UK focused oil and gas play Hurricane Energy (HUR:AIM) is starting operations on the final well of what has been until now a hugely successful drilling campaign.

The shares are up 1.5% today to 50.3p but have advanced 405% in the last 12 months and by more than quarter since we last looked at the investment case in October.

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SECRET TO SUCCESS

The secret to Hurricane’s success has been to target fractured basement reservoirs. A largely untapped source of hydrocarbons beneath the sandstones which have accounted for the majority of the UK’s historic oil production. Yemen, Libya and Vietnam have successfully exploited fractured basement reservoir potential and Hurricane looks to be on the road to emulating this success.

Hurricane is concentrating its efforts in the area of the North Sea West of Shetland. It’s first big success came with the Lancaster well in June 2014 and, ultimately, it is estimated the company has uncovered as much as 500 million barrels of oil. This activity has been backed by shareholders with the company raising more than £120m in placings in 2016.

This latest well, Halifax, could prove to be an extension of the Lancaster discovery and potentially double resource estimates.

BROKERS BULLISH

Despite a strong run for the share price, brokers remain bullish. Cantor Fitzgerald analyst Sam Wahab reiterates his ‘buy’ recommendation and 69p price target.

FinnCap’s Dougie Youngson also stays at ‘buy’ with a 91p price target. He comments: ‘Hurricane is aiming to submit its Field Development Plan (FDP) for the Lancaster field by the end of the first half of this year. We can therefore expect more newsflow as it works towards this target.’

Before it submits its FDP it needs to raise as much as $400m to the fund the development of the field. The aim is to commence output in 2019.

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Issue Date: 16 Jan 2017