Hurricane Energy PLC (LSE:HUR) shares are very much resurgent, up some 160% in 2022 so far, as it looks set for a debt-defying Houdini escape - and the broader UK North Sea might just do the same.
The embattled oiler has spent the past few years on the brink, but, soaring oil prices and rapidly shifting dynamics favouring secure, domestic sources of fuel has put the company in an unexpectedly hopeful position.
Hurricane has told investors it expects to fully repay its bond debt before the July deadline (as recently as April 20 the debt had stood at US$78.5mln) and, moreover, it anticipates having around US$60mln of free cash available to invest in new growth.
It remains to be seen what type of investments Hurricane may target, in Thursday’s results statement it simply said it would look at “the existing portfolio, now opportunities in the UK oil and gas sector, or both”.
Given that Hurricane also revealed that it had surrendered the Lincoln discovery (once estimated in the hundreds of millions of barrels) as there is now “no reasonable expectation that Lincoln could generate any meaningful near-term cash realisation”, it is probably safe to assume that there won’t be any more deep-drilling of ‘basement’ reservoirs to merely to stack prospective resources into a spreadsheet.
The company – along with the North Sea and the whole country for that matter - want more domestic production, and they want it yesterday.
An unlikely and unpredicted window of opportunity is now open for the likes of Hurricane because of the events in Ukraine.
To second guess (without so much as hint of what plans may be afoot at Hurricane) one could easily assume that another new Lancaster well could be one possible option, to boost oil volumes and perhaps pump less water, another, and possibly more interesting option might come from the negotiating table, with Hurricane potentially dealing into a new partnership or acquisition.
Of course, Hurricane isn’t the only North Sea oil stock to be resuscitated amidst soaring prices.
Harbour Energy (LSE:HBR) – one part of which used to be Premier Oil – is also managing to rapidly repay debt thanks to bumper oil revenues.
With US$1.6bn operating and US$678mln free cashflow as it flowed an average of 175,000 barrels oil equivalent per day in 2021, and this year forecast to deliver US$1.5 to US$1.7bn of cash in 2022, Harbour expects to have cleared its US$2bn debt in 2023.
Small-cap firms are also seeing their fortunes transformed as their project’s garner greater interest and their economics are boosted.
Jersey Oil & Gas shares shot up Thursday as it told investors that the farm-out process for the Greater Buchan Area (GBA) field development project has generated widespread interest.
Initial engagement and screening have led to Jersey Oil being actively engaged with multiple serious counterparties of scale with “ongoing due diligence involving two-way collaborative workstreams”.
Stockbroker finnCap, in a note, meanwhile called GBA “one of few material, ‘development ready’ North Sea projects” and highlighted that a successful conclusion of negotiations should see shares surge.
I3 Energy and Europa Oil & Gas, which recently partnered up, are advancing the Serenity project with an appraisal well planned this summer to unlock to the project to a development scenario – Europa is earning its spot in the partnership, a 25% stake, in exchange for covering some 46.25% of the upcoming well costs.
These are just sprinkled examples from a sector where enthusiasm has been greatly renewed.
Industry bodies will keenly await insights into the "bespoke support" promised by the government last month in response to soaring energy pricing and fears over the UK’s energy security.
The support was pledged as support for new exploration and projects, and at the same time said that a new licensing auction round which will launch in the Autumn.
Time will tell whether or not the so-far loose promises of government support and 2022 oil and gas prices are sufficient lures to bring fresh energy to the sector. But, in the meantime, the region’s cash-machine producer will continue to thrive.