Highlands Natural Resources PLC (LON:HNR) is looking forward to a happy New Year with a number of new wells due online over the coming weeks. It follows a busy and successful work programme at the East Denver project in Colorado this year.
"The development agreement concluded for our East Denver project has been the defining point of 2018,” chief executive Robert Price said in the company’s interim results statement.
“It both fully funded the project at no cost to Highlands and delivered US$5.4 million to the company, enabling us to invest in a broad portfolio of projects in line with our strategy.
"We are expecting to have eight producing wells on the project by the beginning of 2019 and, assuming the new wells perform in line with the first two wells, our 7.5% share of revenues will fully cover all of our overheads.”
Price added: "In the meantime, two of our new projects, developed during the period under review and funded from the proceeds of our East Denver project, have already begun to make a revenue contribution.
“Whilst small at present, we expect to develop both projects and deliver additional revenues during 2019.”
Thursday’s statement noted the first commercial sale agreement for nitrogen from its project in Kansas, along with the formation of the Highlands Water Resources unit which intends to pursue a number of initiatives for water management services for the oil and gas industry in North America.
In terms of the financials, revenues for the company’s first half amounted to £522,408, and, it reported a £4.38mln loss for the period.
HNR ended the six months, at 30 September, with £1.99mln of cash and equivalents.
"Highlands enters the new year in a strong position and, as our portfolio of operations develops, we look forward to updating our shareholders on our progress,” Price added.
Much to admire, but insufficient focus - broker
In a note to clients, analysts at SPAngel commented: “The Company’s interim update today leaves us with the belief that there is a much to admire about the management team, in the way that they try to seek an opportunity in what they are presented with.
“However, there comes a point where a management team has to accept that the markets they are trying to sell in to is just not mature enough to support a growth company.”
He added: “Currently, we fear that insufficient focus in any one area is starving all areas of cash to grow, and hence all with wither and die before shareholders have an opportunity to benefit from their management’s evident zeal.
“What investors need management to do is high-grade the portfolio and focus on the single most likely project to generate sufficient cash flow to achieve the self-sustainability in the near term — that way the remaining projects have a better chance of coming to a commercial conclusion, albeit in a longer time frame.”
In afternoon trading, shares in Highlands Natural Resources were 8.5% lower at 12.85p.
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