Shares of Hurricane Energy PLC (LON: HUR) edged higher after announcing its decision not to renew the charter for the Aoka Mizu vessel currently in use at its Lancaster offshore oilfield.
The bareboat charter for the Aoka Mizu vessel expires in June 2022 unless it exercises the option to extend it for three years, starting June 2022 to June 2025.
Hurricane Energy’s board cited that current projections for the Lancaster oil field do not support the high financial costs it could incur from leasing the vessel for another three years.
The oil company said that it had opened negotiations with Bluewater Energy Services, the owners of the Aoka Mizu, to get favourable terms for the charter’s extension for a period of fewer than three years.
Hurricane Energy also noted that there were no guarantees that it would reach an agreement with Bluewater before the current charter expires in June 2022, which would likely lead to the winding down of its business operations.
Investors cheered today’s announcement as a proactive move by the oil company’s management to reduce its financial commitments, but today’s move may not be enough to save the firm from its dire financial straits.
The massive downgrade of the Lancaster oilfield’s proven, and probable reserves from 2.6 billion barrels of oil equivalent to 7.1 million barrels has placed the company in an impossible position given the challenges it has faced drilling another well at Lancaster.
Hurricane Energy would have to commit significant financial resources, which it doesn’t have at the moment. The company is currently negotiating with bondholders who will vote on its restructuring plan on 11 June 2021.
As an investor, I would stay away from this company given its risks, as other companies have better prospects.
*This is not investment advice.
Hurricane Energy share price.
Hurricane Energy shares edged 10.32% higher to trade at 1.261p, rising from today’s opening price of 1.143p.
Hurricane Energy shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Hurricane shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies
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