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Hurricane Energy set to bank another US$10mln with issue of extra bonds

Published: 14:39 19 Jul 2017 BST

Offshore oil operations, North Sea
The funding follows drilling successes and sets up an early production opportunity

Hurricane Energy Plc (LON:HUR) is to bank another US$10mln as Cenkos Securities and Stifel Nicolaus have taken up options to issue more bonds.

The brokers ran Hurricane’s recent US$220mln bond issue, and they had a provision for a further US$10mln to be issued – that option has now been exercised.

In late June, the company launched a US$520mln funding, comprising a US$300mln share placing and US$220mln convertible bond.

READ: Hurricane Energy tipped for 130% upside, but analyst expects quiet few months

The new capital moves Hurricane closer to producing from the large, undeveloped Lancaster oil field, in the West of Shetland region.

"This Fundraising facilitates the key to unlocking value on the company's wider portfolio: production and reservoir data that can only be acquired through long term production operation,” said Robert Trice, Hurricane chief executive said in June.

Farm-out still possible, but it can now wait

Cantor Fitzgerald analyst Sam Wahab earlier this month highlighted in an interview that a potential tie-up with a big oil firm could still potentially be “on the cards” for Hurricane, even though it has now the financial wherewithal to take the Lancaster field development project forward.

“Who they [the companies in the data-room process] are, we still don’t know. But, they are certainly of the ‘Big Oil’ variety. I can’t see many independents having the balance sheet to come in Lancaster and the ancillary assets.

He added that the funding has strengthened Hurricane’s bargaining position: “The fundraise does give them [Hurricane’s team] a further optionality, they are coming at this from a place of strength, so any company coming in won’t be able to steal the asset of them, as we have seen with some of the other small cap names in the market.”

Lancaster early production can start to unlock a huge prize

Lancaster’s early production system will produce some 17,000 barrels of oil per day and, strategically, it will be a decisive step for Hurricane as it seeks to unlock the truly vast resources it has found in the waters of the West of Shetland region.

The Lancaster discovery is presently seen to contain some 2.1bn barrels of oil-in-place, with 523mln seen as recoverable, while the EPS area alone has been estimated to host 37.3mln barrels, valued at US$525mln (net value).

But, the group’s latest streak of well successes has proven the case for more than one ‘mulit-billion barrel’ project.

Desktop work is underway to firm up the technical estimates of just how big the discoveries in the Greater Lancaster Area (comprising Lancaster and the Halifax discovery) could be, as well as the Lincoln discovery and Warwick area.

"With the money raised in the equity market this makes a strong contribution to the EPS for Lancaster, which is motoring along well," noted oil analyst Malcolm Graham-Wood.

Shares in Hurricane were up 1.9% at 30.06p in afternoon trading.

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