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Another broker puts Hurricane Energy ‘upside’ in the spotlight

WH Ireland sees some 63% upside to Hurricane's current price.
oil and gas operations
Hurricane released financial results on Tuesday

WH Ireland is the latest broker to write up Hurricane Energy PLC’s (LON:HUR) potential share price growth.

The broker has a ‘buy’ recommendation with a 61.8p target that suggests around 63% upside to the current price.

It follows Hurricane’s financial results on Tuesday, and Wednesday’s note from Cantor Fitzgerald which set an 80p per share target.

READ: Hurricane Energy shares could double as Lancaster advances - analyst

On the face of it, much of the financial result statement was immaterial for investors, though the commentary around the ongoing development of the Lancaster field, which is set for first oil in the first half of 2019.

WH Ireland analyst Brendan Long, in the note, said: “Following the publication of Hurricane’s final results, an associated corporate presentation and an analyst call, we believe that progress made towards the goal of achieving first oil from the Early Production System (EPS) at Lancaster in 1H 2019 can be summarised by ‘on time and on budget’.

He added: “We believe that the two potentially critical developments that have come to light in conjunction with the results announcements are: firstly that gas reinjection is being contemplated and secondly that data acquisition objectives from the EPS have been provided with increased granularity.”

Early production to deliver valuable data

Long, meanwhile, highlighted that the planned early production system could provide more than just cash flow, though, he noted that restrictions on gas flaring present a challenge.

“We have been asking for some time whether the data from the EPS will provide incrementally critical information that will materially favour a successful farmout,” the analyst said.

“For perspective, in our opinion, Hurricane’s assets already benefit from an extraordinary amount of data, inclusive of highly successful drill stem testing.”

He elaborated: “The crux of the issue is that the flaring restrictions will limit the capacity of the EPS to test the actual productive boundaries of the reservoir. The most robust well testing analysis such as traditional decline curve analysis requires “boundary dominated flow” to be achieved.

“In the absence of actually achieving that the gas flaring restrictions may create a constraint akin to testing the strength of a champion muscle builder (which the Lancaster field is, in our opinion) with 5 kg. barbells.

“This could create a risk of an ambiguous or frustrating test results.

“However, based on details recently released by the company we believe that Hurricane is formulating a creative testing strategy that should circumvent many of the constraints imposed by the flaring restriction.”

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