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Hurricane Energy (HUR)

JonnyT
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Re: Hurricane Energy (HUR)

#17809

Postby JonnyT » December 23rd, 2016, 8:31 pm

Great post, but I have two questions
1) What size do you think Lincoln is given its materially larger than 250m barrels?
2) Why do you think it's unlikely Lancaster and Halifax are one mega structure?

PeterGray
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Re: Hurricane Energy (HUR)

#17869

Postby PeterGray » December 24th, 2016, 9:54 am

Won't speak for dspp but

2) Why do you think it's unlikely Lancaster and Halifax are one mega structure?


I'd say assuming not was a good default stance. As far as I'm aware there is little hard evidence to support it, other than some seismic that might be encouraging. It may prove to be the case, but the distances are big and the probabilities must be against it. Not advice that would go down well on the ADVFN board I'd guess, but probably safer from the point of view of making an investment.

Peter

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Re: Hurricane Energy (HUR)

#17873

Postby dspp » December 24th, 2016, 10:03 am

JonnyT wrote:Great post, but I have two questions
1) What size do you think Lincoln is given its materially larger than 250m barrels?
2) Why do you think it's unlikely Lancaster and Halifax are one mega structure?


Absolutely good questions:

1. In the Hurricane investor presentation of 4Q 2016 they give 2C resources of 250mb for Lincoln on slide 13 albeit heavily caveated. Understandably they are coy with their maps and sections and only release partial well depth data so I have been unable to come up with a better number. If you know any of the key numbers (e.g. top structure depth at crest, top structure where penetrated, areas, volumetrics) then one can form an opinion though it is much less sound than an opinion based on full facts. So it might be more, but ....

2. Again good top structure maps are the real issue as well as knowledge about what 'ODT' really means. They note that they have not detected the presence of sealing faults, which is likely to be based on seismic interpretation given the fairly short length of the well tests, and this is good. The best top structure picture I have seen is the one at https://www.hurricaneenergy.com/Operati ... tProspect/ as the Trice SPE paper and the CPR paper both do not give a good look north into this area. Looking at that picture the key missing information is the spacing of the contour lines so as to scale & locate the image in 3D space. They show a minimum ODT at 1620 tvdss on the SE of the Lancaster discovery. Following that northwards they show that depth in slide 13 of the 4Q 2016 presentation. This is a potential column of 600m so I think it is 500m between the dark contours, and 50m between the light contours. So it is possible that there is oil all the way along. Against that if you look at the jellyfish model (e.g. https://www.hurricaneenergy.com/Experti ... reservoir/) and think that the ODT might be a lucky intersection of a wellbore with a jellyfish 'stinger' fault holding oil you can see that one might have a misleading understanding of the 'real' ODT. That's why the knowledge of the structural close depth is more relevant as the structural close gives the greatest area for the greatest volume, and oil trapped vertically lower in the 'stingers' is extra, but it is only present vertically and will not extend horizontally. So .... I too hope for a mega-structure that is oil full, but my investment was based on a structure at Halifax (which we know) but not filled with oil (as it may not have an adequate seal etc). So any developable oil is an upside as far as I am concerned. However in terms of maximising shareholder value they are doing absolutely the right thing by drilling it now (but not before now) - in fact one of the things that has struck me as I have worked through their info is how data-driven and dispassionate they are in their moves, and that is something I applaud and which has caused me to put a few in my portfolio.

3. So they will have three things intersecting towards the end of Q1 2017: Halifax well results, the next level of detail on the EPS/FDP, and finance/farmin discussions. Hence my taking a position now. If the price drifts down between now and then I might take a few more, we will see - personally I prefer the oil price to stay under $50/bbl between now and end March.

regards, dspp

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Re: Hurricane Energy (HUR)

#17977

Postby JonnyT » December 25th, 2016, 8:20 am

My limited understanding is that Lancaster is filled below structural closure thanks to a sealing fault. HUR are suggesting that there is a similar fault at Halifax but they are not sure it's a sealing fault.

My take is if it is and oil has migrated, which is very probable then effectively it's one large mega field along the Rona ridge. If it's not then Halifax could be a separate accumulation filled to structural closure.

I guess either way any oil at Halifax is a bonus, though I think Dr Trice really thinks it's one large accumulation and has wanted the acreage for years.

HUR should be interesting the majors now, if it's one big mega field I don't think HUR will be around in 2018 as we would likely be talking 2 billion barrels plus some.

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Re: Hurricane Energy (HUR)

#17980

Postby Carcosa » December 25th, 2016, 9:06 am

dspp wrote:...I think it is 500m between the dark contours, and 50m between the light contours.


If I am understanding you correctly then, looking at the same image as you highlighted, it does say "Contour Increment 100m" so that would make the dark contours 1000m. Or have I misinterpreted what you were referring to?

Carcosa

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Re: Hurricane Energy (HUR)

#17994

Postby dspp » December 25th, 2016, 11:55 am

Carcosa - Well spotted. 100m per contour it is although makes it very difficult to marry up slide 15 with that top structure map https://www.hurricaneenergy.com/assets/ ... 1479332623 . Anyway proves this engineer can't read :)

JT - For a continuous accumulation to exist there would need to be a) seal across the top of the structure that is continuous for 30km and many millions of years to enable oil to firstly migrate and b) a closing seal to the north of Halifax of some sort that has 600m of vertical effectiveness (see slide 15 of the 4Q 2016 corporate presentation) and down the flanks all the way back to enable that oil to be retained. More complex interpretations are possible so it is not an all or nothing situation :) Note also my concern about the shallower depth of Halifax having possible implications for oil quality.

It would be great news if this were to be the case, but to my mind anything is a bonus at present. Mind you there is still quite a big difference between the 2C resources on the book now which mkt cap gives £1/bbl to, and the 1P reserves that would merit an upwards revaluation. Both levers are worth pulling - valuation and volume.

regards, dspp

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Re: Hurricane Energy (HUR)

#22786

Postby JonnyT » January 13th, 2017, 10:37 am

Interesting to see that some Industry workers are thinking Lincoln could be over 700m barrels recoverable over on the LSE website based on oil down to and the CPR figures.

My own view is that I'd think 400m is likely in the bag, with potential for more.

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Re: Hurricane Energy (HUR)

#22805

Postby dspp » January 13th, 2017, 11:08 am

Yes JT there are two posters there who have been looking at the maps/data and coming up with comparable numbers of about 700m bbls for Lincoln. This compares with the 250m bbls I popped in the overview table from HUR's post-2016 info. The error bars were in the right direction for me when I looked at it, hence my putting some cash on the table from my little portfolio, however I am unsure there is enough data to take a more positive view on what might be recoverable if developed.

For info for anyone reading go to http://www.lse.co.uk/ShareChat.asp?page ... Ticker=HUR and look at the comments of today and yesterday (13/1/17 and 12/1/17).

regards, dspp

(edit: Scanning back they've also been talking about HUR doing a deal with PMO to tie Strathmore back into PMO's troubled Solan platform. Again I do not know if Solan has topsides constraints that would make this unattractive at this stage, but clearly it is a possibility. Again in my summary I commented on various issues with Strathmore/Solan reservoirs.)

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Re: Hurricane Energy (HUR)

#22817

Postby dspp » January 13th, 2017, 11:40 am

And to put in context it is also worth reading back through all of WWN's and Riffle's exchanges on LSE-chat where (e.g. 10/1/17) they postulate 5bn bbl STOIIP or 1.7bn recoverable. I appreciate JT has raised this possibility before here on TLF. In my opinion truth is in the drillbit.

By comparison Brent liquids STOIIP was 3.8bn with ultimate recovery of 2.0bn liquids (see http://mem.lyellcollection.org/content/ ... 3.abstract). Note GOR for Brent is much higher than for Lincoln etc.

I do not know timing for the likely CPR, or the various finance/investment/etc discussions, except that they are indicating H1 2017 for FID on the EPS.

regards, dspp

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Re: Hurricane Energy (HUR)

#22946

Postby PeterGray » January 13th, 2017, 6:27 pm

except that they are indicating H1 2017 for FID on the EPS


Hopefully. There's no question there's a lot of oil down there. However, I'm not very interested at present in long discussions, and guesses, of the sort happening on a lot of bbs about just how much. They aren't going to have much impact on the share price until they can demonstrate economic production, and significant recovery levels. Given that this is basement, serious questions remain about those, and the EPS is the only way to start answering those. And that will still only be a start in terms of how the industry values HUR's assets.

Peter

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Re: Hurricane Energy (HUR)

#22982

Postby Carcosa » January 14th, 2017, 4:47 am

PeterGray wrote:They aren't going to have much impact on the share price until they can demonstrate economic production, and significant recovery levels


Have to concur with Peter on this. Hurricane themselves have long acknowledged that substantial proof of oil production is the key to success. Fractured basement plays of this sort remain unusual in the industry and before any serious investment is made to pursue commercial recovery, the level of belief in success has to be an order of magnitude greater than is currently the case. That may take several years. So whilst oil column depths and overall field size is clearly relevant, if the recovery of oil percent is low (which it almost certainly will be) then it needs to be a huge oilfield(s).

As regards share price activity I think it is reasonable to see large scale selling of shares from the likes of Crystal Amber Fund (CRS) for a long time to come which will put the dampers on any non-driven news share price increase. Partly because of that I have been heavily exposed to CRS because their share price, so far, lags any significant news driven share price action regarding Hurricane; allowing you to buy and (presumably) sell hours or days after a shift in Hurricane's share price. There is also the upside that the millions of 20p warrants they have are on their balance sheet are at a valuation of only 6p. I therefore believe CRS provides better exposure for a slightly less risk averse Hurricane investor.

A recent review from CRS says:

During the Quarter, Hurricane released several positive drilling results and raised GBP70 million to fund drilling an exploration well at Lincoln, to acquire subsea equipment and to fund engineering studies for the Early Production System phase of the Lancaster development.

Crystal Amber was pleased to participate in the fundraising, investing a further GBP10.7 million in line with the Fund's stake in the company at the time of 15.3%.

In November 2016, Hurricane was awarded a new licence (Halifax) in its West of Shetland acreage, further expanding the footprint beyond its Lancaster oil asset. Further exploration of this prospect has the potential to not only increase Hurricane's resource base, but also to help determine how far the Lancaster field extends.

On 19 December 2016, Hurricane announced very positive interim results at its Lincoln exploration well, adding to its increasingly substantial resource base. Results demonstrated a 660m deep oil column which exceeded the company's expectations and led to the company stating that the pre-drill estimate of 250 million barrels may be conservative. Hurricane's drill rig will now be moved on to drill the Halifax prospect.

Recent drilling results reinforce the Fund's view that Hurricane has a significant resource base, potentially in excess of one billion barrels of
oil. We expect to see further positive news flow over the coming months, which should serve to de-risk the asset base further and may attract potential partners.


Carcosa

dspp
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Re: Hurricane Energy (HUR)

#23305

Postby dspp » January 15th, 2017, 5:40 pm

Carcosa & PeterGray,
Good points which I am mindful of, esp re overhang of CA warrants at 20p, and produceability/URF. Another one is that having the institutions heavily on board means that it is unlikely the majors can sweat HUR into cash-starvation. Also if the overall resources/reserves come in the way they appear to be going then anyone who wants to be a major player in UKCS needs to be seen to try and get onboard, even if some paddle harder than others. For sure UKGov will not want HUR to go it alone for full-field, and HUR themselves as said they don't see themselves as full field operators (though I note they've left open the option to be EPS operators). Anyway spud RNS likely tomorrow. Various sensible 3-6m timetables posted on ii and LSE.
regards, dspp

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Re: Hurricane Energy (HUR)

#23670

Postby JonnyT » January 17th, 2017, 8:56 am

If Lancaster and Halifax are proven to be a single accumulation then I think it's unlikely that HUR will exist by the end of the Summer. Even with the doubts around UFR such an accumulation would wet the appetite of several majors operating in the North Sea. I'd think 200p ought to do it.

If Halifax fails I'd still think with the Lincoln success there will likely be a suitor prior to the EPS commencing.

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Re: Hurricane Energy (HUR)

#23704

Postby thebuffoon » January 17th, 2017, 10:50 am

JohnnyT,

I note that your opinion is that Halifax isn't connected to Lancaster.

If it isn't, but we find 250m bbls plus, what do you think HUR is worth?

Buffy

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Re: Hurricane Energy (HUR)

#23718

Postby JonnyT » January 17th, 2017, 11:39 am

Buffy,

I haven't said it's my opinion that Halifax and Lancaster aren't connected, what I have said is the mathematical probability is that they aren't given the large area over which a sealing fault is required to exist.

That said I don't think Halifax will be a 250m barrel reservoir if it's only filled to structural closure.

Also what if Halifax has no closure? What if its Gas/Condensate which is a possibility?

Personally I'm staying invested in HUR through the Halifax drill, so guess what my personal view is?

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Re: Hurricane Energy (HUR)

#24171

Postby JonnyT » January 18th, 2017, 4:06 pm

I'm not sure if everyone listened to the podcast by AS yesterday?

The most interesting point is that given the surprising ODT result at Lincoln it opens the possibility that Lincoln is connected to Warwick on the other flank forming one mega structure comparable to a Lancaster/Halifax.

HUR are going to provide further details around this sometime in Q1.

So essentially Lincoln and Warwick could be 2 billion barrels plus recoverable!!! Now that has wet my appetite.

I really don't see HUR existing for 2018, they must be a prime bid target post Halifax.

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Re: Hurricane Energy (HUR)

#24987

Postby Rhomboid1 » January 21st, 2017, 1:52 pm

Much as I hate the format of these podcasts I did listen and sat up suddenly at the same point as you did. I can't really see much point in trying to interpolate what the likely resource is across HUR licences because as far as I can see the value case is compelling for remaining fully invested ..in fact I'm delighted to just ride this one through to the monetisation event that all stakeholders are eyeing. I'd be equally happy if they were to produce the assets and gain full value that way for shareholders.

Cheers

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Re: Hurricane Energy (HUR)

#26790

Postby dspp » January 27th, 2017, 6:55 pm

Carcosa wrote:....I would suggest that if anyone wants to get 'in the action' with Hurricane and feel they may have missed the boat ( ;) ) then an investment in Crystal Amber Fund, which is likely to lag in terms of share price, is the way to go.


Carcosa, (or anyone)
Clearly CA have been selling steadily for a while now. From what I have read that is because, as a fund, they must comply by a rule that says they must not be overexposed to any one stock (?? 30% of their own). So whenever HUR rises too far they are a forced seller. At the moment they are at 15% of HUR, and I guess (not checked) 30% of their own.

You will probably know more about this than me so can I ask a few questions:
Q1. Do we know anything about the terms of the shareholder agreement that surely exists for Kerogen, CA, ?? Hudleston.
Q2. Or is there no SA and were all these shares bought completely on the open market ?
Q3. Is there a timeframe which CA need to observe during which they can go over the limit ?
Q4. And how does this affect their options ?

regards, dspp

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Re: Hurricane Energy (HUR)

#26853

Postby Carcosa » January 28th, 2017, 4:10 am

dspp,

The Crystal Amber Fund Articles of Association do not impose any hard limit on any individual share dominating their overall shareholding. It does say that they will try to limit any such holding exposing them to excessive risk. Currently CA hold just less than 13% (156,149,010 Hurricane shares) of Hurricane representing ~35% of their fund.

Thus they are not a 'forced' seller as such and their is no time limit. However, it is clearly prudent they dispose of as many Hurricane shares as they can to fund new share/company purchases for the fund bearing in mind they also have Warrants to subscribe for up to 23,333,333 shares in Hurricane. In many ways Hurricane does not fit in with CA's overall mandate as an activist investor.

The warrants have an exercise price of 20p and were last valued at 6p using the Black-Scholes Model. I don't know the expiry date of these warrants but perhaps 3-5 years?? CA may use them strategically to bolster their NAV if they have a particularly poor year. Supposition on my part.

As regards Kerogen and Hudleston, I have no idea...

Carcosa

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Re: Hurricane Energy (HUR)

#26871

Postby slartybartfast » January 28th, 2017, 9:49 am

The warrants are for 3 years so expire in May 2019.
I could work out the current value using Black Scholes ( if I had any idea as to the volatility level!) but it seems irrelevant as they are unlikely to be tradeable so the intrinsic value of 47p-20p = 27p would be the value I would attribute to them.

Slartybartfast


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