Hurricane Energy

A trading and operational update this morning from Hurricane which will hopefully allay the unnecessary fears in the market from short-termists who don’t understand the nature of the Lancaster EPS  and the way that the company needs to treat the fractured basement in which it is operating.

Shareholders will be delighted to know that full year results for the year will be out on the 19th March followed by a Capital Markets Day. In addition, the company now plans to provide quarterly production reports going forward in the first month of each calendar quarter.

Now that’s out of the way we can look at the statement in detail, where HUR report ‘continued strong performance from the Lancaster EPS with well productivity above pre-start up expectations with the facility availability running above 90%. In future Lancaster EPS will report production quarterly so in line with this, Q3 2019 was 15,400 b/d significantly above guidance of 9,000 b/d on good facilities availability. Q4 was 11,800 b/d also exceeding updated guidance of 11,000 b/d ‘despite ongoing commissioning activities and commencement of individual well tests’ as explained in the last announcement.

Adding that all up gives a highly creditable 3.0 million barrels of oil averaging 12,900 b/d since introduction of hydrocarbons on 11 May 2019. So, oil sales of 2.9m barrels of oil across seven cargos. That gives for year ended December 2019 revenue of $170m unrestricted cash of $157m and a year end net payables balance of 25m.

And there’s more, Hurricane has updated for 2020 as well announcing an eighth lifting on 22nd January and that the individual well test on 205/21a-6 (the 6 well);is due to complete before month end following which two well production is expected to resume at 20,000 b/d, subject to facilities availability. The company even suggest that an additional Lancaster production well is being considered and even greater detail, if that can be imagined is in the RNS.

With this report, the results and the CMD upcoming it will become obvious, well before the first anniversary of first oil, that the company’s guidance since  the inception of the Lancaster EPS has been consistent, that it would take 6-12 months of stable production following first oil to draw meaningful conclusions from the data from production and the tests and analysis being undertaken.

As a result of all this Dr Robert Trice remains confident that Hurricane ‘remains focused on delivering operational progress, on budget and on schedule and, in so doing delivering returns to shareholders.

Under such circumstances it must be particularly galling to not only witness the weakness in the share price but then to have to explain that there are no operational or commercial reasons for such decline. Hurricane remains well placed to deliver  the Lancaster project  as  well as a number of others in line with or above leading industry standards. I remain convinced of the substantial upside for Hurricane and advise shareholders to remain equally confident, this is no short term game, grow a pair for the long term.