Portfolio

Morgan Stanley reiterates 'buy' for shares of Hurricane Energy

By Alexander Bueso

Date: Thursday 16 May 2019

Morgan Stanley reiterates 'buy' for shares of Hurricane Energy

(Sharecast News) - Analysts at Morgan Stanley reiterated their 'buy' recommendation for shares of Hurricane Energy, telling clients they continued to see a "realistic bull case" for the company under which its shares would trade over five times higher by the end of 2020.
According to the investment bank, the outfit's shares were akin to a 'call' option, potentially offering "a very big pay-off".

Linked to the above, they pointed out four potential catalysts for the share price over the next rougly two months.

The triggers mentioned by Morgan Stanley were: the startup of the early production system at Lancaster, lifting of the first cargo from Lancaster, results from Warwick-Deep exploration well at Hurricane's Lincoln and Warwick assets, and the company's Capital Markets' Day which was tentatively expected for late July.

"We believe even an announcement of the CMD will itself be a good signaling factor," they said.

Nevertheless, they did also warn that even if those catalysts turned out positively, there might continue to be "significant uncertainty" around the ultimate recovery of reserves at the Lancaster field.

Under said 'bull" case scenario, which assumed a long-term price for oil of $75.0 a barrel, and a value of $8.0 for each of the approximately 785m barrels of 2C reserves at Lancaster and Lincoln, Morgan Stanley estimated a net asset value for the shares of 347.0p.

However, under their base case scenario the projected NAV was now a lesser 58.0p, which was down from 56.0p previously, and under its bear case it was 17.0p, which was up from 14.0p previously.

"We believe a Price Target at this point is not relevant, given the wide range of valuation outcomes."

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