Thursday, September 28th 2023

Shame For Hurricane!

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By William Turvill


Storm Engulfs Hurricane Energy

How long can the storm engulfing Hurricane Energy’s shares go on? The oil exploration firm’s stock price has been in freefall for months and bosses are at a loss to explain the rapid decline in value. Analysts have described the initial fall, in early December, as “overdone” but Hurricane’s share price has continued to fall into the New Year.

The Aim-listed firm is struggling to establish itself as a reliable oil producer. But buy or sell? Analysts and investors are torn on the issue of whether or Hurricane has a bright future ahead. Tracking Hurricane’s stock market decline Hurricane was not exactly having a stormer of a year by late November, but its share price – 46p –had edged up from 45p at the beginning of the year after peaking at 60p over the summer.

However, investors were evidently disappointed by the company’s final drill result of 2019, which led to a stock price fall of 20 per cent to 36p on Monday, 2 December. That day Hurricane confirmed discovery at the Warwick West Well, but the result – 1,300 barrels of oil a day – was judged to be weak compared with previous projects. As Hurricane’s shares continued to fall that week, analysts from Morgan Stanley came to the firm’s defence. On 4 December they reiterated their “overweight” recommendation and said the fall in value had been “overdone”, according to Share Cast. However, the company’s share price continued to fall through January, to 21p by the end of the month. CEO and analysts confused by fall In a trading and operational update on 29 January, chief executive Dr. Robert Trice said the firm was not aware of the reasons for its share price fall.

He said: “We note the recent weakness in the company’s share price and I can confirm that we are not aware of any subsurface, operational or commercial reasons that would have caused such decline. “The production performance of the Lancaster EPS wells is above our base case expectations and we remain on target to provide an update at the Capital Markets Day in March whilst continuing to make progress towards the next operational steps for our portfolio.” Another analyst spoke out in favour of Hurricane the next day.

Ashley Kelty, an equity research analyst at Whitman Howard, suggested the fall was a “knee-jerk” reaction to recent results, Brexit and the spread of coronavirus, according to Energy Voice. He said: “The coronavirus has spooked markets across the globe, and oil has suffered as a consequence over concerns about a drop in economic activity and ergo oil demand.

“There has been an overreaction to the fall in oil prices for UK stocks – Hurricane, Serica, and Rockrose to name but three.”Hurricane’s shares briefly recovered after this update – bouncing up from 22p to 24p – but have since continued there downward trajectory.

What now?

Last Thursday, 6th February, Hurricane updated the market again, breaking the news that it may have to plug and abandon its Lincoln Crestal well off the coast of the Shetland Islands. The firm added though that it was preparing to speed-up production at its Greater Lancaster Area in the North Sea. But this was not enough to win over investors, with its share price dropping again from 21p to 17p last week.

Is there a glimmer of hope for Hurricane’s suffering shareholders? Barclays analyst James Hosie said last week said Hurricane was failing to elevate itself from “a basement reservoir concept with niche investor appeal into an established UK oil and production growth business”, according to an Investors Chronicle report. But Investors Chronicle itself has maintained a “hold” rating on the stock, noting: “The exploration troubles have taken away some upside expectation but the transition from explorer to developer to producer is never totally smooth.” today shares trade at 16p.

In December our friends IG index covered a news update, cautioning with a stop

The author was remunerated but does not hold shares in the company