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Hurricane Energy and share price manipulation

By Gary Newman | Monday 30 June 2014

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.

Hurricane Energy (HUR) announced some fantastic news last week, but like most AIM shares these days it didn’t stop the share price being manipulated. This oil explorer with assets in the West of Shetland area revealed that the appraisal of its 100% owned Lancaster discovery had been a huge success, with flow rates as high as 9,800bopd being achieved.

This is a share that I tipped a while back at around 29p, and it has also been a favourite of fellow ShareProphets writer ChrisOil. The successful flow test is massive news for the company and the maximum rate recorded was with the help of an electrical submersible pump – it could have flowed even more but was constrained by the equipment on board the rig – was 5,300bopd.

ChrisOil has already covered the recent news in detail so I won’t go over the same ground, but this has the potential to be one of the largest finds in UK waters for many years.

The company also informed us in the last RNS that it would be updating us on other aspects of the appraisal and I would expect that to include a resources upgrade in addition to the 207mmboe that it already has for Lancaster in the latest CPR.

There several interesting aspects about the trade in Hurricane following the news. In particular, what caught my eye was the way the share price behaved when the market opened and the blatant manipulation of it. This is, of course, not to mention the fact that few on the bulletin boards seemed to understand what was going on!

These days it seems to be the case that if you have enough money, then even if you miss out on the news you can still get a cheap buy. We don’t see the sustained buying pressure that we used to get that made it harder for this to occur.

The market hasn’t been good for small resource stocks for the past couple of years, which has meant that a lot more people try to trade any good news, thus limiting potential rises, and the bigger players are fully aware of this and use it to their advantage.

Hurricane opened well up at around the 34-35p level but then after a few minutes someone hit the orderbook hard, firing a burst of DMA ‘a’ trade sells at the buy side of the book and wiped out a fair few orders in a way that saw the bid drop fast.

At the same time they loaded up the sell side of the book with ‘ghost’ orders – anyone watching will have seen a 500k and two 250k orders. These were used to help push it down further and stall any DMA buying.

This caused some PIs to panic and grab what profit they had and also put others off of jumping in at that point.

Then miraculously, a short time later, we started to see some larger trades showing that had been bought via ‘o’ trade inside the spread (some were delayed and appeared to be sells, but weren’t) and at the same time the big orders blocking the sell side of the book were all removed around the same time having not been filled.

I’m pretty sure we saw the same party in action again a bit later in the day when the rise stalled, but then we saw a quick run to 48p on fairly low volume using similar tactics, this time bursts of trades fired at the ask to take it up quickly, and 100k orders supporting the bid.

I would expect further games here whilst we await for more news, and whilst I am very confident in the fundamentals and long term potential, I think that if you are looking to buy you will get a chance to do so closer to mid-30s than the current SP of 44p.

Overall it is still a very strong long term buy for me and I can’t think of another AIM share with a similar market cap that has as much potential.

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