Hurricane Energy Plc

Hurricane Energy Plc (LON: HUR) is a UK based oil and gas company which engages in the exploration of oil and gas reserves. Hurricane Energy Plc was developed to extract hydrocarbon resources from naturally fractured reservoirs.

Recent Update
On 20th December 2019, Hurricane Energy announced the selection of Ms Beverley Smith as director non-executive effective immediately.

Trading Update
On 13^th December 2019, Hurricane Energy announced its operational and trading update and Licence Updatefor P1368. The company’s Lancaster EPS (Lancaster Early Production System) wells delivered strong performance with good natural flow rates and a decline in minimal bottom hole pressure. The company’s license P1368 extended for five years in Lincoln and Lancaster subareas, while sub-areas Strathmore and Whirlwind had been relinquished. The company expect its total production in the financial year 2019 to be 3.1 million barrels of oil, with an average rate per barrels of 13,300 per day. The company’s oil sales across seven cargoes were 2.8 million barrels. The total revenue at the end of financial year 2019 stood at around USD 165 million, while the unrestricted cash to be around USD 150 million at the year end. The company’s average production rate before operational downtown is expected to be around 20,000 barrels per day and will be tested as a part of the testing programme. Prior to any shut-ins required for debottlenecking and tie-ins, the Lancaster EPS facilities availability stood at 90 per cent.

Share Price Performance

Daily Chart as at 27^th December 2019, before the market close (Source: Thomson Reuters)

On 27^th December 2019, Hurricane Energy Plc shares were trading at GBX 30.93 at the time of writing before the market close (at 8:50 AM GMT), up by 0.88% against the previous day closing price. Stock's 52 weeks High and Low are GBX 64.70/GBX 28.54.The company’s stock has given investors 3.93 per cent of a positive return in the one week. The company’s stock has given investors 30.85 per cent of a negative return in the last year.

Valuation Methodology

*Peers: Energean Oil & Gas Plc, Parkmead Group Plc, Rockhopper Exploration Plc and Caspian Sunrise Plc

Conclusion
The company reported a robust set of financial numbers in the first half of the fiscal year 2019. The company recognised revenue for the first time by selling a single cargo of crude oil which determines the growth of the company is on the right track. There are some principal risks associated with the business of the company. The company requires substantial capital for its business and failure of raising fund could curtail the growth of the company. There are many production-related operational risks which could hamper the operations of the company. There is a risk that the reservoir does not behave as expected, which could affect the operations of the company. There is uncertainty regarding regulatory obligations, which could impact the company’s revenue. There is uncertainty related to oil price fluctuation, which is critical to the company and could impact the operating costs and profitability of the company.
The company has a promising outlook regarding its business. Various new productions and developments are in the pipeline, which would generate value for the company. The company has given production guidance of over 2.8 million barrels for the Lancaster Early Production System. The company is expected to sign various contracts on its operations front, which would grow the business of the company. The company proactively manages operations to have zero fatalities. The company is on the road to obtain all required permits and develop appropriate internal processes to support operations. The company is looking attractive and is in the growth phase and provide opportunities for long term investment.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “SPECULATIVE BUY” recommendation at the current price of GBX 30.45 (as on 27th December 2019, at 8:10 AM GMT) with single-digit upside potential based on 6.80x NTM EV/Sales (approx.) on FY19E Sales (approx.)

Inspirit Energy Holdings Plc

Inspirit Energy Holdings Plc (LON: INSP) is a construction and materials company based out of London, the United Kingdom. The company is engaged in the production and commercialisation of mHCP (micro Combined Heat and Power) boiler for various industrial applications. Inspirit charger is the leading product of the company.

Financial Highlights – Financial Year 2019 (30^th June 2019, GBP, thousand)

(Source: Annual Report, Company Website)
 
For the financial year ending 30^th June 2019, as the group is still in the development phase, no revenue was reported during the period. While the administrative expenses declined to £264 thousand in FY19 from £545 thousand in FY2018, operating loss declined from £969 thousand in FY2018 to £264 thousand in FY2019. Similarly, loss before tax decreased to £264 thousand in FY2019 from £973 thousand in FY2018. Total loss from continuing operations attributable to shareholders declined to £239 thousand in FY2019 against £953 thousand recorded in FY2018, which corresponded to a basic and diluted loss per share of 0.017 pence, against a loss per share of 0.07 pence in FY2018. The cash and cash equivalents surged to £40 thousand in FY2019 as compared to the previous year (FY18: £45 thousand).

Share Price Performance

Daily Chart as at 27^th December 2019, before the market close (Source: Thomson Reuters)

On 27^th December 2019, Inspirit Energy Holdings Plc shares were trading at GBX 0.077 at the time of writing before the market close (at 10:00 AM GMT) and remained same against the previous day closing price. Stock's 52 weeks High and Low are GBX 0.65/GBX 0.02.The company’s stock has given investors 36.36 per cent of a positive return in the one week. The company’s stock has given investors 31.82 per cent of a negative return in the last month.

Conclusion
In January 2020, the Inspirit team will be demonstrating a 3D model of the redesigned engine and application. During 2020, the company is expected to produce the initial unit with the assistance of the engineering partner in Poland. The accomplishment of the unit will allow them to have a unit prepared for batch production.Profitability margins were in the negative zone. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

The company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.  The group’s board will continue to monitor developments, consider the effect on the company’s businesses and take appropriate action to help mitigate any risks associated with the United Kingdom leaving the European Union. With the failure to manage financial resources properly and forecast material exposures, the company might encounter financial risks.

Based on the above risks as aligned with the company’s operations, we have given a "WATCH" recommendation at the current price of GBX 0.085 (as on 27^th December 2019, before the market close at 8:30 AM GMT), with support from few catalysts needs to be evaluated at a later stage.
 
*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.76557 GBP.

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