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Hurricane Energy (HUR)

nigelpm
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Re: Hurricane Energy (HUR)

#310984

Postby nigelpm » May 22nd, 2020, 12:29 pm

dealtn wrote:
nigelpm wrote:The business is still being valued at £132m which based on all the knowledge out there and today's dreadful RNS is probably £132m too much. There's a chance things turn out ok but I'd say those chances are almost nil.


No, the equity in the business is valued at that, not the business. The business is valued higher.


You what? The equity is the business.

dealtn
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Re: Hurricane Energy (HUR)

#310986

Postby dealtn » May 22nd, 2020, 12:42 pm

nigelpm wrote:
dealtn wrote:
nigelpm wrote:The business is still being valued at £132m which based on all the knowledge out there and today's dreadful RNS is probably £132m too much. There's a chance things turn out ok but I'd say those chances are almost nil.


No, the equity in the business is valued at that, not the business. The business is valued higher.


You what? The equity is the business.


No the equity is the equity. Market Cap alone isn't the value of the business. In this case there is also a convertible loan, but there can be many different claims on the business that together sum to it's Enterprise Value.

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Re: Hurricane Energy (HUR)

#310992

Postby nigelpm » May 22nd, 2020, 12:53 pm

I think there's some confusion around terms and suspect we are in agreement so probably worth setting them out.

The simple value of a business as assigned by the number of shares in issue x by the market price = the market capitalisation of the business.

Which is what the market is saying Hurricane is worth. A simple measure but also an important one since if you could get every shareholder to agree to sell at the prevailing market price that is what a third party would pay for the business excluding debt repayment and cash etc...

Enterprise value is a different metric and a fair one to use but it's not giving a direct value of the equity since as you say it's considering the debtand cash as well which may well be a useful one to determine what its value is if all the debt needed to be repaid.

So probably fair to use both but you would also need to include cash and other short term cash like assets in the calculation.

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Re: Hurricane Energy (HUR)

#310995

Postby dealtn » May 22nd, 2020, 12:58 pm

nigelpm wrote:I think there's some confusion around terms and suspect we are in agreement so probably worth setting them out.

The simple value of a business as assigned by the number of shares in issue x by the market price = the market capitalisation of the business.

Which is what the market is saying Hurricane is worth. A simple measure but also an important one since if you could get every shareholder to agree to sell at the prevailing market price that is what a third party would pay for the business excluding debt repayment and cash etc...

Enterprise value is a different metric and a fair one to use but it's not giving a direct value of the equity since as you say it's considering the debtand cash as well which may well be a useful one to determine what its value is if all the debt needed to be repaid.

So probably fair to use both but you would also need to include cash and other short term cash like assets in the calculation.


Call it confusion if you like. But if the "business" was worth £150mio, say, and that was the price an acquirer was able to buy all the net assets for, then the equity would be worthless (and the bondholders would take a haircut too).

There is some difference between the value of the business of £150mio (that which a buyer would be paying) and the value of the equity £0.

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Re: Hurricane Energy (HUR)

#310999

Postby nigelpm » May 22nd, 2020, 1:01 pm

That then depends on how you then value future cashflows etc...

Probably done this to death now though.

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Re: Hurricane Energy (HUR)

#311008

Postby dealtn » May 22nd, 2020, 1:16 pm

nigelpm wrote:That then depends on how you then value future cashflows etc...

Probably done this to death now though.


We both go in to a car dealership and buy identical cars at a price of £35k.

I pay cash. You pay £13.2k and negotiate a £21.8k loan.

The cars are both valued at £35k, which is what they are worth.

Now replace "car" with "business" and multiply the numbers by 10,000. You (appear) to be saying the "business" is worth £132mio, when to the "car salesman", and me it is worth £350mio (or £35k).

The financial structure, and the value of any of the components "attributable", are independent to the worth of the business.

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Re: Hurricane Energy (HUR)

#311053

Postby nigelpm » May 22nd, 2020, 2:24 pm

Yes - we are in agreement!

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Re: Hurricane Energy (HUR)

#311160

Postby MrContrarian » May 22nd, 2020, 6:14 pm

Some broker comment at https://ftalphaville.ft.com/2020/05/22/ ... -May-2020/ including:

"In this 12kboe/d scenario we do not believe Hurricane would be free cash flow positive at $35/bbl." - Barclays.

"We believe that management’s immediate obligations are to assess the impact of switching on the installed ESPs and, depending upon the results, recompleting 7Z so that it produces from a larger, more distant, portion of the wellbore. A recompletion might also enable Hurricane to address the well’s water-production issues.
Timing: Even working within the constraints of Covid-19, the ESPs could be commissioned relatively quickly; indeed, a well recompletion could probably be undertaken in H2/20. We believe that these options need to be exhausted before we revise our outlook for the business and investment case." - RBC

and

"We believe today’s announcement of suspending the production guidance will not be well received by the market." -Morgan Stanley. No manure Sherlock.

MrC

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Re: Hurricane Energy (HUR)

#311192

Postby Tinderboy » May 22nd, 2020, 7:20 pm

The HUR dream is all but lost, the last chance saloon is the board getting someone onboard who will negotiate from a tentative position to something positive, unfortunately there aren't many folk around who can convince folk to invest on a gamble.
A lot of people have lost a lot of cash investing in HUR, ordinary folk, people hoping to enter retirement in good place, its a risk of course as we all know.
Yet even today there are imbeciles on other lower echelon BB's still touting a falling knife, they should be ashamed of themselves.....

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Re: Hurricane Energy (HUR)

#311626

Postby FabianBjornseth » May 23rd, 2020, 10:03 pm

An interesting post from Alexander Stahel of Burggraben Holding:

https://twitter.com/BurggrabenH/status/1263965750861221889/

On @hurricomms - Always do your own homework. We did in Q4 2017 & gave it a pass after negative geological DD. Below, we share some findings back then for the first time in public (although we warned others on this channel about the risks)... Today, CEO Trice said the following on HUR’s fractured basement: “The results of the recent tests are “disappointing,” The degree of “interference” between the two wells requires further study before Hurricane can determine long-term production rates.


This is not a hater gloating as HUR struggles, but simply shows how other parties looked at the same data long before the EPS was in place, and drew very different conclusions. Conclusions that now appear justified, as the data to date suggest that the EPS may produce less than even Hurricane's low case estimate. A commissioned CPR may have less value as a second opinion than one would like.

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Re: Hurricane Energy (HUR)

#311655

Postby Dod101 » May 24th, 2020, 7:36 am

ReallyVeryFoolish wrote: For me, it's a salutory lesson in no matter how good the story is, if it's a small company reliant mostly on one man, drilling a few holes in the ground with someone else's money and it's traded on AIM - Then avoid at all costs. Run a mile.


Never in a million miles would I ever be anywhere near this sort of share but it has taken a while to get to that eternal truth.

Dod

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Re: Hurricane Energy (HUR)

#312343

Postby dspp » May 26th, 2020, 2:32 pm

Over the course of the last 12-months the HUR share price has reduced from 60p to 6p following bad drilling results in Lincoln/Warwick, Kerogen selling a load at 46p in July 2019, and water influx into Lancaster. My understanding is that the convertibles are now trading at 75%.

On each occasion I have looked at the results and taken the view that the post-news share price continued to represent a fair risk/reward balance. So that with the benefit of advance warning of the news I would have sold, but that following the news and the price reductions it remained appropriate to hold. On each occasion I have felt that the remaining value represented a reasonable bet for that part of my portfolio allocated for high risk.

These are very large geological structures, which clearly have some good quality mobile oil in them. Depending on exactly how much there is, and what fraction of it could be produced, then the potential reserves upside is very large indeed. Provided of course it is accessed in a reasonable timescale. That is why the success case reward justifies the risk that is inherent in fields of this nature.

I personally have had technical concerns that differed from the company’s view, most especially with the water, but also about other aspects such as distribution of fracture volumes. These greatly affect the probability and size of the success case vs the failure case. Nonetheless I also appreciate that the company has full visibility of detailed information, and so have always given them the benefit of the doubt. That is part of why I have not traded out, as I felt that the company is being very clear and so must have very firm evidence. Nevertheless I have taken the time over the years to set out my developing concerns so that I understand the risk that I am taking, and en passant anyone reading my posts would have seen that.

I ordinarily prefer to think the best of people. So although I have long also had my own concerns about the way in which the company releases information I have not previously taken that aspect into account when forming a risk/reward view. Some typical information patterns have worried me. The first is where they have repeatedly been silent about the contents of information sets which are relevant and material, and/or competing hypotheses. The second is where they have released information only to follow up very soon after with contradictory information. Examples of the former are that they still have not put out the temperature signatures in the Lancaster wells, the Lancaster wells’ horizontal profiles & related geology, or the bond default terms, or the analyses that the company suggests would refute coning upwards through faults from a compartment base aquifer OWC, or the updated Lancaster well PIs. Examples of the latter are the 7z flow instability information that was released last Friday, only days after the company sanctioned release of the post-CMD company-sponsored Edison broker report. A third pattern is their reluctance to put company people into an environment where they can be tested by proper questioning, instead they prefer to control both the timing and the content of information release, and sometimes the audience is pretty tame and market release is not uniform (in this day and age, not releasing live Q&A is unacceptable).

As I say I have not taken these informational concerns into account until now. If I were to have done so, then that would have been me saying to myself that I do not trust the HUR senior management team. And if I do not trust them, then why be invested at all. Yet I also have known that explorationists, especially ones who are not afraid to challenge orthodoxy, can become target-fixated and not take a balanced view of the merits of alternative hypotheses and risks. It has been a concern of mine that this is going on inside HUR, and that effective peer review and governance is lacking at the top. Yes, they may now superficially tick the LSE main market governance boxes, but they certainly don’t demonstrate it when it comes to the core matter : is the reservoir hypothesis correct or incorrect and are we dealing fairly with all our shareholders regarding the evolving informational story ? It is being very satisfactorily demonstrated at the more mundane operational level, but not in some other key respects.

Over the weekend I came to the view that I could no longer trust the company as much as I need to. I have now seen too many RNS’s that have clearly had the red pen wielded to chop out the more unwelcome bits. I have now seen too many presentations that are missing key slides, or reports missing key pages or consideration of alternative hypotheses. And quite clearly the CFO felt the same way, and was no longer prepared to be the fall boy, hence leaving 27 Feb 2020 when the share price was 14p. He, like most of us, could see that finding funds to repay the convertible bonds was going to be a very difficult thing to do. Perhaps he had seen the red pen take too much of a 90/10 rose-tinted view, and too little of a 50/50 view, for the information to be trusted and he no longer wanted to be the fallboy.

Therefore I sold out of HUR this morning at 7p. For me it is a loss, but it was my high risk pot, and it largely arose as a result of making good calls on some other oil shares a few years ago, and is eased by another high risk call going well. I had been on the verge of selling last week at 12p but reviewed the Edison report which I felt was somewhat optimistic, but within a believable range, and so concluded that the risk/reward balance was still acceptable. I rather suspect Edison now feel somewhat burned – but in their case the fee will ease things – indeed there are some caveats in the Edison report (and other broker reports) that indicate they are protecting themselves. For me I will watch with interest but from the sidelines for the time being – it is a fascinating play technically, and there will be lots of interesting technical stuff. I wish everybody who is a long term holder and who is going to remain so the best of luck.

My personal learning points are 1) although I don’t like trading, sometimes I need to do it, so best get better at it; 2) I must factor management quality in more than I have done in the past, especially if there are cultural and/or messianic worries; 3) never be afraid to take profits. Given that my other big high risk share is TSLA that is quite a tough challenge, however 4) I’m up 3x over there, and 5) it is a sufficiently large and distributed business that it cannot control the message so as to manage away or suppress key information.

Good luck all, regards, dspp

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Re: Hurricane Energy (HUR)

#312723

Postby tournesol » May 27th, 2020, 5:49 pm

DSPP

Exceptionally well written and fair minded exposition of your thought process. Thank you.

I sold out back in Feb. I had concerns about the wider market, the whole of the E&P sector and the company itself.

I felt that the impending Covid epidemic would cause a serious fall in the wider market and that the collapse in the oil price would badly damage the whole E&P sector.

Thinking more specifically about Hur, my primary concern was that the general fractured basement model was no longer unambiguously supported by the empirical data. The Fractures in the zone penetrated by the EPS had been as expected - substantial, clean and unimpeded and full of dry* oil. The fractures in Warwick were very different and yielded no commercial discoveries. Lincoln was better than Warwick, but significantly worse than Lancaster. This means, as I see it, that the core hypothesis on which Hurricane's business model depends, is no longer reliable. It could be that the 95% of Lancaster which is outside the EPS zone, is similar to the EPS, but it could easily be like Warwick, or less catastrophically, like Lincoln. This does not mean that eventual FFD is non-viable. It does however mean that significant exploration will be required to prove up the resource. And until that has been done, the status of the area outside the EPS seems to me to be unkown and unknowable.

Based on the above, I found it easy to decide to sell my entire holding in Hurricane. I'd bought it in 15 tranches at prices between 20 something p and 60p. I sold at an average (I think) of 19p so took a substantial loss.

Fortunately the thought process set out above, led me to sell my entire portfolio and I went 100% into cash. I have not regretted that. It has avoided a loss of about similar magnitude to the realised loss on Hur. When I'm feeling positive I play an intellectual/emotional game with myself, in which I offset the actual loss on Hur against the loss I avoided and tell myself I've come out level. Nonsense of course, but strangely comforting.

I still have a soft spot for Trice and for Hurricane. I would consider re-investing at some point when things have become clearer and the balance of risk and reward has shifted. Not likely to be anytime soon though.

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Re: Hurricane Energy (HUR)

#312742

Postby Nimrod103 » May 27th, 2020, 6:55 pm

tournesol wrote:I still have a soft spot for Trice and for Hurricane. I would consider re-investing at some point when things have become clearer and the balance of risk and reward has shifted. Not likely to be anytime soon though.


Put not your trust in princes (nor in "experts" either). You might try sending a bill for your losses to RPS, who wrote the CPR, or some of the big name directors who have been promoting this dud, but it probably wouldn't do you any good.

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Re: Hurricane Energy (HUR)

#312789

Postby Dod101 » May 27th, 2020, 9:11 pm

I have great respect for you guys who seem to know something about the oil exploration business. I know nothing of it but from dspp's latest post, it seems that he just paid a fee for a good lesson in investing bearing in mind his learning points as enumerated.

His first, learn to trade, seems the least important but his second point is absolutely fundamental, management quality. No matter how good a company, poor management can usually wreck it so good management whom you can trust is essential, I would say above all else. Comes back again to my watchword, culture and a good culture at that, a culture you can trust, no cutting corners, honesty at all times and so on.
His third point, never be afraid to take profits. Well yes, but sometimes better to let your profits run. It is usually after the event that you know whether it was a good thing or not to take your profits.

Dod

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Re: Hurricane Energy (HUR)

#313235

Postby pcpaul » May 29th, 2020, 8:39 am

DSPP, thank you for your detailed and honestly laid out thought process through which you have gone during the past months-years. I have followed your posts with interest and have learnt a lot throughout this time. I have to say, without in any way wishing to appear sycophantic, that you seem to be the most learned and objectively analytic poster that I have encountered on any of the bulletin boards in relation to HUR. You once took time to respond ,in great detail, to a query of mine that I very much appreciated. I was, I have to say, rather surprised that you decided to maintain your holding despite your misgivings but I suppose if your general portfolio was supportive it was a risk you were willing to take and I sincerely hope that it was not a severe loss. I however , in great part due to your posts , decided to sell up some time ago to avoid drastic losses for which I will be eternally grateful to you, while you were being criticised and derided by others on other boards.
Despite being out of HUR for some months I am still interested in the story and might even be willing to invest again if the picture becomes clearer and more promising and to this end I would like to ask you, if I may be so bold, if you would be willing, time allowing, to continue your excellent analysis and share your thoughts when any significant news arises, RNS, CPR,CMD etc. as I am certain that not only I would greatly appreciate it.
Good luck

dspp
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Re: Hurricane Energy (HUR)

#313388

Postby dspp » May 29th, 2020, 3:24 pm

pcpaul wrote:DSPP, thank you for your detailed and honestly laid out thought process through which you have gone during the past months-years. I have followed your posts with interest and have learnt a lot throughout this time. I have to say, without in any way wishing to appear sycophantic, that you seem to be the most learned and objectively analytic poster that I have encountered on any of the bulletin boards in relation to HUR. You once took time to respond ,in great detail, to a query of mine that I very much appreciated. I was, I have to say, rather surprised that you decided to maintain your holding despite your misgivings but I suppose if your general portfolio was supportive it was a risk you were willing to take and I sincerely hope that it was not a severe loss. I however , in great part due to your posts , decided to sell up some time ago to avoid drastic losses for which I will be eternally grateful to you, while you were being criticised and derided by others on other boards.
Despite being out of HUR for some months I am still interested in the story and might even be willing to invest again if the picture becomes clearer and more promising and to this end I would like to ask you, if I may be so bold, if you would be willing, time allowing, to continue your excellent analysis and share your thoughts when any significant news arises, RNS, CPR,CMD etc. as I am certain that not only I would greatly appreciate it.
Good luck


pcp,

Sycophancy is great. Unfortunately it won't replace my own losses which arose from a conscious assumption of the risk. Never mind, I am still healthy and still smiling. Glad it helped you and hopefully others, what goes around comes around.

Of course I am happy to contribute, and like you might reinvest if I felt it appropriate. Just post a question here in the normal way and I or other people will offer our opinions in the normal way.

regards, dspp

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Re: Hurricane Energy (HUR)

#313407

Postby pcpaul » May 29th, 2020, 4:45 pm

dspp,

thanks, glad to hear that you are taking it all philosophically. Hope to hear from you in the future and, for the good of all investors who are still in and for whom I have a great deal of sympathy, let´s hope that there is some sort of recovery. It was, and may still be, an exciting proposition, albeit unfortunately problem ridden and much more complicated than anticipated both by HUR themselves and by most investors on the back of HUR confidence. I ,like you, feel that the lack of self-criticism and the absence of an open and informed discussion on the various problems encountered, most notably the water issue, kept investors in the dark. I remember vividly Dr T´s withering response and put down to an analyst who brought up this very issue in the penultimate CMD and the subsequent denigration of the analyst by virtually everyone on the BB´s. That was perhaps the starting point of an absence of honest debate and things only got worse thereafter.
Anyway we live and learn and live to fight another day.
Regards

88V8
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Re: Hurricane Energy (HUR)

#313442

Postby 88V8 » May 29th, 2020, 6:49 pm

dspp wrote:Just post a question here in the normal way and I or other people will offer our opinions in the normal way.

But few people back up their opinions with so much detail, and the time taken is much appreciated.

V8 (no position)

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Re: Hurricane Energy (HUR)

#314038

Postby nigelpm » May 31st, 2020, 8:46 pm

dspp wrote: Given that my other big high risk share is TSLA that is quite a tough challenge, however 4) I’m up 3x over there, and 5) it is a sufficiently large and distributed business that it cannot control the message so as to manage away or suppress key information.

Good luck all, regards, dspp


Wow - I wish you well with that venture.

My own view on TSLA is unprintable - essentially it's a fraud IMHO.


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