Opinion

Oil price, Hurricane, Cairn/FAR, Sound, Tullow, Sundry-Petrofac-Cycles analysis- And finally...


Oil price

Another up day yesterday as the market's eyes turned to the EIA inventory stats following the rather disappointing API numbers the night before. Whilst the draw of 1.8m barrels was short of the 2.5m whisper it was enough to keep the bears at a distance. It will be worth watching the net long positions when they come out as I suspect that there has been a lot of bear closing in the last few days.

Hurricane Energy

Hurricane has announced the completion of the warrant scheme and there are no more in issue and the scheme has lapsed. The shares had been issued to broker Stifel who had exercised and sold 5.5m shares in the market prior to yesterday and the remaining 19.5m were placed in the market yesterday at 51p raising £12.7m for the company. The buyers I am told were existing shareholders who were keen to support the company and clear up any possible overhang. Word on the street yesterday gave me the impression that Crystal Amber were particularly supportive in the process as befits a major shareholder.

With some concern in places that this warrant issue may have created an unwelcome tap on the market the placing of all of the balance makes a lot of sense for which the company and shareholders should be praised. The ‘supportive' shareholders are also wise as the exciting prospects for HUR over the next few months should not be overshadowed by such market concerns. With some expensive long lead items to pay for now, in order to keep the development process on schedule this solution has ended up doing the job. The modest raise means that the company have a free run to the FID and of course will continue the process of raising the approximately $467m needed to  fund the EPS which we have already been told will be a combination of Debt, equity and possibly a farm-out of some nature. This process is well under way and I consider that it will be complicated but not impossible and that with a potential 2bn barrels at stake investors will be found in each asset class. Hurricane has a superb portfolio of basement plays led by Lancaster and my existing target price of 100p is looking well past its sell by date and I shall be updating that substantially shortly.

Cairn/FAR

Cairn has announced the results of the SNE-6 appraisal well offshore Senegal and it is another success. The well proved good connectivity with SNE-5 in the Upper Reservoir and the oil quality was similar to previous finds. This is incredibly good news for the partners who are now looking at a huge oilfield with massive potential, it also does nothing but increase the excitement around the whole area where deals are being done and every major worth its salt is in town. The rig moves on to FAN SOUTH where they are targeting prospective resources of 110m barrels and who's to say that  this won't be success no 10 for the partners. Excellent news for Cairn and of course even better for FAR who are now funded up and the shares should rise significantly, my 25c target remains in place.

Sound Energy 

Sound announced yesterday that the Saipem rig has arrived at Sidi Moktar, onshore Morocco to re-enter and test the lower and middle Jurassic in two existing wells in the Kechoula discovery. Stage 1 will complete, perforate and test Koba-1 by the end of May and stage 2 will do the same at Kamar-1 by mid June. If these are successful expect an EWT and first commercial gas could be flowing by the end of this year.

Tullow 

Also yesterday, Tullow announced an oil discovery at the Emekuya-1 well in Block 13T in Northern Kenya. With 75m of net oil pay in 2 zones this de-risks the Northern part of the Etom block and goes some way to proving that the Greater Etom Structure is oil filled. Good news for Tullow who also announced extensive plans for the TEN area for when litigation ends there.

Sundry

I havent commented about the PFC situation as it is clearly sub-judice but today's announcement that a non-executive who only joined the company in November 2016 has resigned ‘with immediate effect' doesnt sound good.

For those of you who dont follow Cycles Analysis, run by Andrew Pancholi, I had a conversation with him yesterday whereby he is seeing a build up of a significant nature in his commodity charts which could lead to something big on the geoseismic front. As he has an incredible track record I thought I would pass it on…

And finally…

Very little on the news front after a dreary nil-nil draw between the Saints and the Red Devils last night. JM has asked for forgiveness if he plays the kids v the Eagles on Sunday, a sure sign that they will lose the final of the Boropa Cup… And watford have sacked another manager, what are they like?


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