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JimV

I avoid SP predictions. There are so many variables and unknowns. I similarly avoid setting fixed target prices, and believe many are no better than guesses that can be mis-leading.

What I look for is companies operating in the right sectors, with good management, a strategy to develop the business that I can understand, a clear plan to develop and grow profits, and to be under-valued against current/forecast sustainable profits. HUR has all of these, IMHO.

I will re-evaluate as the strategy is delivered and sell if any of the criteria look to be failing. Whilst a TO would most likely be great for the SP, I can't control this and have learnt to avoid investing in the hope it will happen.

JimV

What are the assumptions and timeline that underpin your valuation estimates.

POO, production rates, profit multiples?

RicFle. The 68p NAV mentioned is what I was referring to as per the original question. The higher figure is as you describe. I would be really keen to understand the $10 per barrel valuation and just what stage of development that applies to. I personally haven't found any examples of 2C being valued at that level and am keen to know if it is realistic.

Proactive put it well:

It adds that the market is pricing in just 32.7mln bbls of reserves at the moment. If the Lancaster EPS is extended from six to ten years, as Morgan Stanley expects, and the separate Greater Warwick Area EPS program lasts for eight years, that figure rises to 74mln bbls.

“Assuming oil prices in line with our house view, this leads to a net asset value of 68p.”

That’s still a drop in the ocean compared to the 2.3bn bbls of contingent resources for the whole field, which includes 785mln bbls associated with Lancaster and GWA.

Assuming the Lancaster EPS provides the expected sustained production, the analysts believe the “market is likely to assign value to these reserves very quickly.”

“If we assume US$10/bbl value for Lancaster and GWA 2C resources, we arrive at a base case NAV of 292p. Should long-term oil prices increase further to US$80/bbl (real), we see potential for a bull-case NAV of 381p, ~7.0xhigher than current levels.”

Net asset value in this case refers just to the value they see in our production reserves, not the huge contingent resources. So it is valuing just the 74m bboe mentioned.

All IMHO As I've not seen the note in full, only reports.

Overweight is the highest level of a 3 tier system (over, equal, under-weight relative to the market).

MS estimate our NAV (assuming the EPS is extended from 6 to 10 years) is 68p. This estimate does not include a value attributed to 2C. It is 27% higher than the SP when the note was issued.

Just a thought.

If the market as a whole perceives the risk as low then it will be (imperfectly) priced in. And the potential for a SP surge on foil, or even 6 months later, will be correspondingly modest.

If the market thinks the risk is higher, then any SP uplift will be corresponding higher as the evidence disproves the risk.

There are some (not all) who seem not to understand this!

M&G are owned by the Prudential and they invested in a recent placing. So yes, very significant new institutional investment. Especially as the CEOs used to work for them.

Just for clarity the following is the RPS CPR view:

7.10 Lancaster Risk Assessment
Following Hurricane’s appraisal drilling campaign many of the development risks outlined in our previous report have been addressed:
 Uncertainty of fracture propensity and distribution have been significantly reduced
 Commercial flow rates from a well test have been demonstrated
 Two horizontal wells have been drilled successfully
 OWC uncertainties have been significantly reduced.
However two risk factors remain outstanding:
 Interconnectivity of fracture network
 Water production rates and subsequent water handling requirements.
Both these issues should be addressed during the course of the EPS and will allow an optimum design of a full field development.

Escargot. The words are a direct lift from one of the worlds largest brokers who have significant access to expertise and to Hurricane management. It is a new piece of analysis. Why is that not worthy of discussion?

WW is quite obviously paraphrasing the MS note. Most of the key terminology is theirs. Whilst some will criticise their expertise and independence, as a HUR broker, it is undoubtedly useful for them to initiate coverage with an overweight rating.

Separately, the Suilven drone video is spectacular, I've always wanted to climb it but it is a long way from me! However, I'm not sure we can take any relevant geology lessons from it! Similarly, fractures on the surface that you can walk through are not necessarily directly reproduced sub-surface. Weathering of the surface rocks that have been exposed for long periods will accentuate the fracture size, possibly significantly.

Finally, I still find it surprising that so many LTHs worry about daily or weekly SP movements. So many track the SP by the hour (or minute) that they would be perfect day traders! ;-)

It also looks like the production uplift to the 7k+ bops in the presentation.

Comcas

You obviously think the company and it’s officers are in some way fraudulent and that the RNS and the various statements are all lies.

What evidence do you have?

'Profitable by the end of the year' based on revenue from contracts already signed with distributors and being delivered against now.

Interesting listening. Future appears very bright.

The Spirit deal is important because a biggish company is prepared to invest $387m+ into a FB field. It does not change the geology but it's a clear vote of confidence.

Given the nature of the deal, I think the implied valuation of HUR is higher than the current SP. Adding together the implied value of Linwick plus the NPV of the EPS, plus the implied value of Lanfax is not an exact science. But I suspect there is an implied value in the FO about 20% above the current MCap. This is before the intangible value of Spirit investing such a large sum in a FB discovery which has only had one recent drill and no flow/test history.

Add to that the high volumes of the rise, the fact that the 20SMA still sits below the 50SMA, a supportive POO, and that none of the main tech indicators look problematic and I think we have a good chance of a continuing rise in the SP. I think it is only selling by the likes of CRS that is holding us back. I certainly wouldn't criticise them for doing so as I have done well on previous occasions with a similar strategy. However, not this time!!

I'd also add that the BoDs implied motives in the FO (de-risking) make it much more likely that further corporate activity will follow. I still expect and hope that Lanfax will not be FO'd until next year, but the chances an earlier deal (or a Solan deal) are now higher (IMO).

Jac

Strathmore is difficult to understand how best to deal with. The oil is heavier, like Solan and unlike Lincoln. And the sands (it's not fractured basement) are tight. When tested flows were relatively poor - like Solan! It's commercial but needs careful development. Hopefully, PMO would have interest.

It's all tabulated at the end.

The sector prospects continue to look strong.

https://www.edisoninvestmentresearch.com/research/report/boku392497/preview/

The Edison report gives a good BOKU / BGO comparison of metrics. I've recently sold BOKU given the SP has more than doubled in a short period. To me BGO now looks better value on forward looking metrics.

Has anyone else used Spirit farm in as a valuation metric?

If you take the $387m as an indicator of value, discount it, double it and convert to £ then it implies a value for LinWick of around £500m of which Hur's share is £250m

Company figures at the 'high deck' ($60)oil price are a NPV for our Lancaster 2P reserves of around £550m.

That leaves the remaining 1.6 Bn boe in LanFax plus whirlwind and Strathmore. LanFax alone is likely worth at least as much as Linwick (£500m) and most likely considerably more given the maturity of the field and number of drills. This suggests we are undervalued by as much as 30%.

Anyone care to check my figures?

For those unfamiliar the following is the CPR verdict on Lincoln, which emphasises the uncertainties that the JV will still face. Warwick is obviously less certain due to the lack of drilling info.

7.1.10 Lincoln Risk Assessment
Following the drilling of well 205/26b-12, Lincoln can now be classified as a discovery and, as such, is assigned a significant quantity of Contingent Resources (Development Unclarified). The rationale for assigning discovery status is that a combination of mudlogging, and wireline logging data have satisfactorily demonstrated the presence of both a hydrocarbon column and effective reservoir porosity. The discovered hydrocarbons are potentially movable as evidenced by the probable presence of a pervasive hydrodynamic fracture network and the apparent permeability of the formation as suggested by drilling losses. Further evidence of permeability is noted from wireline resistivity invasion profiles, C1/ROP character, and from NMR station stops. The associated contingent resources are considered to be significant in that they are potentially commercial.
The chance of development of Lincoln is contingent on developing a more thorough understanding of the following uncertainties:
• Fluid properties
• Fracture propensity and distribution
• Interconnectivity of fracture network (pending interference testing)
• OWC depth
• Demonstration of commercial flow rates from a well test
• Water production potential and subsequent water handling requirements
• Full field development plan (number of wells required, drill centre locations)
• The Lancaster development which could potentially be considered to be the host facility for Lincoln hydrocarbons
The Lincoln discovery requires further appraisal to address these uncertainties.