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GWA farm-in accelerates resource monetisation

Hurricane Energy 5 October 2018 Update
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Hurricane Energy

GWA farm-in accelerates resource monetisation

Farm-in update

Oil & gas

5 October 2018

Price

55p

Market cap

£1,078m

US$/£1.33

Net debt ($m) at June 2018 including convertible debt

30.8

Shares in issue

1,959.6m

Free float

75%

Code

HUR

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.9

21.1

82.7

Rel (local)

1.7

23.8

83.6

52-week high/low

60p

24p

Business description

Hurricane Energy is an E&P focused on fractured basement exploration and development in the West of Shetland region. The company’s 100%-owned Lancaster oil discovery (523mmbbl 2P reserves + 2C resources) is targeting first oil in 1H19.

Next events

Lancaster EPS first oil

H119

Analysts

Sanjeev Bahl

+44 (0)20 3077 5742

Elaine Reynolds

+44 (0)20 3077 5713

Carlos Gomes

+44 (0)20 3077 5700

Hurricane Energy is a research client of Edison Investment Research Limited

Hurricane Energy recently farmed out 50% of its Lincoln and Warwick licences covering the Greater Warwick Area (GWA) to Spirit Energy. This transaction is intended to accelerate the de-risking and monetisation of GWA, adding a new leg to the Hurricane business model running in parallel with the development of the Greater Lancaster Area (GLA). Under the terms of the farm-in, Hurricane will retain a 50% working interest in GWA licences in return for a net carry of $137.2m through a two-phase initial work programme and $150–250m contingent carry on net GWA full field development (FFD) expense. We update our valuation to reflect the terms of the Spirit Energy farm-in, driving our RENAV from 81.0p/share to 102.8p/share (+26.9%). We believe the transaction materially accelerates the de-risking of Hurricane’s Rona Ridge asset base, both in terms of GWA resource and the ability to focus Lancaster EPS cash flows on fast-track appraisal of the GLA resource base. Key valuation uncertainties include resource recovery from the GLA and GWA FFDs – we expect reserve and resource estimates to tighten on the back of further appraisal and EPS performance.

Year end

Revenue
($m)

EBITDA
($m)

Operating cash
flow ($m)

Capex*
($m)

Net cash/
(debt) ($m)

12/16

0.0

(8.8)

(5.6)

(63.5)

98.1

12/17

0.0

(14.6)

(8.1)

(265.7)

133.5

12/18e

0.0

(4.7)

(10.1)

(229.6)

(114.9)

12/19e

128.4

43.2

28.6

(96.5)*

(182.8)

Note: *Capex is net of carried investment by Spirit Energy and includes 5% cost contingency for EPS.

Lancaster EPS on-track for H119

The Lancaster EPS remains on track for first oil in H119. Subsea umbilicals, risers and flowlines (SURF) installation scope has been completed and next steps involve completion of FPSO sea trials, vessel movement to location, hook-up and commissioning. We continue to assume first oil towards the end of H119, which could prove to be conservative based on current progress.

Active 2019 drilling programme

Hurricane has an active 2019 well programme, with three E&A wells planned for the GWA. The first well is likely to be drilled at Lincoln, which would provide a potential tie-back for the Aoka Mizu FPSO, taking gross oil production to 30kbod. Two further wells target Warwick, testing basement reservoir connectivity across large-scale faults and deep oil productivity closer to mapped oil water contact.

Valuation: GWA farm-in accretive to RENAV

Our valuation increases to 102.8p/share after incorporating the Spirit Energy farm-in, driven by accelerated cash flow from the GWA tie-back to the Lancaster EPS and 500mmboe GWA FFD. We had previously only assumed farm-out of a 250mmboe development for Lincoln. We also increase our short-term oil price assumptions for 2018 and 2019 based on the latest EIA projections.

GWA farm-in details

Partner brings technical expertise and financial firepower

We view Spirit Energy as an appropriate partner for Hurricane Energy, as it brings technical expertise in field development, operatorship capability and financial firepower. Spirit Energy was created in 2017 following the combination of Centrica’s exploration and production business (69% owned) and Bayerngas Norge (31% owned), and has a team of more than 800 people focused on assets in Europe, overseeing production of 50mmboe per year, with a reserves/resource base of over 600mmboe.

Farm-in five phases

Spirit Energy’s farm-in to GWA can be broken down into five distinct phases. In the first, starting in 2019, Hurricane is to be fully carried up to a maximum of $180.6m gross, on its share of work programme including a three-well drilling programme. This will accelerate the exploration of Warwick and appraisal of Lincoln, including preparation works for the tie-in of one or more producers to the Aoka Mizu. The Transocean Leader semi-submersible has already been contracted, providing visibility on 2019 drilling catalysts.

Contingent on Phase 1 success, in 2020 Hurricane will be 50% carried for its share of an estimated $187.5m gross programme to tie back one GWA well to the Aoka Mizu, including tie-in to the West of Shetland Pipeline (WOSP) gas export system. The tie-in is a key requirement for enhancing Aoka Mizu throughput to 40kbod, as current flaring consents are unlikely to be extended to cover this level of production.

Phase 3 includes drilling three additional wells on GWA for further appraisal and providing well stock for the FFD. Phase 4 is front end engineering and design (FEED) and Phase 5 sanction of FFD targeting a 500mmboe resource. There will be a further contingent carry contribution by Spirit Energy of $150–250m for Hurricane’s share of GWA FFD costs dependent on the reserves included in the FID for the FFD. Hurricane is to remain operator until commencement of the FFD workstreams (including FEED), at which point operatorship will transfer to Spirit Energy.

Exhibit 1: Hurricane Energy operational activity timeline

Source: Hurricane Energy

GWA: Accelerated monetisation of Lincoln and Warwick

The GWA encompasses Lincoln, discovered by Hurricane’s 2016 well, 205/26b-12, together with Warwick, which has yet to be drilled. 205/26b-12 established that Lincoln was a separate accumulation to Lancaster, based on the large differences (>500m) seen in the interpreted oil water contact depths of the two structures. Hurricane attributes the barrier effect between Lancaster and Lincoln to the Brynhild Fault Zone, and has also identified a splay system of large-scale faults that may further intersect the GWA.

Exhibit 2: GWA well locations map

Source: Hurricane Energy

Three horizontal wells will be drilled in the 2019 campaign, with one to appraise Lincoln and two to explore Warwick. Each well will have a 1km horizontal section through the reservoir and will be logged and tested. They are located so that one well will be drilled in each potential fault compartment, allowing drill stem test (DST) pressure data to be used to determine whether the large-scale faults are acting as pressure barriers. The wells will all be drilled at different reservoir depths, ranging between 1,770m and 1,900m, and this should also allow an oil gradient to be defined from DST pressures if no fault compartmentalisation is seen (Hurricane’s experience in collecting pressure data and samples using wireline tools in basement reservoirs is that it is challenging, and no such pressures or samples were recovered in 205/26b-12). One of the wells, 205/26b-C, will be drilled below structural closure to demonstrate oil flow from this deeper section.

Exhibit 3: Schematic of proposed well locations (not to scale)

Source: Hurricane Energy

In the event of success, each well will be suspended as a future producer, and management expects that the Lincoln well will be tied back to the Aoka Mizu to facilitate early production. This will provide data for planning the first phase of a GWA FFD, while attributing reserves and providing cash flows.

Valuation

We had assumed a farmed-out 250mmboe development for Lincoln in our last published valuation. This has now been replaced by the terms of the Spirit Energy GWA farm-in, which envisages a larger FFD for the GWA (Lincoln/Warwick) at a targeted 500mmboe gross.

Other key changes to our valuation include an upgrade to our short-term oil price assumptions, which are based on EIA figures for 2018 and 2019, at $72.8/bbl and $73.7/bbl. This predominantly affects our valuation of the Lancaster EPS (+3% in dollar terms), assuming first oil in H119, as our long-term oil price assumption of $70/bbl Brent from 2022 remains unchanged.

Based on our model, we see potential for Hurricane to produce more than 100kboed net at peak, assuming a GLA and GWA resource base in line with company 2C estimates. As can be seen in Exhibit 4 below, the Spirit Energy farm-in adds a material leg to forecast net production and cash flow beyond the Lancaster EPS phase from 2024.

Exhibit 4: Modelled net production for GLA and GWA field developments*

Source: Edison Investment Research. Note: *Assumes 50% equity in GWA FFD post Spirit Energy farm-in and 46% equity in Lancaster post assumed farm-in.

Our post-transaction valuation is detailed below. We believe the market is likely applying a higher risking to GWA/GLA full field development than our current estimates in anticipation of potential de-risking, as the Lancaster EPS provides data on well productivity and basement reservoir pressure response. Recoverable resource estimates for GLA and GWA remain key areas of uncertainty; current P10 to P90 ranges remain relatively wide but are expected to narrow post the Lancaster EPS phase and further appraisal. We use 2C or mid-case prospective estimates where provided.

We include the Spirit Energy farm-in terms in our valuation as per the announced transaction, but continue to assume a farm-in for Lancaster FFD and Halifax based on an assumed farm-in partner IRR of 20%. This assumption assumes that a farm-in partner fully carries Hurricane through the development phase in return for a working interest in the project. Under our base case, Hurricane would release 54% of its equity in the FFD under our modelled transaction. The value dilution through farm-out is significantly less than 54% given the assumed cost carry, which is reflected in our valuation of Hurricane’s retained equity stake. In this analysis, we assume that the farm-in partner retains the value of tax losses created from both its equity capex and carried capex, as is the case under the Spirit Energy transaction.

Edison RENAV reflects farm-in and higher 2019 oil price

Exhibit 5: Hurricane Energy valuation breakdown

 

 

 

Recoverable reserves

 

Net risked

Value per share

Asset

Country

Diluted WI

CCoS

Gross

Net

NPV/boe

value

Risked

No of share: 2401.9**

%

%

mmboe

mmboe

$/boe*

$m

/share(p)

Net (debt)/cash at YE17 ex convert (assumed conversion)

100%

100%

360

11.3

SG&A (2 years)

100%

100%

(17)

(0.5)

Lancaster EPS - 10y

UK

100%

100%

57

57

13.3

766

24.0

Core NAV

 

 

 

57

57

 

1,109

34.7

Contingent

Lancaster FFD (post-EPS)***

UK

46%

81%

451

207

6.8

1,137

35.6

Contingent RENAV

 

 

 

451

207

 

1,137

35.6

GWA tie-back (carried)

 

50%

72.0%

20

10

11.1

80

2.5

GWA FFD (part carried)

50%

49.0%

478

239

5.8

678

21.2

Halifax 250mmbo dev***

 

46%

45.0%

250

115

5.4

280

8.8

Total inc exploration RENAV

 

 

 

1,256

629

 

3,285

102.8

Source: Edison Investment Research. Note: *$/boe value where we assume farm-out includes cost carry (US$/£1.33). **Assumes conversion of convertible debt. ***Assumed farm-out at 20% farminee IRR.

Valuation sensitivities

Our valuation of Hurricane is highly sensitive to our underlying oil price assumptions. In our base case, we use the EIA’s short-term forecasts ($72.8/bbl Brent in 2018 and $73.7/bbl in 2019) and a long-term oil price of $70/bbl (from 2022). Below we look at the oil price sensitivity of our total risked valuation. The market appears to be either taking a conservative view on asset risking and/or implying a lower long-term oil price than Edison.

Other key valuation sensitivities include WACC and, to a lesser extent, opex and capex assumptions. We note that our valuation is relatively insensitive to capex assumptions, as we assume Lancaster EPS capex is largely fixed and, under our Lancaster FFD farm-out scenario, Hurricane is fully carried.

Exhibit 6: Hurricane risked valuation sensitivities

Exhibit 7: RENAV waterfall

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 6: Hurricane risked valuation sensitivities

Source: Edison Investment Research

Exhibit 7: RENAV waterfall

Source: Edison Investment Research

Risks and sensitivities

Hurricane is subject to several sector-specific and company-specific risks. We highlight the key risks below.

Sector risks

Generic sector risks include:

commodity price volatility;

geological risk and uncertainty and reservoir performance uncertainty;

recent studies on project execution in the upstream oil and gas sector suggest that up to 60% of projects incur delays and capex overruns versus FID expectations;

small-/mid-cap availability of funding: while we include the potential dilutive impact of equity funding and farm-outs in our valuation, if the cost of capital implied by equity financing or farm-outs is higher than our estimates, this could lead to additional equity NAV/share dilution.

volatility in service sector availability and pricing.

Company-specific risks

Asset concentration: the bulk of Hurricane’s value is based on one large, concentrated asset base and a play new to the UKCS (basement reservoir is a relatively less understood play compared to conventional sandstone reservoir). Hurricane’s recent transaction with Spirit Energy provides an element of asset diversification, with visibility on the development of GWA as well as GLA.

Geographical concentration: Hurricane is 100% exposed to the UKCS and petroleum fiscal terms, which have been volatile over the last decade. While tax terms and capital allowances are currently favourable versus other mature basins, there is no certainty they will not change if oil prices rise significantly from current levels, potentially reducing equity holder leverage to a rising oil price.

Funding risks: our valuation assumes farm-out of GLA FFD in return for a development cost carry assuming a farm-in partner IRR of 20%. Value dilution through farm-out and access to developing funding for GLA FFD is explicitly assumed in our valuation.

Financials

Short-term cash flow and balance sheet items are driven by Hurricane’s investment in the Lancaster EPS ahead of first oil, which we model in H119.

Exhibit 8: Lancaster EPS phase development cash flows

Exhibit 9: Lancaster EPS production expectations

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 8: Lancaster EPS phase development cash flows

Source: Edison Investment Research

Exhibit 9: Lancaster EPS production expectations

Source: Edison Investment Research

Hurricane is fully funded for the EPS phase, with contingency based on current capex forecasts. GWA exploration and appraisal (three wells) are fully carried by Spirit Energy in 2019, and GLA drilling activity is likely to be funded through Lancaster EPS cash flows in 2021. Assuming successful de-bottlenecking of the Aoka Mizu FPSO to enable 40kbod of gross production, an option exists to tie back an additional GLA producer to the FPSO, accelerating monetisation of Hurricane’s GLA resource base. Indicatively, this could add c 10p/share to our valuation.

Exhibit 10: Forecast net cash and gearing

Exhibit 11: Group operating cash flow and FCF

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 10: Forecast net cash and gearing

Source: Edison Investment Research

Exhibit 11: Group operating cash flow and FCF

Source: Edison Investment Research

The recent rise in oil price increases the likelihood and value retained net to Hurricane should the company look to farm out GLA full field development or appraisal of its other assets.

Hurricane remains relatively unleveraged with the company’s only debt being a $230m convertible bond due in 2022 bearing interest of 7.5% and convertible at $0.52/share. We assume the bond converts in our RENAV, treating this debt instrument as equity.

Exhibit 12: Financial summary

US$m

 

 

2016

2017

2018e

2019e

2020e

2021e

2022e

2023e

2024e

2025e

Dec

 

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

 

0.0

0.0

0.0

128.4

396.4

510.4

506.3

519.0

531.9

1,120.2

Operating Expenses

(8.9)

(14.6)

(4.7)

(112.7)

(224.3)

(254.1)

(254.1)

(254.1)

(254.1)

(440.1)

EBITDA

 

 

 

(8.8)

(14.6)

(4.7)

43.2

260.0

359.9

355.8

368.4

381.4

850.8

Operating Profit (before amort. and except.)

 

 

(8.9)

(14.6)

(4.7)

15.7

172.1

256.3

252.2

264.8

277.8

680.1

Exploration expenses

0.0

(10.4)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

10.4

(70.2)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Operating Profit

(8.9)

(14.6)

(74.9)

15.7

172.1

256.3

252.2

264.8

277.8

680.1

Net Interest

2.5

7.6

(7.6)

(14.6)

(14.6)

(14.6)

(14.6)

(14.6)

(14.6)

(14.6)

Profit Before Tax (norm)

 

 

 

(6.4)

(7.0)

(12.3)

1.1

157.4

241.7

237.6

250.2

263.2

665.5

Profit Before Tax (FRS 3)

 

 

 

(6.4)

(7.0)

(82.4)

1.1

157.4

241.7

237.6

250.2

263.2

665.5

Tax

7.3

0.0

0.0

0.0

0.0

(13.1)

(28.6)

(32.4)

(122.7)

(131.2)

Profit After Tax (norm)

0.9

(7.0)

(12.3)

1.1

157.4

228.7

209.0

217.8

140.5

534.3

Profit After Tax (FRS 3)

0.9

(7.0)

(82.4)

1.1

157.4

228.7

209.0

217.8

140.5

534.3

Average Number of Shares Outstanding (m)

889.5

1,583.8

1,958.4

1,958.4

1,958.4

1,958.4

1,958.4

1,958.4

1,958.4

1,958.4

EPS - normalised (c)

 

 

 

0.1

(0.4)

(0.6)

0.1

8.0

11.7

10.7

11.1

7.2

27.3

EPS - normalised and fully diluted (c)

 

 

0.1

(0.4)

(0.6)

0.1

8.0

11.7

10.7

11.1

7.2

27.3

EPS - (IFRS) (c)

 

 

 

0.1

(0.4)

(4.2)

0.1

8.0

11.7

10.7

11.1

7.2

27.3

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

NA

NA

NA

12.3

43.4

50.2

49.8

51.0

52.2

60.7

EBITDA Margin (%)

NA

NA

NA

33.6

65.6

70.5

70.3

71.0

71.7

76.0

Operating Margin (before GW and except.) (%)

NA

NA

NA

12.3

43.4

50.2

49.8

51.0

52.2

60.7

BALANCE SHEET

Fixed Assets

 

 

 

305.6

587.9

859.8

928.8

850.9

1,048.8

1,387.7

1,518.9

1,765.3

1,739.3

Intangible Assets

302.5

126.4

127.7

127.7

127.7

127.7

127.7

127.7

127.7

127.7

Tangible Assets

0.0

445.3

724.5

793.5

715.6

913.5

1,252.3

1,383.6

1,630.0

1,604.0

Investments

3.0

16.3

7.6

7.6

7.6

7.6

7.6

7.6

7.6

7.6

Current Assets

 

 

 

106.3

350.1

111.2

43.3

278.7

309.5

179.6

266.2

160.3

720.6

Stocks

0.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

1.4

Debtors

7.3

4.7

5.6

5.6

5.6

5.6

5.6

5.6

5.6

5.6

Cash

98.6

343.9

104.2

36.3

271.6

302.5

172.6

259.2

153.3

713.5

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

 

(26.3)

(28.8)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

Creditors

(26.3)

(28.8)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

(51.5)

Short term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

 

(6.0)

(226.7)

(317.0)

(317.0)

(317.0)

(317.0)

(317.0)

(317.0)

(317.0)

(317.0)

Long term borrowings

0.0

(191.1)

(194.5)

(194.5)

(194.5)

(194.5)

(194.5)

(194.5)

(194.5)

(194.5)

Other long term liabilities

(6.0)

(35.6)

(122.5)

(122.5)

(122.5)

(122.5)

(122.5)

(122.5)

(122.5)

(122.5)

Net Assets

 

 

 

379.6

682.5

602.5

603.6

761.1

989.8

1,198.8

1,416.6

1,557.1

2,091.3

CASH FLOW

Operating Cash Flow

 

 

 

(5.6)

(8.1)

(10.1)

28.6

245.3

332.3

312.6

321.4

244.1

705.0

Cash tax paid

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Capex*

(63.5)

(265.7)

(229.6)

(96.5)

(10.0)

(301.5)

(442.5)

(234.9)

(350.0)

(144.7)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Financing

160.6

301.2

(6.7)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

91.5

27.4

(246.4)

(67.9)

235.3

30.8

(129.9)

86.6

(105.9)

560.3

Opening net debt/(cash)

 

 

 

(11.3)

(98.1)

(133.5)

114.9

182.8

(52.5)

(83.3)

46.5

(40.0)

65.9

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(4.7)

8.0

(2.1)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

 

(98.1)

(133.5)

114.9

182.8

(52.5)

(83.3)

46.5

(40.0)

65.9

(494.4)

Source: Company accounts, Edison Investment Research. Note: *Includes net capex for GWA wells and FFD after carry and assumes farm-out of GLA for full development carry using a farminee 20% IRR.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hurricane Energy and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hurricane Energy and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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