Hurricane agrees up to £249m sale to Prax

Hurricane Energy plc has agreed to be sold to Prax Exploration & Production plc in a deal of staged returns of up to £248.9 million to shareholders, depending on the performance of the Lancaster field.

ASSETS

Hurricane focuses on fractured basement reservoirs offshore West of Shetlands and has a 100% operated interest in the Lancaster field.

As at 31 December 2022, Lancaster’s proved and probable reserves were 6.6 mmbbls.

Hurricane is currently producing 7,710 bbls/d from a single well, with a water cut of 52%.

The company projects that production of 2P reserves will continue until August 2025 when the Lancaster field will be abandoned.

As at 28 February 2023, Hurricane had net free cash of $140.1m and $60.7m cash and liquid investments within restricted funds.

FIRM PROCEEDS

The recommended acquisition will result in each Hurricane shareholder being entitled to receive 4.15 pence for each share.

This comprises the transaction dividend of 3.32 pence per share in cash (£66.1m) and the cash consideration of 0.83 pence per share in cash (£16.5m).

DEFERRED CONSIDERATION

In addition, each Hurricane shareholder will receive a supplementary dividend of up to 1.87 pence per share in cash (£37.2m), and a “deferred consideration unit”, which may deliver up to 6.48 pence per share in cash (£129.1m).

The company said that the acquisition represented a premium of approximately 84% to the closing price per Hurricane share of 6.80 pence on 1 November 2022.

If shareholders only receive the firm proceeds, the acquisition is valued at £82.7 million, a discount of approximately 39%.

MITIGATED RISKS

Chairman Philip Wolfe added that the formal sales process had been thorough and exhaustive.

“The Hurricane board believes that the acquisition will deliver more cash than Hurricane shareholders are likely to have received from Hurricane’s Lancaster oil field, on a much expedited timeframe, as well as mitigating the risks associated with production from a single well development.

“In addition, the deferred consideration units offer the opportunity to share in future production out-performance or higher oil prices, as well as revenue from future acquisitions by Hurricane.”

PRAX

Prax, a wholly-owned subsidiary of State Oil Ltd, aims to build an upstream business in the North Sea, to complement its midstream and downstream activities.

The £1.7 billion company is reported by The Times to be owned by chairman and chief executive officer Winston Sanjeev Kumar Soosaipillai and chief human resources and corporate officer Arani Kumar Soosaipillai.

Companies House reported the appointments of Alessandro Agostini and Iain Charles Mckendrick as directors on 15 March.

Mr Soosaipillai said that Prax had revenues of $10 billion and 1,274 employees across seven countries.

“We see great strategic value in being a fully integrated energy company and have invested in experienced upstream and M&A management teams to drive this.

“The acquisition of Hurricane will provide a strong foundation for further upstream investments.”