Hurricane Energy - valuation is far too high. I am short says Peter Brailey...

Tom Winnifrith Bearcast: Unable to answer the question posed by Nick Leeson. Listen HERE

Year end results from Hurricane Energy (HUR) answer some questions I have raised, but leave others unanswered – it’s a bit of a curate’s egg at first glance. The company has provided clarity on some issues, not least of which in the current market is a going concern assessment against expected low oil levels, but left other questions unanswered and I remain of the view that this is overvalued at the current time. I raised a few questions previously, particularly about the water production from the Lancaster EPS 7Z well during the current quarter and what impact this had on the longer term production plans, why the CFO walked only weeks before these results were announced and what was the future for the GWA asset and the Spirit Farm in?...

Time to close all your shorts? Sort of! But two to open! Read from Tom Winnifrith HERE

The company has not provided any material information regarding the 7Z well water production rates, other than noting water production is consistent with it being perched water, rather than aquifer water and increased over the reporting period. Nothing material has been stated about production rates of water since the 7z well has been brought back online at the end of January. We are guided that the Capital Markets Day next week will reveal further and better technical information. I do take it as positive the company guidance for this year’s production being unchanged from previous expectations. I look forward to that further and better information – maybe it will put my concern to bed. We will see. The various statements regarding the Spirit farmin re-iterate the costs of the 3 well drilling campaign on the GWA asset were borne by Spirit, but I note in the detail that some $47.5 million remains as cash outstanding and not paid at the year end. It also confirms the Lincoln Crestal (LC) well, which at one stage was hoped to be tied back to the current FPSO, will be plugged and abandoned. We are told this results from an absence of consents to leave the well in its suspended form or tie the well back and put it into production. It is still not clear to me why this situation has arisen but on reflection over recent weeks, I rather think the statements made by CEO in an Energy Voice interview about the PI (productivity index) of this well has been a key matter. The PI is a measure of oil production rate (in barrels) per unit of pressure (in PSI) to make the oil flow. The Lancaster wells are in the 160 to 200 PI range, but Lincoln Crystal was only 18 -20 PI. The pressure drawdown to achieve the target 10,000 bpd production rate was hence c.10 times higher than Lancaster wells – this would risk early water breakthrough. Regardless in the current climate the more limited capex from a plug and abandonment strategy compared to further consideration of tie back costs has to the better outcome.

The one where I eat humble pie about Carnival Cruises. From Chris Bailey HERE

So that brings me to the last of my prior concerns – why did the CFO walk? I have noted the cash due from Spirit on the balance sheet as a current asset to the tune of $47.5 million. There are also current liabilities on the balance sheet of $5.4 million due to Spirit and accruals of $66 million of costs incurred by Hurricane as the operator. That looks to me like a net liability to Hurricane of some $24 million which will flow out as cash at some point in time. The rest of the accounts appear reasonable, noting the write-off of the Whirlwind asset which had been advised previously, and do not give me concern about how the company has performed financially over the last 12 months. What is glaring by its omission is any hedging programme. The company has been an oil producer since May 2019, and it has a forward capex plan. I can think of no other comparable oil company that has not put a hedging programme in place, at least to cover capex costs, to provide security against oil price decline. The prior CFO resigned on 27th February, which was after the oil price started to collapse. Perhaps this absence of hedging was the reason he walked off, or perhaps not – it’s immaterial now! Regardless this company is fully exposed to current and future oil prices. This is not a comfortable place to be with committed capex and current oil price. The company does have substantial cash, $157 million at the year end, and $164 million as of 18th March, but of course one has to allow for the net cash outflow from the unwinding of the GWA costs. The company has guided the cash costs, at target production rate of $17 per barrel. I can see the Brent oil price going lower before it moves back towards the going concern assumptions of $30 to Q3 2020 and on to $50 in 2021. In my view these assumptions look to be on the optimistic side of the range, but I would not criticise the company for using this basis. We simply do not know what the full impact of the Covid19 will be on both demand and supply.

Optibiotix - new distribution deal & share price comment, Strong Buy says Tom Winnifrith HERE

There is limited time to accumulate cash to satisfy the bond debt, which may be rolled forward, but I am pleased to see the company is not assuming this will be possible. If oil prices remain low over the short and medium term, I can see cash generated being used to service the debt and pay for the commitment wells. The lack of success on GWA combined with any reasonable oil price view, the opportunity value of that asset at the current time is negligible. That leaves me viewing the current value based on the Lancaster EPS only, and I do not see much left over for shareholders. Even at a share price of 10p, market cap of £190 million, I see nothing at the current time to encourage me to invest, despite this company being one of the few on AIM which has moved from drilling to producer. The company has achieved a lot and is not in my view going bust (which cannot be said of many oil & gas companies on AIM) but I see only one way for this share to move over the foreseeable future. I am SHORT.

Read HERE: SpaceandPeople – I having reviewed share price decline last month, now more on further news…

Filed under: Hurricane Energy, Bearcast, shares short, Carnival, Optibiotix, SpaceandPeople

Burberry & ASOS - fashionista trading update face-off


Fevertree - a Trading Statement lacking financial specifics… & a recovered £2.7 billion valuation


Centamin - Q2 report, well ahead on this tip but still a buy considers Nigel Somerville...


Red Rock Resources - spin-off potential, and more than one...


KEFI Minerals - about to rip? The HotStockRockets team writes...


Gold cracks $1800 - what to do now and is it Ouzo time yet?...


Whitbread - why you should not worry about a -80% Q1 revenue move writes Chris Bailey...


It has been a torrid time for pubs but Marstons should recover strongly reckons Gary Newman


Highland Gold Mining - update on COVID-19 response, continuing as planned...


DS Smith - respectfully Mr Market you are wrong says Chris Bailey...


Pity us poor British taxpayers bailing out Versarien plc says Tom Winnifrith...


Petra Diamonds - heading for a wipeout for equity holders? Gary Newman writes...


easyJet - data breach is not in my top three worries and I own the shares says Chris Bailey...


San Leon Energy - 2019 results & now about to capitalise on a strong position?


KEFI Minerals - reduced Tulu Kapi project funding requirement, buy says HotStockRockets


UK Oil & Gas - do not get spiked & is that a dodgy deal I smell? writes Peter Brailey...


Cranswick - future FTSE-100 constituent? Chris Bailey reviews...


Why Amigo Holdings is a zero considers Tom Winnifrith...


BP - new CEO sounding loony... or being very clever?


Novacyt - corona update, this is all about executive greed and share ramping now says Tom Winnifrith


Kingfisher sings a song of recovery... but can do so much more says Chris Bailey


Two UK shares which cannot defy gravity forever says Tom Winnifrith


Metro Bank - potential acquisition two drunks propping each other up?...


Cora Gold - a buy suggests HotStockRockets


Hummingbird Resources - a diversified gold production buy?...


Nearly a 10 bagger tip... but evidence of alternative energy bubble?


Avacta - its covid game soon to be up says Tom Winnifrith...


Columbus Energy - another potential share price catalyst...


Biffa - still brass in muck says Chris Bailey...


Union Jack Oil - for a hat-trick of wins?...


Volvere - 2019 results... & 2020 opportunities...


Hochschild and Hertz... A review of two old timers by Lucian Miers


Big themes still at Playtech says Chris Bailey...


Centamin, Ariana Resouces & Gold - was that the correction, in double-quick time?


Asiamet - negotiations for deal on KSK helps shares, target increased...


Bluebird Merchant Ventures - further project funding progress, increased price target...


Burberry shares remain fashionable to me says Chris Bailey


Imperial Brands - still an Income buy?


Columbus Energy - project & funding update suggest still a buy?


Marks & Spencer - never the same again? Chris Bailey reviews...


OptiBiotix - sales trajectory sparks shares, but still an even stronger buy?...


A whole sector that is a short?...


Tri-Star Resources - sale of first Antimony BUT...


KEFI Minerals - still significant upside offered by its asset base...


OptiBiotix - now Taiwan agreement adds to confidence...


Some gold and gold stock takeaways from Nigel Somerville...


Is Trainline ever going to make sensible profits?


Another reality pill - this time for BT Group


Jadestone Energy has the strength to ride out low oil prices says Gary Newman...


Hummingbird Resources - a buy says HotStockRockets...


Goldplat - quarterly update, production getting back on track...


The markets & sell NASDAQ-listed Credit Acceptance Corporation. From Lucian Miers...


Columbus Energy - shares bounce on Saffron well oil discoveries but remain a buy...


Read and learn from the latest Next plc update says Chris Bailey...


IG Group - why the shares are worth considering writes Malcolm Stacey...


Ariana Resources - a cue to bank massive profits on this share tip? Nigel Somerville reviews...


FirstGroup - activism and the coronavirus. Chris Bailey writes...


Highland Gold Mining - shares bounce on quarterly operational update, but more to come...


Bluebird Merchant Ventures - we tipped at 2.5p now 4.3p to sell, but worth 6p+. Buy...


Will the Oil price rout be repeated (in reverse) in Gold? Nigel Somerville reviews...


The man who predicted negative oil prices reviews where to next...


PZ Cussons - keep washing your hands... and be on board this stock? Chris Bailey writes


OptiBiotix - placing somewhat annoying... but it is for a VERY good reason says Tom Winnifrith


Imperial Brands - an income buy


Sterling Energy a buy? Gary Newman writes...


Ariana Resources - what after a stonking gain in less than four weeks?...


Volvere - shares up on Feb tip after trading update, more to come say Tom Winnifrith & Steve Moore


Chris Bailey updates on Rolls-Royce & GVC Holdings...


It is also Sage to look at shares that are not romping says Chris Bailey...


Versarien forced to start to come clean - a stink regulators MUST investigate says Tom Winnifrith...


At a time when dividends are being scrapped, Legal & General stands out says Gary Newman


UK Oil & Gas - another 50 percent share price fall the best case scenario? Peter Brailey reviews...


The big banks know what side their bread is buttered. Chris Bailey writes...


Two stocks which look slam dunk zeros considers Tom Winnifrith...


Premier Foods - a buy despite its high level of debt? Gary Newman reviews...


Bluebird Merchant Ventures - an Agreement supporting a positive view? A review from HotStockRockets


Rockrose Energy - a week is a long time says Peter Brailey...


Cineworld - a good shorting opportunity? Gary Newman reviews...


Silver is my metal of choice at the moment says Gary Newman


Golden Prospect Precious Metals - a gold buy


Hurricane Energy - valuation is far too high. I am short says Peter Brailey...


Altyn - mining equipment purchases, gold production increasing...


Versarien - when & at what price the attempted bailout fundraise?


The company playbook on Covid-19...


Doing nothing looks a great move... with a few possible exceptions says Nigel Somerville


As an investor, doing nothing is generally under-rated... but sometimes the facts have changed...


Bowleven - another AIM oil & gas play crunched by the market sell-off, is it a buy?...


A review of my favourite two gold stocks by Nigel Somerville


GVC & Aviva - catching up on some boring but worthy updates (& the continuing Amigo shambles)...


Volvere - a buy suggest Tom Winnifrith & Steve Moore


Finablr - the car-crash continues at Red Flag Central. Sell says Nigel Somerville


Aggreko, Ibstock, Ashtead & Robert Walters update - any value amongst them?


Hurricane Energy - more risks? Peter Brailey reviews...


Investment thoughts as fear has racked up in recent days - from Chris Bailey...


Ariana Resources - bank gains? A review from the HotStockRockets team...


Goldplat - interims emphasise return to profit & reasons for further encouragement


Gold set to remain strong & Highland Gold Mining a favourite producer considers Gary Newman


Petra Diamonds - now a sell? Gary Newman reviews...


B.P. Marsh and Partners - a buy say Tom Winnifrith & Steve Moore


OptiBiotix - now a US and Canada LPLDL distributor agreement...


RISK WARNING & DISCLAIMER - tips are provided by independent authors via a common carrier platform and do not represent the opinions of does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.

Five Free Share Tips?

. . . . . . . . . .

Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.

The Details

Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.

We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.

You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.

There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.

Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?

Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now

The Team

We've put together a panel of top tipsters, including:

Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"

Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit

Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks

Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books

Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers

Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies

Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments

The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view

Sign Up Now

UK Investor Show 2018

Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.

To reserve your ticket, visit UK Investor Show.

Risk Warning & Disclaimer

The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). & its sister site defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.