A new price target for Hurricane Energy PLC (LON:HUR) suggests the share could more than double in value as the Lancaster field advances towards production.
Cantor Fitzgerald has a ‘buy’ recommendation and an 80p price target, compared to the current price of 38.79p.
Hurricane yesterday updated investors on the progress being made on Lancaster as the company released its financial results statement.
READ: Hurricane Energy highlights ‘transformative’ achievements
“The Lancaster development saw FID taken following the $547m in new funds raised during 2017,” Cantor analyst Ashley Kelty said in a note.
“This sees the first phase of the development of the field using the Aoka Mizu FPSO, with first production from two wells at around 17,000bopd in 1H19.”
Kelty highlighted that at least 60mln barrels over 10 years, although he noted that additional wells could be drilled in the near term and that would increase volumes up towards the 30,000 barrels per day capacity of the floating production vessel.
Such a ramp up assumes a way around gas flaring constraints, and would see 90mln barrels unearthed over the 10-year period.
The analyst added that last year’s exploration successes, which saw “world class” discoveries in the Halifax and Lincoln wells - adding more than 1.8bn barrels of crude - and these assets present further value potential. It means the company’s assets could be in the crosshairs for oil majors.
“It is believed that the Lancaster and Halifax field are in communication, making this a giant accumulation – easily the biggest field yet to be developed on the UKCS, and easily the biggest discovery since 2000,” Kelty added.
Current valuation "far lower than any peers"
“Hurricane asset base now equates for 13-25% of the entire remaining recoverable resource on the UKCS. Whilst further appraisal across the portfolio is required, the potential is staggering, and we believe that it will be of great interest to the majors as they seek to acquire new reserves.”
At the same time, the analyst pointed out that the current valuation rating is “far lower than any peers”, but, he reckons the discount will be unwound as project development milestones are reached.
Kelty said: “We believe that Hurricane offers the biggest and most exciting opportunity on the UKCS at the current time, and that the current price offers an exceptionally attractive entry point to investors.”