Hurricane Energy PLC (LSE:HUR) has confirmed the North Sea producer is up for sale in the wake of an unsolicited offer to buy the company.
An indicative offer pitched at 7.7p per share has been received by the company albeit management stated that they will not recommend the offer to shareholders.
The company, in a statement, said it is in a “very strong financial and operational position” but its cornerstone private-equity backer (which owns 28.9% of the company) has indicated that it wants to "monetise the value of its shareholding".
Hurricane said the formal sale process will seek to “establish whether there is a bidder prepared to offer a value that the board considers attractive, relative to the standalone prospects of Hurricane as a publicly traded company and accordingly one that should be recommended to all shareholders”.
If the company is not sold, Hurricane it will alternatively launch a significant capital return programme and indicated that up to US$70mln (3.1p per share) will be returned to shareholders in the first quarter of 2023.
"The board intends to deliver near term shareholder returns through either the successful outcome of the formal sale process or with a substantial capital return programme,” said Hurricane chair Philip Wolfe.
“Hurricane is in a strong position with an experienced senior team, robust balance sheet, profitable ongoing production and significant tax losses - a platform capable of supporting distributions throughout Lancaster's expected economically productive life.
“We look forward to updating shareholders in due course."
Interim results released last month confirmed production of around 9,000 barrels of oil per day in the first half of 2021 from the Lancaster field – which has fallen short of the original expectations of the company and continues to suffer challenging conditions (high volumes of water in production, nearly 50%) – to generate US$159.5mln of first-half revenues and US$110.1mln of operating cash flow.
First-half profit after tax was reported at US$67mln and during the period, the company became debt-free after repaying bonds, something which prior to 2022’s surging oil and gas prices was not widely expected by the market.
Having completed a Houdini debt escape thanks to high prices in the first half of 2022, the company evidently believes it retains an attractive asset for potential buyers – the company itself describes “significant oil price geared cash generation from a predictable well” along with a material inventory of drilling and subsea equipment, US$118mln of year-end net free cash (forecast), and more than US$370mln of value in past tax losses which can be used against future tax liabilities.
Hurricane has hired Stifel Nicolaus for the formal sales process.
At 7.7p, the unsolicited offer represented a premium of 13% to the Hurricane price on 1 November.
In London, Hurricane shares began Wednesday up 21% changing hands at 8.25p.