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Broker upgrade sees 125% upside for Hurricane Energy shares

Published: 11:58 12 Dec 2017 GMT

oil and gas operations
A new price target has been set at 70p.

Royal Bank of Canada has upgraded its target price for Hurricane Energy PLC (LON:HUR), following the UK offshore oiler’s new resource estimates.

The broker’s new target of 70p suggests some 125% upside to Hurricane’s current price of around 31p.

READ: Hurricane Energy confirms FPSO works on track to deliver Lancaster start-up on time

“Although production history (through 2019) will be needed to full convince a farmin partner, the stock remains one of the cheapest,” RBC analyst Nathan Piper said in a note.

Oil inventory rises to 2.6bn barrels

Hurricane on Monday unveiled a long awaited competent persons report which gave maiden estimates for the new Halifax and Lincoln discoveries, plus a prospective number for un-drilled Warwick, taking the group’s total crude inventory to 2.6bn barrels.

Then today, the company confirmed that operations at a dry-dock in Dubai are advancing with the Lancaster field on-track for first production in the first half of 2019.

In the past week, Hurricane shares are up some 15%.

Piper sees the shares going much higher, as the group’s assets continue to advance and de-risk.

Passed every test so far

“The company has passed every test so far, successfully determined how to drilling into basement, conducted successful short term production tests (over 15,000b/d) and crucially securing funding to progress development of Lancaster,” the analyst said in a note.

“The final test will be endorsement from industry through a farm-in to fund full development of Lancaster and appraisal of Halifax/ Lincoln.

“In our view, the Lancaster Early Production System (EPS) is critical to demonstrating unequivocally to industry (and investors) that the fractured basement at Lancaster can produce sustainably (concerns remain around water breakthrough and longer term deliverability).

“The company remains on track to deliver first oil H1/19 with the Aoka Mizu FPSO vessel upgrade, buoy and Christmas tree fabrication all underway.”

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