Seen this before, but not like this.28 Jul 2020 12:03
The single biggest thing holding the price back at the moment is that most of the people watching HUR are stuck in the old way of thinking about HUR, i.e. what is required to get from 60p to 100p and 100p to 200p.
To get from 60p to 100p a few things needed to happen, to get from 100p to 200p lots of things needed to happen.
Those things look far away right now, and this is the main thing at the forefront in peoples mind.
HUR spent a long time building the big expansion narrative and that narrative is still in the minds of the vast majority of people here. That big expansion story is like an object lodged in your brain.
But when priced below 10p none of that stuff matters.
At 6p HUR is not primarily a geology play. It is not even a field development play. Right now, nothing new needs to happen in the world for HUR to produce 2x their market cap in oil sales over the next couple of years.
They ship about $20m of oil every month or so. About $5m of that is profit, and they don't have to pay tax for a long time because of their huge tax credits. HUR will probably generate $50-60m free cash this year and the MCAP today is £100m.
At the current price, the free cash flow yield is something like 40 - 60%.
Hurricane are already making good money but at £100m market cap it is stupidly good money, they have very low debt relative to their peers, huge tax credits, they are shipping lots of oil to market, the oil price is decent, they are hedged.
What has happened to HUR in the stock market is that all the geology froth has blown away and the pendulum has swung right back. Most AIM investors have seen this dozens of times before, so are naturally very wary, it looks very familiar. But usually when this price chart happens on AIM all that is left is a husk of debt and overdue invoices.
With HUR, the stock bubble popped and inside of it all was a very profitable oil company. This is really unusual.
It is so unusual in fact, that everyone seems to be blind to it. Assuming there will be some kind of equity raise, when in fact the company is easily self financing and even generating substantial free cash.
I guess when priced at 60p nobody cares about 4p free cash flow? But priced at 6p and I think we can all agree that 4p free cash flow is very rare. They are making so much free cash right now, HUR could buyback todays market cap in cash with just a couple of years of operation.
At what share price does HUR consider it good business to buyback equity?
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