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Hurricane Energy stock may be due an upgrade - broker

Hurricane is now on-track for 'first oil' in the first half of 2019
offshore oil platform
WH Ireland has a 'buy' recommendation with a 54.5p target

Hurricane Energy PLC (LON:HUR) could be due an ‘upgrade’ from stockbroker WH Ireland, albeit not necessarily a large one.

WH Ireland analyst Brendan Long, in a note, responded to Hurricane’s half yearly results and repeated a ‘buy’ recommendation which presently comes with a 54.5p target.

READ: Hurricane Energy highlights “significant endorsement” as it advances Lancaster field to first oil

“The company reported a cash balance at 30 June 2017 of $29.1m, very modestly better than we had anticipated,” the analyst said.

“We will review the details in the company’s interims and use the opportunity to review our model, we see scope for a very modest valuation upgrade.”

Elsewhere, oil companies expert Malcolm Graham Wood in his daily blog said: “Upcoming information from the company should also be good, expect EPS progression and a CPR on Halifax, Lincoln and Warwick which will move the needle significantly in the right direction.

“The shares have suffered from indigestion post the raise but those capable of taking anything like a long term view at should ‘make out like bandits’ as they say in most reputable saloons.

“I still think that the final number will be as much as 2bn barrels of oil and my target price of 100p + may eventually look conservative, the words pay your money and takes your choice come to mind.”

A “significant endorsement”

In Thursday’s results statement, Hurricane chief executive Dr Robert Trice described the group’s recent US$547mln funding as a “significant endorsement” as he highlighted another successful period for the West of Shetland oil firm.

The funding, a mix of convertible debt and equity, was a key component in the group’s recent success as it allowed the company to green-light the Lancaster field early production system, a campaign that is now in motion towards a target of ‘first oil’ by the first half of 2019.

READ: Hurricane Energy lists convertible bonds onto The International Stock Exchange

“The equity and convertible bond placing announced in June 2017 now fully funds the first phase of development on Lancaster which will not only generate significant cash for the company but, importantly, will provide key production and reservoir data to enable a full field development of this very substantial oil field and unlock the potential of our wider fractured basement portfolio,” the Hurricane chief executive said in the oil firm's half yearly results statement.

Trice added: "We look forward over the coming months to announcing further key milestones in the EPS progression; and to publishing the revised CPR on Halifax, Lincoln and Warwick.

“We remain on track for first oil in 1H 2019 and look forward to updating our shareholders as this exciting development progresses."

Strong balance sheet

Hurricane ended the first half, to June 30, with US$29.1mln of cash, although the balance sheet was “significantly enhanced” by the completion of the funding post-period end (the raise closed in July).

The pre-revenue oil field developer reported a US$4.2mln loss for the six month period.

Looking forward to upcoming milestones for the EPS, Hurricane noted that the floating production (FPSO) vessel is on the way to Dubai where it will undergo upgrades and that regulatory approval for the project is expected shortly.

Desk-top work could also provide new catalysts, with a new competent person's report due to assess the scale of resources in Hurricane’s broader West of Shetland portfolio following the exploration drilling success of the last campaign.

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