Canaccord Genuity upgrades Hurricane to 'hold'

7th Apr 2022 13:40

(Sharecast News) - Analysts at Canaccord Genuity upgraded exploration and production firm Hurricane Energy from 'sell' to 'hold' on Thursday, stating the group appeared to be "pivoting to better times".

Canaccord Genuity said Hurricane has "had a couple of very tough years", but noted that over the past six months, "the glimmer of hope has grown".

For much of the last two years, Canaccord said it had considered the risks associated with two basement production wells, now down to one, together with the looming mid-2022 FPSO lease expiry, July 2022 convertible bond maturity, and the weak oil prices added up to "a very challenging story".

However, the Canadian bank said all of those key issues had since improved, with production from Hurricane's Lancaster well #6 bing "much better" than it had expected and oil prices, of course, being "extremely favourable".

"There is still, in our view production risk, and we think the valuation is a little ahead of events. Nevertheless, Hurricane is a continuing turnaround story which looks to be in the process of pivoting towards a highly cash generative outlook that could open the way to a brighter future beyond the single Lancaster well," said Canaccord, which raised its target price on the stock from 2.6p to 9.0p.

"We recognise the new target price is substantially above our valuation of 5.3p, but given the near term oil price strength (at $100/bbl Brent 2022 and 2023 our valuation would increase to 8p) and the potential tax loss value (to Hurricane or an acquiror) we believe that 9p is a reasonable assessment of current value."