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Hurricane Energy has done well to “buy time” with new equity raise - broker

“We view this as a materially positive development as it buys Hurricane time to consider options to fund the Lancaster Early Production System."
Offshore oil operations, North Sea
Lancaster is on track to start producing oil in around two years

Hurricane Energy Plc (LON:HUR) has done well to ‘buy itself time and options’, so says WH Ireland analyst Brendan Long.

After hours on Wednesday the West of Shetland focussed explorer reported a previously announced share warrant funding had completing, delivering just shy of £13mln of new capital at a time when it is advancing project financing talks.

Hurricane had told investors that the warrant issue (and subsequent exercise) would give it financial flexibility at a time when it was also committing existing cash resources to long-lead items necessary to maintain the current schedule for the initial Lancaster development – which targets ‘first oil’ in the early 2019.

A portion of the new shares (about 5.5mln) were sold into the market, though the majority (19.5mln) were placed with institutional investors.

WH Ireland analyst Brendan Long, in a note today, highlights that “clearing the overhang” of new shares should be seen as positive for ‘trading dynamics’, while overall he is upbeat about the company’s position.

“We view this as a materially positive development as it buys Hurricane time to consider options to fund the Lancaster Early Production System.

“We believe that the farm-out process will have started in earnest only since the most recent CPR was published.

“We also believe that it is increasingly likely that Lancaster and Halifax will be treated as a single field.

“Possibly the regulator of the UK oil & gas industry, the OGA, will take the view that the two fields should be appraised and developed as a single “Rona Ridge” development. If that is the case, it is possible that Hurricane’s farmout efforts would benefit from a CPR or resource assessment for the Halifax discovery, which is likely over the course of 2017.

“Hurricane has done well to buy time which will provide it with options.”

WH Ireland repeated a ‘buy’ recommendation for Hurricane, though its target price moves to 120p from 127p, to account for the dilution created by the new equity issue.

“Our recommendation remains BUY and in the light of the trading dynamics and strengthening crude oil prices the timing looks particularly attractive.

“We do not anticipate a material equity fundraise anytime soon from HUR, the whole point of the warrants was to defer funding requirements.” 

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