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Drilling into Hurricane Energy: What should investors look out for?

Publication Date: 19 Sep 2018 - By David Dhannoo By David Dhannoo
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Equity Fundamental Equity UK Energy

AIM-listed oil explorer Hurricane energy (LSE:HUR) has had a positive year so far with its share price increasing to over 60%.

The North Sea oil specialist is less than a year away from establishing its well-talked about Lancaster Field which is located off the Shetland Islands.

The company has revealed that their estimated plan of producing 17,000 barrels per day (bpd) is on track and should provide extra cash flow.

In addition, investors have whetted their appetite from the fact that Hurricane has around 2.6 billion barrels of 2C resources (best estimate of contingent resources), in layman’s terms, oil resources that have been discovered, but are not in the process of being used for commercial production just yet.

Company founder Dr. Robert Trice has sustained ownership of their oil fields and has kept Hurricane afloat which has been very challenging when oil started to fall back in 2014. This hasn’t just been a hurdle for Hurricane, but for other small-cap players as well as blue-chips who operate in the industry.

Despite not being an easy journey, Hurricane has worked hard to maintain their Lancaster Field from the bottom-up.

The small cap oil explorer is on a forward P/E of around 20, with profits looking to increase in the 2020 financial year according to one analyst.

We’ll gain a further insight soon with the company’s Lancaster project development in a few month’s time, in addition, it’s worth noting that if the price of oil continues on its current trajectory and Hurricane’s oil production from Lancaster goes smoothly, it will be definitely be a major turning point from the past four years. 

Like any share there’s always an element of risk, it’s fair to say that Hurricane Energy carries a high level of volatility from the industry it operates in. That being said, the oil explorer seems to be in a good position with ownership of its assets and has the potential to offer a sound risk to reward ratio.

There’s still plenty of work to be done at Hurricane but one major sign is that it has majorly taken a turning point this year. This one is definitely for patient investors who will have to wait until the company starts to gain revenues, 2019 will be a vital year when the drilling phase commences.

More from David Dhanoo

Disclosure:

I have positions in the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

David Dhannoo

 

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