Analysts at Morgan Stanley reckon Hurricane Energy PLC (LON:HUR) has the potential to reward investors with a “very big payoff” as they initiated their coverage with an ‘overweight’ rating.
The oil explorer took a step closer to production earlier this week when it confirmed it had finished the majority of offshore works at its Lancaster early production system just west of the Shetland Islands.
That’s ahead of first oil from the well, which is expected in the first half of 2019 once a production, storage and offloading (FPSO) vessel arrives from Dubai where it is currently in dry-dock.
Morgan Stanley added that the market is pricing in just 32.7mln bbls of reserves at the moment. If the Lancaster EPS is extended from six to ten years, as Morgan Stanley expects, and the separate Greater Warwick Area EPS program lasts for eight years, that figure rises to 74mln bbls.
“Assuming oil prices in line with our house view, this leads to a net asset value of 68p.”
Hurricane shares rose 3.7% to 54.1p in early afternoon trading.
Eco Atlantic Oil & Gas Ltd (LON:ECO, CVE: EOG)
Eco rose on Thursday as the explorer announced that French oil giant Total SA has now exercised its option to acquire a 25% stake in the Orinduik Block, offshore Guyana.
Total joins the exploration venture alongside operator Tullow Oil plc (LON:TLW), owning 60%, and Eco which will retain a 15% interest.
Perhaps notably, Total decided to take-up its stake in Orinduik earlier than expected, before it received the final seismic report (under the original timeline the report’s delivery would’ve triggered a 120-day deadline for a decision).
It comes after Tuesday’s news that a new resource estimate had underlined the potential for a big future at the Orinduik licence, offshore Guyana.
Orinduik was estimated to contain a potential 2.9bn barrel resource across a series of exploration targets. It would mean that Eco’s 40% stake in Orinduik would be equal to some 1.16bn barrels.
UK Oil & Gas PLC (LON:UKOG)
UKOG has told investors that the Portland reservoir test in the Horse Hill well has been successfully completed - with analysis of flow results suggesting a rate of 362 barrels of oil per day would be possible when full-scale production starts.
Significantly, the company highlighted that the re-perforation of the Portland in the Horse Hill 1 well has demonstrated a 65% increase in productivity from the past testing programme.
It is now planned, in light of the new analysis regarding the Portland’s “true flow potential”, fresh plans are being formulated for either a side-track to HH-1 or a new HH-2 well as a horizontal appraisal well.
Such a well would target a production rate between 720 to 1,080 bopd, pitched some 2-3 times better than the calculated rate for the vertical HH-1 well. That said, it clarified that there can be no guarantee that forecast, targeted or calculated rates of production will be achieved.
UKOG, the largest London-listed Horse Hill stakeholder with 46.7%, said that all the planning permissions, Environment Agency permits and the ‘well cellar’ are in place for a horizontal well.
The company added that would be envisaged that all future Portland wells will be horizontal, not vertical, and, that the reservoir at Horse Hill is “robustly commercial” at even the lowest observed sustainable daily rate”. A formal declaration of Portland commerciality is expected shortly.
Sound Energy PLC (LON:SOU)
Sound chief executive James Parsons told investors that the explorer is now ready for its next “potentially transformational” phase of drilling.
This morning, in its interim results statement, Sound detailed its operational progress onshore Morocco which in the first six months of 2018 saw the company advance its two-pronged strategy to develop existing discoveries at Tendrara whilst also undertake high impact exploration in the surrounding areas.
In the period, it completed a substantial (2,850 kilometres) seismic exploration programme, which was fully funded by partner Schlumberger.
It applied for and subsequently secured necessary approvals for a production concession covering the Tendrara discovery, and, engineering operations also advanced in regards to the infrastructure development that will be needed to monetise the gas.
Cairn Energy PLC’s (LON:CNE)
Cairn’s Indian tax dispute continued to distract from its growing North Sea oil business, as the London-listed group was forced to report a US$500mln loss for the first half of 2018.
It is locked in a prolonged international arbitration process on a tax dispute tied to now disposed assets, though with final hearings taking place last month, the process is now closer to a conclusion.
India has continued to enforce retrospective tax claims against Cairn, with the country's Income Tax Department forcing the sale of shares in Vedanta held by Cairn, seizing proceeds, and, also, seizing dividends due from the company’s shareholding in Vedanta.
Altogether, the IITD instructed the sale of a 3% shareholding in Vedanta during the year to date.
In its accounts Cairn marked a US$230mln loss for the ‘de-recognition of financial assets’ and a US$319mln loss against the fair value of its financial assets - if not for US$102.4mln of tax credits (tied to Norwegian exploration) the interim losses would’ve been steeper still. Cairn told investors it “remains confident of its legal position” and highlighted that the UK-India Bilateral Investment Treaty “affords strong provisions to enforce a successful award”.
Diversified Gas & Oil PLC (LON:DGOC)
DGOC shares rose on Tuesday as the group reported on what is described as “a period of transformative growth” following its Alliance and CNX acquisitions.
July’s deal to acquire US$575mln of assets from EQT Corporation came after the reporting period ended.
The US-based production business generated some US$58mln of revenue in the six months to June 30, and, earnings (adjusted EBITDA) was reported at US$22.87mln for the half year. DGOC closed the US$80.7mln Alliance acquisition in early March before completing the CNX transaction for US$89.3mln in April.
Daily production averaged 19,300 barrels of oil equivalent per day, and, the period’s ‘exit rate’ measured 27,000 boepd – whereas the EQT deal was expected to lift the daily rate above 60,000 boepd.