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Hurricane Energy (HUR)

Business description

Hurricane Energy is an E&P focused on UKCS fractured basement exploration and development. It owns 100% of its licences, including the 523mmbbl (RPS 2P reserves plus 2C resources) Lancaster oil discovery, West of Shetland.

Stock data

Market cap.£1133.6m
Last close57.85p
High / Low (52 weeks)57.9p / 24.0p
Stock market listingLN
Forecast net debt (US$m)58804
Forecast gearing ratio (%)9
TeamResources - Oil & Gas
SectorOil & Gas

Price performance

%1m3m12m
Actual22.126.891.2
Relative *23.227.285.5

* % Relative to local index

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Company news

Y/E Dec Revenue (US$m) EBITDA (US$m) PBT (US$m) EPS (c) P/E (x) P/CF (x)
2016A 0.0 (8.8) (6.4) 0.1 744.5 N/A
2017A 0.0 (14.6) (7.0) (0.4) N/A N/A
2018E 0.0 (15.0) (25.8) (1.3) N/A N/A
2019E 115.0 14.8 (28.0) (1.4) N/A 3.3

Last updated on 23/07/2018

Investment summary

Spirit Energy has farmed-in to 50% of Hurricane’s Lincoln and Warwick licences covering the Greater Warwick Area (GWA). The farm-in is intended to accelerate the de-risking and monetisation of GWA, adding a new leg to the Hurricane business model that will run in parallel with the development of the Greater Lancaster Area (GLA). Under the transaction, Hurricane will retain a 50% working interest in GWA licences in return for a net carry of $137.2m through a two-phase initial work programme and $150–250m contingent carry on net GWA full field development (FFD) expense. Based on company-estimated GWA gross 2P reserves of 500mmbbls expected to be unlocked by the FFD, the combined carry value is $1.2/boe to $1.6/boe. The transaction structure differs materially from our assumed 60% working interest dilution through farm-out for Lincoln (250mmbbl development case) and a post-carry NPV/bbl of $5.0/boe ($2.5/boe risked) in our last published valuation of 81p/share. We expect to revise our risked Lincoln valuation ($241m) to reflect the details of the transaction, which include accelerated production via tie-back to Lancaster, not currently reflected in our valuation. We believe today’s deal materially accelerates the de-risking of Hurricane’s Rona Ridge asset base both in terms of GWA resource but also the ability to focus Lancaster EPS cash-flows on fast-track appraisal of the GLA resource base.

Last updated on 03/09/2018

Industry outlook

Lancaster EPS development benefits from the recent recovery in Brent crude and is forecast to generate a point-forward IRR of c 40% based on our commodity price assumptions.

Last updated on 27/07/2018

Key management

Dr Robert Trice, CEO
Alistair Stobie, CFO

Company address

The Wharf Abbey Mill Business Park
Lower Eashing
Godalming
Surrey
GU7 2QN
United Kingdom
+44 1483 862 820
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