Member Info for Stu255

It’s that little “o” at the end that’s the killer.

Stop thinking about selling, and start thinking “how can I buy more HUR at these prices”.

People seem more interested in signalling their loyalty virtues to some anonymous online group rather than thinking coldly.

When the price is low, you should think of buying.
When the price is high, you can think of selling.

Most retail investors do the opposite of this and so they lose money every year.

A bad guess.

The price is low because there were suddenly lots of people willing to sell for a low price. This is a good thing that has happened (good for me). Actually maybe there weren’t so willing to sell but were just horribly over leveraged on CFD’s and spread bets and got forcefully parted from their cash and assets? Doesn’t matter now.

The HUR stock crash is in the past. So what’s left?

There are 1,500 to 2,000 producing wells across UK waters and right now the -6 well is the single most prolific oil well on the U.K. Continental Shelf.

It is the UK’s most prolific oil well by a large margin.

Yet some people are worried that it might not be commercial. I’m being serious!

It has been producing at these rates for over a year.

Still some people think it might not be a commercially viable well.

It is the UK’s most prolific well, even with the choke only half open.

I mean, come on. This is just too funny.

I honestly wonder, where do AIM oil investors come from? How do they always get everything so wrong? Why do they always behave as a dumb herd? Bit weird isn’t it.

You do realise that when someone says a profitable company is “priced to go bust” that that is a very bullish statement to make about the share price?

Those numbers are off. ( I accept it's not possible to perfectly accurately forecast, but we can do better).

See pg47 of the Capital Markets Day presentation from April 27th.
https://www.hurricaneenergy.com/download_file/force/557/220

It shows Net Cash generated as $24m, from April to December (9 months) assuming an oil price of $30.
On top of that, pg 42 assumes 18k bopd for 2020 and shows that most of the operating costs ($/bbl) are actually fixed and not variable.

So we can unpack the costs.

CMD forecast oil sales (April - December) = 18,000 bopd * 365 days * (9 months / 12 months) * $30 * 90% uptime = $133m
They expected $23m free cash from this^

So forecast operating costs, April to December = $133m - $23m = $110m
Annualised operating cost forecast = $110m * (12 months / 9 months) = $146m

The operating cost is largely fixed (maybe 80% fixed cost), but has some variability.

Oil price today is ~$44, lets discount this 10% and assume an average oil price of $40 over the next 12 months.

Forecast 12 month oil sales = 17,000 bopd * 365 * 90% uptime * $40 = $223.4m

Forecast 12 month free cash = $223.4m - $146m = $76.7m

Now this figure might go up if the oil price rises or if production is increased.
Likewise this figure might go down if the oil price falls or if production falls.

But a free cash flow of $76m from a company valued at $150m is a HUGE discount.
Typically this ratio would be 1:15 for a large company with diversified risks e.g. Unilever.

It is discounted because there are some risks. But is the discount proportional to the risk.

But everyday that passes where HUR continues to operate this cashflow, it just adds more evidence to the case that this business is real. All the other stuff (GWA and infill drilling on Lancaster) is nice but not necessary for now.

No news is good news.

This is exactly what I have been saying. It is a cash machine now.

If they are generating $100m+ cash flow, they will be able to refinance the bond cheaply and retain their cash on hand and liquidity. From a cost of capital perspective, it doesn't make sense to go debt free with IR at the zero bound.

If everything remains as is, they will be in a position to issue a new vanilla bond to replace the convertible, and it will likely have a lower coupon too given the strong cash flow. They then have a $300m cash allocation problem (a very nice problem to have).

This is the new course. This plan is much better for current shareholders.

In reality they don't need to repay the convertible with cash on hand. If they can demonstrate strong profitability (which they are already doing) they will have no problem issuing a new 5 or 10 year non-convertible bond to pay off the convertible.

The convertible is not perilous (covenants permitting). It will merely be refinanced with a non-convertible.
The more free cash flow HUR can generate the lower the coupon on the next bond will be.

The capital structure should be about 50:50 debt to equity and the debt should be serviced from EBITDA.
All of this is possible with the two existing wells only.

What you have here is a company generating $50-100m free cash flow (with another $90m in uncommitted cash) listed at $150m.

Buy popcorn.

Don’t steal their thunder.

Volume is drying up at 6.00 - 6.50 now.

Anyone wanting to buy or sell in any volume is going to have to move the price.

Yeah typo and no edit button...

Water cut < 50% = water in oil
Water cut > 50% = oil in water

These can behave quite differently and the transition from one to the other can be tricky to manage.

How do you get $20m EBITDA for the year?

HUR have said the asset b/e is $17/bbl and the group b/e is $26/bbl.

Brent is $44.

So round up the group b/e to $30 and round down Brent to $40 (discounting) and I expect HUR to make about $10/bbl on operating.

HUR also say they expect 5.5m barrels per year including 10% downtime.

They have money. They are making good money.

I strongly support the new board and the focus on growing the cash flow to even greater levels and not spamming all the money of exploration. Just monetise Lancaster and give the money directly to shareholders.

I’ve seen somewhere on one of the forums that the ESP on -7 was adjusted to avert slugging?

Professional Tip: water cut <50% is water in oil, oil cut >50% is oil in water.

53% watercut is oil in water and this is stable, no slugging, no interference.

The fact the water cut is up on -7 is probably by intention, specifically for flow assurance reasons.

Not that any of that matters.
Cash is more interesting than geology.

All that matters now is:

1). HUR ship $20m a month, of which $5m is tax free profit.
2). Current market cap is $150m

That is all. Cash, cash, cash. Keep it coming.

Just buy em and hold em, HUR will pay you if the market doesn’t. Hurricane are raking it in just now. The existing production at Lancaster is plenty enough to pay out shareholders at this lowly mcap.

"But Stu convert anything they have to inform the market by RNS"

Yeah, it's fine. It's not happening.
It was just a misunderstanding on my part.

Forums are a learning tool. That's what they are for. That's how I use them.

Yeah, easy answer... these convertibles don't work the way I thought.
Usually it's the bondholder who holds the conversion powers but here it's the issuer who holds the conversion powers.

HUR don't need / want to convert the bonds.

"Stu
Think I gave you my answer last time round

You trying to tell me that given the opportunity an entity like kerogen wouldn’t take the opportunity given the chance in cahoots with their mates to reduce the average price they have payed for hurricane shares.

Sorry but your talking b@ll@cks again

That’s twice in a short space of time

Says it all really about your posts"

You shouldn't be trading with real money.

"Thats as I understand the market, I might be v naive in my experience but this site shows stats saying 12 mill sells 6 mill buys"

This website is NOT the stock market.

Some retail investor websites take it upon themselves to label trades as "buy" or "sell", but this something these websites do and not something the stock market itself does.

The stock market doesn't do it, because it doesn't make any sense.

The way the websites do it is that trades that are executed closer to the bid price are labelled as "sell", trades that are executed closer to the ask are labelled as "buy".

I bought all of my shares in the last 2 days, buy bidding on the bid using limit orders. All of my limit orders were filled with market orders. So even though I was buying plenty of HUR shares, retail websites would label those trades as "sell".
Which is obviously a complete misnomer.

Every trade has both a buyer and a seller. This is really simple.

A market is just a place full of buyers and sellers, (buyers can bid and sellers can offer) but the trades are the transactions and they only happen when both a buyer and a seller converge.

"Kerogen and Mr Tao hands are all over this"

Hands all over it... As is Kergoen are the largest shareholder and Mr Tao sits on the board of directors?

Why is it a problem that some people are invested and not selling?
That's not a problem. You aren't making any sense.

There is no weird conspiracy at work here. Get over it. This is normal market stuff.
The market is wild sometimes, that is all. 2020 has been a wild year. E&P is wild.

It turned out that HUR's capital structure was built on a load of over leveraged retail investors ill suited to survive the swings of 2020 with lots of investor redemptions and liquidations. But that's not a problem for a self-financing company like HUR.

It just means that in the smouldering ashes of the retail immolation there is now this brief opportunity for people like me to jump in at an outrageously silly price for a company with such a decent revenue.

I don't care what the market does from here. HUR can afford to pay me out directly as a shareholder.

"Learning! Would it also be right to assume, even though there is currently more selling than buying, the approx 18 mill combined is not excessive either way. 436 trades (which we know about- ud5ing data on this site) averages about 40k trades nothing as yet showing big selling to drive sp price down so maybe the "shorters" got it wrong? Asteris only have,currently, 0.86% anout 17 mill"

There can never be more selling than buying.

By definition, every trade has a buyer and a seller. The market is nothing more than an exchange.

The market does not hold any shares of its own, or any money of its own. It is just a place (a marketplace) where buyers and sellers can meet in order to conduct trades.

It's irrelevant.

ALL THAT MATTERS JUST NOW...

1). The balance sheet is growing by ~$5m cash every month.
2). You can still buy in at a $150m valuation.

AT THIS VALUATION, EVERYTHING ELSE CAN BE IGNORED.

Can everyone agree to stop concerning themselves with these bizarre conspiracy theories that make absolutely no sense at all.

This is wrong on so many points, I hardly know where to start.
It's quite scary that anyone who believes this stuff can own shares.

There is no secret conspiracy. Short selling is not a major problem here. This is normal market operations.

NB: Kerogen Capital own a large stake in HUR, they are long. Not short. If they are selling, that is selling not shorting.
You are confused.

This is fun isn't it.

That market plumbing changed during the auction at 12:00

Now you can't get hit on the bid.

Doesn't need any of that.

I would be very happy for HUR to:

1). Relinquish Lincoln. Relinquish everything. Give all the prospects back to OGA.
2). Never spend another penny on exploration or development.
3). Just keep Lancaster producing 15,000 bopd.
4). Just keep shipping 5 million barrels per year.
5). Just keep making $10 / barrel profit.
6). Just keep making $50m per year EBITDA.
7). Just keep enjoying the tax credits.
8). I would even be very happy if the market cap stayed at £100m, because could just use the cash thrown off Lancaster to buy more.

I would be very very happy if nothing changes at all.
If I can buy HUR at 6p and HUR pays me 4p a year that's just great.