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Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
For my first article on ShareProphets I highlight as a buy Hurricane Energy (HUR) where the upside is massive and risks less than almost any other oil exploration and production company listed on AIM
Let me explain. Hurricane Energy is a North Sea, West Shetlands based company with a 90% cos and economic 60% cos. Not surprisingly BP has invested directly into the company derisking the geology and any future farm in deals with infrastructure nearby including the Clair BP oil field.
The company estimates recoverable contingent resources at 450m 2c of which 350m is within the Greater Lancaster Area Project combining the Lincoln prospect six miles to the north.
CEO Dr Robert Trice has mentioned that their shallow acreage alone could be something like a 3 billion barrel play already identified. He hopes to use subsea wells tied into a floating production (FPSO) vessel in the future once a farm out is completed in the future.
The Lancaster prospect 207 2c Contingent recoverable 100% interest is fully funded drilled, 38API light oil unlocking up to 8,000 barrels a day, stated on the CPR. However anything over 3,000 barrels is positive. Indeed broker Cenkos says that it is confident that 4,000 bopd can be achieved and a testing success can unlock significant value. Bearing in mind that 2,500 bopd has already flown in the past vertically on the edge of Lancaster it is not unreasonable to suggest that a horizontal well in the best position can double this figure.
Following the recent RNSs which came out ahead of schedule using state of the art Transocean Sedco 712 Hurricane succeeded in drilling the one kilometre horizontal section in a fractured basement resulting in extremely encouraging data. Dr Trice is believed to be over the moon while on the rig operations and I hope he will have more information at the AGM on Monday.
Top management include Dr Robert Trice CEO a world leader in factured basements. If they can work in Vietnam, Libya and Yemen why not in the North Sea with 90% cos. John Hogen, the Chairman, has spent 35 years in the oil industry and Nicola Taylor, the FD, has 30 years’ experience including various roles in Total.
As I write the shares trade at a c81% discount to net asset value. Is that fair? Have punters decided to not to invest in this safe haven and go speculating in another dodgy Falklands based company 12 months hence or another form of TRP ? I find it hard to believe that the likes of Mosman with little proven results can see its shares go up by 500% while Hurricane is stuck in no man’s land. If punters do not snaffle the shares now then F&C or other city funds will buy and any sell off by traders will be bought into as we enter flow results only two weeks away with rumours beforehand.
I believe the flow has started and believe that the Cenkos recent report claiming the scale of existing discoveries is materially larger than most in the sector should be a hint on the opening up a new North Sea continental shelf.
The only risks that I can see is the weather which up till now has been fine. Some see the shares hitting £1. We shall see. I am a holder and buyer at these levels.
Until the next time at the castle.
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