Edison Investment Research

Price: 17.75p
Listing: AIM
Sector: Oil & Gas
Market cap: £112m
Analysts: Kim Fustier, Elaine Reynolds, Ian McLelland

Hurricane Energy is an E&P company focused on fractured basement in the UK, where it has de-risked its 207mmboe Lancaster field with a successful horizontal appraisal well (flow rates of c 10mb/d constrained by surface equipment). Management is now envisaging an Early Production System to answer remaining uncertainties and reduce upfront capital requirements. The company is currently seeking a farm-out to fund an EPS, targeting first oil in late 2017, with full field production five years later. While the farm-out market is currently subdued, Lancaster may attract interested parties due to its high well deliverability and relatively simple development scheme. Furthermore, success at Lancaster could lead to a wider de-risking of basement plays – opening up a much larger resource base. In these circumstances, our RENAV of 45p/share could have considerable upside, although we note that the terms of the farm-down and performance of any EPS are critical.

Hurricane is an E&P focused on UKCS fractured basement exploration. It owns 100% in three licences, including the 207mmboe Lancaster discovery where it drilled an appraised well in 2014. It is currently engaged in a farm-out process to fund an Early Production System (EPS).

Year endEBITDA (£m)PBT (£m)Operating cash flow (£m)Capex (£m)Net (debt)/cash (£m)

Full report available on the Edison Investment Research website.