have made in excess of £40 million from their HUR dealings over the years. Is it correct the average cost of their remaining holdings is about 6.7p? Crystal Amber will certainly have a strategy that suits them and their shareholders. Whether this strategy suits other HUR shareholders as well is a point for all shareholders to review carefully. As and when HUR is sold, the Company's assets will be gone as far as current HUR shareholders are concerned.

One wonders how an Auditor would value these instruments were they to feature in a set of accounts. There is no guarantee of value express or implied by Hurricane.

The March 16 document from the Company referred frequently to the risk of production suddently being disrupted or stopping completely. Bearing in mind the Board's wish to proceed with Prax's proposal, this tone is probably not surprising.
Over the last 2 years or so, the Company's projections of 2P reserves have been shown to be far too pessimistic. One wonders how this has happened and why the figures were so inaccurate. I copy my previous query once again and would add, if previously projections underestimated 2P reserves and production life so much, could that be happening again now? If current shareholders still owned the Company, it wouldn't matter so much but they won't own the Company if what is proposed is carried.
2P reserves were quoted by the company as at 31 December 2020 at 7.1 million barrels. 3.7 million barrels were produced in 2021
2P reserves were quoted by the company as at 31 December 2021 at 5.8 million barrels. 3.1 million barrels were produced in 2022.
2P reserves were quoted at 6.6 million barrels as at 31 December 2022. In the event that 7700 barrels per day are produced every day in 2023 (2.8 million barrels), what do we expect 2P to be at at December 2023?
Why did 2P stay so strong over the last few years given the significant production over the same period? Can this trend continue?

The report stated ' Re-evaluation of procuction test data, and updated mapping after reinterpretation of seismic and log data, suggest that significant oil volumes are potentially present in the Victory and Rona sandstones which onlap the Lancaster fractured basement on the flanks of the structure. An analogus structural setting has been documented at the Clair Field along trend to the north west of Lancaster. Further work is required to assess the size of these volumes'. Was this work ever carried out, if so, what were the findings? If not, could the Board assure shareholders that the work will be carried out and reported on prior to any sale of Company assets?

2P reserves were quoted by the company as at 31 December 2020 at 7.1 million barrels. 3.7 million barrels were produced in 2021
2P reserves were quoted by the company as at 31 December 2021 at 5.8 million barrels. 3.1 million barrels were produced in 2022.
2P reserves were quoted at 6.6 million barrels as at 31 December 2022. In the event that 7700 barrels per day are produced every day in 2023 (2.8 million barrels), what do we expect 2P to be at at December 2023?
Why did 2P stay so strong over the last few years given the significant production over the same period? Can this trend continue?

The report stated ' Re-evaluation of procuction test data, and updated mapping after reinterpretation of seismic and log data, suggest that significant oil volumes are potentially present in the Victory and Rona sandstones which onlap the Lancaster fractured basement on the flanks of the structure. An analogus structural setting has been documented at the Clair Field along trend to the north west of Lancaster. Further work is required to assess the size of these volumes'. Was this work ever carried out, if so, what were the findings? If not, could the Board assure shareholders that the work will be carried out and reported on prior to any sale of Company assets?

Published on 14 April 2022. Projected 7500- 8600 bopd assuming FPSO uptime of 96.5% and the impact of the Q3 annual maintenance shutdown. Actual 2022 achieved, 3.1 million barrels so around 8493 bopd for every day of 2022. I have previously referred to 2p underprojection followed by over delivery. For 2021 and 2022 combined, the difference was 6.3 million barrels.

I revert to my reference to 2P at 6.6m whereas the projected from 2 years prior was 0.3m based on actual production over the same period. Production could extend past August 2025 and there are other variables too.