With a new ‘buy’ recommendation and a 50p price target stockbroker finnCap sees more than 100% upside to the current price for Hurricane Energy Plc (LON:HUR).
FinnCap analyst Dougie Youngson in a note today highlighted that Hurricane’s Lancaster field is one of the largest undeveloped fields in the UK North Sea. And he added that the field was of “strategic significance” as it promises to open up a new area of production.
Hurricane last month began drilling the first of two wells that promise to take Lancaster closer to full field development.
The well is an appraisal and a pilot for a subsequent horizontal sidetrack. The wells are designed to deliver important information to de-risk the project and upgrade reserves, but, crucially they are expected to provide the basis on an early production system.
“In order to fully derisk the field ahead of full field development, the company intends to install an early production system,” Youngson explained.
He says early production, using floating production and offloading facilities, would have a capital cost of around US$300mln and could be online in 2019 delivering at a rate of 17,000 barrels of oil per day.
The analyst’s 50p per share price target factors in a 25% chance of development, meaning there’s yet more upside available should the latest programme of work prove successful as that would further derisk the project.
Hurricane Energy shares currently change hands at around 22.5p.