Hurricane Energy offers investors salivating Trilogy



Back in July, TheShareHub speculated on the possibility of HUR doing another well. Hurricane Energy – Something brewing?

The crystal ball working very well… although, I certainly didn’t see 2 new wells coming!

If Dr Trice and team designed a rollercoaster ride, it would be banned. I’m not sure investors can cope with 2 more Lancaster size exploration projects! It will surely blow the minds of just about everyone in the industry. Today’s news of Hurricane’s planned 34p placing to raise £74million was initially met with the usual knee-jerk reaction by investors as the sp slide from 39p to test 36p levels. I didn’t think it would take long before some savvy investors opened their eyes a little to see what was actually being tabled.

1 x drill on the Lincoln Prospect and 1 x drill on either Warwick prospect or another. Mouth watering stuff.

The success of this summers Lancaster drill and subsequent tests would be enough to please most investors. A move in share price from 10p lows to test 40p is living proof that you can use dilution (share issues/placements) to deliver progress and sp growth. Dr Trice and team have not only done that but they have achieved it against the backdrop of one of the toughest PoO environments in history. A lot can be said for supportive II’s / HNI’s. In Crystal Amber and Kerogen, HUR have found investors that believe in the business and the prospects and are not shy in putting large stakes behind them.

Now, for most film buffs, the idea of a trilogy is fun especially when the first film goes down a treat. The reality is, the wait for the next film is usually 12 months+. And the finale of the series some 2 years away. So when you look at HUR’s planned back to back drills – there’s not much time to get your next bucket of popcorn in! Lincoln is set to spud in 2 to 3 weeks or less and should be done and dusted by the time you sit down for your Christmas lunch. The 3rd and final drill is likely to complete before Valentines day. Thanks Dr Trice.

If HUR was attractive at 38p ranges based on this summers Lancaster success alone, then imagine that x 2. Of course, the market will rate accordingly and it’s worth noting that these are exploration wells. That means the endings are not yet written and you might not like what your hear or see when the final RNS on results break. But if management are confident and Lancaster has derisked some elements of the next 2 drills, then the CoS has to be high on the next two.

What a terrific next couple of months to look forward to for HUR investors. And if that’s not enough, there is farm in talks, CPR’s and much more to come in 2017 as the company seeks to progress Lancaster towards EPS phase 1.

At 38p, the two new wells are priced in for FREE. I have a hunch that won’t stay like that for long. The sharehub raises HUR’s target price up to 65p.

Hurricane Energy is part of thesharehub top ten picks for 2016.

Hayward in talks with Carlyle over Latin American oil venture

As mentioned on the sharehub a few weeks ago, Colombia is very much back on the map due to recent peace agreements. Granted, the Colombian referendum delivered a shock result in not voting the peace deal through but longer term this bodes well for all parties involved. When a deal is eventually voted through it will have the full backing of the ‘people’ which is essential for continued peace and progress. A new deal could be put in front of the Colombian people and voted through as early as next year.

Sky’s speculative article below highlights the potential interest in Colombia is building. Should Carlyle Group invest or make some Colombian acquisitions, it should benefit one sharehub top pick in particular, AMERISUR RESOURCES (AMER.L). Current SP 29p. The company is well placed in Colombia and has a strategically placed pipeline that crosses into Ecuador thus boosting exports and reducing trucking costs. The Ecuadorian gov are expected to issue the final paper work within days according to the company. When AMER pumps first oil into the OBA pipeline, it will be a historical moment for both Colombia and Ecuador. Both look set to benefit from a peaceful environment. AMER will without a doubt be on Carlyle’s radar assuming Mr Hayward does a thorough job! The company is fully funded, cash rich and debt free. But like any E&P could advance developments at a quicker pace with the right partner backing. The OBA pipeline has a capacity of over 50kbopd yet AMER’s production is not likely to hit that level until well into 2022. It’s possible AMER could lease the spare capacity or do tariff deals with surrounding producers. Carlyle could end up being next door to AMER if Hayward recommends any regional Colombian assets. Interesting times ahead for AMER investors as Colombia looks ‘hot property’ right now.

Sky News. 18:29, UK, Tuesday 11 October 2016, By Mark Kleinman, City Editor

Hayward in talks with Carlyle over Latin American oil venture. The former BP chief executive is working with Carlyle to find oil assets to buy in Argentina and Colombia, Sky News understands.

Tony Hayward, the former chief executive of BP, is scouring Latin America for oil assets under an agreement with Carlyle Group, one of the world’s largest private equity investors. Sky News has learnt that Mr Hayward, who stepped down from the top job at BP soon after the Gulf of Mexico oil disaster in 2010, is seeking to identify oilfields to purchase in countries including Colombia and Argentina. If successful, Mr Hayward is expected to be paid a fee by Carlyle for introducing the deal to the firm, although it is not clear whether he would have an ongoing role in the management of the new venture. The former BP chief is understood to have lined up a team of oil executives to run the business under Carlyle’s ownership. Mr Hayward’s search for oil assets in Latin America is not the only quest to invest in the industry in which Carlyle is involved. The firm has also agreed to back, alongside CVC Capital Partners, Neptune Oil and Gas, a company established by the former Centrica chief executive Sam Laidlaw. A string of vehicles have been set up to buy oil assets on the cheap, but many have struggled to gain traction because of a reluctance among oil majors to dispose of them at the bottom of the cycle. Carlyle and Mr Hayward declined to comment.

Source: Hayward in talks with Carlyle over Latin American oil venture

ShareHub Hotlist up 69.3% – Q3 positions


It’s been a cracking 3rd quarter for the sharehub top ten picks. The sharehub ended Q3 up 69.4%. It’s best performance since the 2010. Growth in Q3 rose 28.4% from Q2’s 41% total. It’s not all smiles of course. There is one poor pick in the top ten which has dented the overall performance. Xcite Energy is currently down 85% after failing to secure a new debt deal and partner for the huge 260mmboe Bentley field. It just goes to show that even booked ‘reserves’ are not safe from the wolf like claws of the market.

In second place is the Daily Mail top ten picks with a very decent performance up 7.7%.
And in 3rd place carrying the wooden spoon are the reigning champions, the Independent top ten with a modest 3.7% rise. Although worth noting that their picks were 9.5% down in Q2 so that’s a healthy recovery swing of over 13%. Still a decent 11 weeks left to go before the final results are in so all to watch for.

The sharehub top picks sport 4 multibaggers out of ten thus far. If Tullow continues to move higher, the 15%+ shorters should be feeling the heat. Which in turn, should bring in the 5th multibagger for the sharehub.

It’s clearly been a year of recovery for many commodity focused stocks. A recovery that many high paid analysts failed to call. If OPEC and Non-OPEC can continue to ‘talk’ positively about rebalancing/stability measures, then Q4 should continue to deliver solid growth for thesharehub top ten. A 100% increase yoy would be astonishing and is not out of the question.

Stocks to watch in Q4 are:

Ithaca – Stella Start up / production set to increase from 9kboepd to 25kboepd
Faroe – DONG asset deal completion & exploration drill catalysts
Amerisur – OBA pipeline, production / reserves increases / drill catalysts
Ophir – New Fortuna deal likely
Premier Oil – Agreement with bond holders on debt covenants
Tullow Oil – Progress on Turret damages case / oil production increases

PoO is key to all of the above and strength/weakness will no doubt contribute to volatility along the way. So be risk alert as always.

Q3 Results as follows:

1. Sharehub top ten up 69.37%
2. The Daily Mail top ten up 7.66%
3. The Independent top ten up 3.36%

hotlist-q3-position-2016 dailymail-tope-ten-q3-2016 independent-top-ten-picks-q3-2016

OPEC pencil 32.5m in as production cap – According to Reuters

The market really wasn’t expecting anything as defined as this and whilst it is early days and more details are needed – the headline figure looks good for Oil going forwards.

Current OPEC production is running at around 33.2mbopd (apparently!). In truth, the number is probably closer to 35mbopd! It’s very hard to monitor and gauge across all the OPEC members as many produce oil for local supply as well as export and the accountancy on those splits is often something left to be desired.

The good news is of course that a DEAL of some sort appears to have been agreed. This is a strong indication that the Saudi’s and their desire for market share at all costs is now turning into something more ‘balanced’ and heading towards stability.

It’s unclear at this stage how long the glut will last but what is clear is that the Saudi’s and Russian’s have been pumping like mad over the last 3 months. Today’s cut of circa 700kbopd does not appear to include Russia. Assuming the latter joins in, then we could see a further reduction by around 300kbopd totaling 1mbopd inc opec and non opec production. This in effect takes numbers back to Jan 2016 levels. However, it does not factor in Libya and Nigeria as far as I can see. It’s possible that these two could add another 500kbopd back into the mix once issues with exports are resolved.

A net cut of around 500kbopd may not be enough to see the glut shrink bet mid 2017 and could see over supplies still reaching through to late 2017.

But it is a start and a change in direction. And that’s good news indeed for many struggling oil focused stocks. All eyes now on Russia. The latter have said they will help with rebalancing ONCE OPEC arrive at their own targets/caps. Also, remember, nothing is likely to be pen’d until the OPEC late November meeting.

More updates to follow. Check Reuters for latest developments as headlines leek out of the Algerian Meeting.

OPEC MEETING – Sept 26th to 28th. What to expect…

Firstly, it should be noted that this meeting is an ‘informal’ meeting and as such can only deliver ‘words’ rather than ‘real action’. The latter can come about via a special meeting which according to some sources would be cited for Nov. Historically, OPEC have agreed to 2 formal meets per year. One in Dec and one in June/July. Due to the volatility in the price of Oil and huge glut, OPEC have been forced to keep the market guessing and to use ‘words’ to help support the price. But as many already know, this has been going on for around 9 months now… talk of freezes, talk of cuts, talk of rebalancing… blah blah blah. The boy who cried wolf springs to mind… and the market is the mother of all wolves.

The next 2 days will be crucial for OPEC. The market will eat PoO alive if all involve come out of these informal ‘chats’ without something concrete to agree later in the month or in Oct/Nov. And even then, the wolves may not be kept at bay as the data on builds rather than draws will focus minds back to the real issue here and that’s…. over supply.

For the last 12 months+ Russia, Iran, Iraq and Saudia Arabia have all been bolstering and growing production as fast as they can. No wonder the glut is not reducing! The battle is of course centered around market share. All 4 have been trying to get to record high numbers in a hope that any broad cut in production across ALL OPEC members will in all reality simply return these 4 back to levels that were seen in Q1 2016. In short… they won’t have cut anything from 9 months ago. Meanwhile, the rest of OPEC (poor souls) will be the ones to suffer. The majority of these already have big issues in financing production growth with PoO in the $50’s never mind the $40’s. Libya, Nigeria and others have all seen production virtually sliced in half due to rebels, infighting and social unrest. It’s very unlikely that these two players will agree to any cuts. Furthermore, it’s a no go for IRAN – end of. They have said they will not cut one barrel until they reach their 4mln barrels per day target. And even then, they are clearly going to be lagging the Saudi’s, Russian’s and Iraqi’s in terms of production growth to new highs.

But… they very fact that these countries are ‘talking’ more actively is a good sign. It suggests that the 2 year rout on PoO could be nearing an end and a focus on stability in a region of $50pb to $60pb is being targeted. Those numbers and any kind of stability are still some months away judging by statement via the IEA on supply vs demand. It could take through to mid 2017 before true balance shows through. This of course would be hastened or supported by any freeze or reduction on global supplies. But the reality is PoO is not going anywhere fast for the next few months. In fact, it could be going down again before it makes a strong move up. OPEC will do its best to support PoO above $40pb at all times in my opinion, but if the data that follows is poor, and builds grow and grow, then its inevitable that the wolves will win in the end.

What lies ahead in 2018 and 2019 is another story entirely. By 2020, it possible that due to lack of Oil investment across the globe and drops to reserves, the market could be under supplied by as much as 1 to 2mln barrels. The only way to dent demand is to raise prices. And in that scenario, PoO could easily return to the dizzy heights of $100pb+ before supply comes back into balance. One thing is sure, markets and commodities tend to overshoot. Whether down or up, the tops and bottoms are way off line. So don’t expect $100pb to last for long in 2020, but lets get real here… predicting anything 2 to 3 years out is like trying to call the lottery numbers. A lot can change between now and then. But one thing the market can be sure about is that at some point in the next 2 years+ the balance between supply and demand will reverse dramatically before it finally rebalances again.

My prediction for Wednesday, is for news on a deal being done but not signed into formal agreement until Iran reach 4mln barrels per day which is likely to be around end of Nov or late Dec.

The market will like any ‘deal’ news but attention to Gluts and weekly data will be hard to ignore and will surely take centre stage again. This will weigh on PoO’s advances assuming the data is poor.

More updates and views to follow as and when news comes out of Algeria.

FAROE v ITHACA – How they stack up

These two healthy E&P companies have  released H1 results within the last few weeks with FAROE posting news this morning which makes for good reading.

The two companies are well run, have great assets (majority in North Sea) and share a great deal of similarities including share prices. At a glance they look very evenly matched. But lets take a closer look and match blow for blow, top trump style:

Here we go…

FAROE MKT CAP: £240m                 ITHACA MKT CAP: £280m
Shares in issue: 367m                         Shares in issue: 412m
Current Production: 9kboped         Current Production: 9.4kboped
Post acquisition production            Post Stella start up production
y/e 2016: 16k-18kboped                     annualised y/e 2016: 16kboped

Net Cash in bank: £61m                     Net Cash £0m
No Debt                                                    Net Debt of £463m

Reserves 2p: 80mmboe                     Reserves 2p: 55mmboe
Sizable 2c/ 120mmboe+                    Limited 2c
Huge 3c / 1bln boe+                            Limited 3c
Finance Costs: £1.5m                         Finance Costs: £20m
Tax Credits: £100m                              Tax Credits: £1.6bln
Exploration cost rebate 78%           No Exploration cost rebate

GAS hedging in place til 2016          GAS hedging in place till mid 2017
No oil hedge in place til 2016          Oil Hedging in place till mid 2017

1 Year SP Range 82p to 42p              1 Year SP Range 76p to 16p

Current Share price 66.25p          Current Share price 64.25p

Production 2017 est: 16kboped     Production 2017 est: 20k to 25kboped
OPEX $25pb                                            OPEX $23pb to $25pb
CAPEX Unclear circa £20m ’17        CAPEX Unclear circa £25m ’17

Both companies are free from heavy development projects although Ithaca still has some way to go before they bring Stella fully online. Also new $20m pipeline expenditure requires noting.

Blow for blow each one is closely matched on production. But the huge difference between the two is the DEBT piles. FAROE have $23m debt which reduces to ZERO when taking NET cash position of £60m. Ithaca has a hefty debt pile of over £460m.

If you strip out FAROE’s cash balance from market cap, you are left with £180m. This compares to Ithaca’s market cap of £280m.

In 2017, Ithaca are likely to average production between 20k and 25k. Faroe look likely to average between 16k and 18k. Ithaca’s hedge through to mid 2017 at $60pb is worthy of note although any correction to PoO between now and mid 2017 could bring FAROE inline pretty quickly in terms of PoO exposure/risk. More importantly, ITHACA’s flagship Stella development is not hedged and thus any increase in PoO could see IAE lock in hedges at anything near $55pb. FAROE is virtually fully hedged on Gas prices for 2016.

On a reserve basis FAROE are more advanced. On a 2c basis FAROE are considerably more advanced. On a 3c basis, FAROE are a country mile ahead of Ithaca. This is largely due to FAROE’s business model which has for the last few years been exploration focused. The advantage is that any sizable exploration in Norway returns almost 75% of all exploration costs back to FAROE on a cash basis. It’s an incentive that is hard to refuse hence why FAROE have such a large pool of development opportunities which Ithaca cannot compete with and will likely have to pay full 100% (less farm outs) on any future exploration projects. Ithaca do have a series of GSA assets which they can bring into play and benefit from the FPF-1 hub facility. The latter is also an owned asset and will provide Ithaca with cost savings in the future.

However, in summary FAROE looks hugely undervalued. The recent DONG asset acquisition has transformed their asset / production base. Whilst the equity placing at 70p was clearly dilutive to some shareholders, the shares in issue compared to Ithaca is still greatly lower.

FAROE are targeting around 40k to 50kboepd within 5 years. They have the resources to develop, whereas, ITHACA’s asset base beyond Stella looks limited. The £100m difference in MKT CAP (less FAROE net cash) is unusual considering Ithaca’s debt of £460m vs FAROE’s debt of zero. Yes, Ithaca could produce 8kboepd more than FAROE but this plateau’s and drops soon after. Their ability to pay down the £460m debt is highly dependent on future PoO going into H2 2017. Hence some risk should be attributed to these unknowns.

On a blow for blow basis, FAROE looks the top trump card. To compare with ITHACA’s sp, FAROE should be closer to 85p a share compared to IAE’s sp of 65p.

Both have near term catalysts to watch out for. ITHACA’s long awaited and delayed Stella project is cited to produce first oil in November 2016. FAROE have a small interest in an exploration well already underway and a slightly more material interest in the Barents sea prospect called Dazzler which is expected to spud in late 2016 or early 2017. Any success with the latter and that could be very meaningful for FAROE. That said, after the PIL and Brasse discoveries, the company doesn’t really need more success… it already has ample 2c prospects to develop.

The above exercise is for illustrative purposes only and investors should research each individual company in detail. RISK remains across both companies as does the uncertainty over PoO.

Both companies are part of thesharehub top ten picks for 2016.