Shares in Hurricane Energy (HUR ) jumped on Thursday following the publication of its half-year results for the six months to 30 June 2021 as the company swung to a profit.

The UK based oil and gas company, which is focused on hydrocarbon resources in naturally fractured basement reservoirs, reported 1H21 profit after tax of $42.8 million, up from a loss after tax of $307.8m in 1H20 while revenue rose to $124.5m in 1H21 from $81.9m in 1H20.

The Group’s revenue rise was largely as a result of a strong recovery in crude oil prices. Over 2 million barrels of Lancaster crude were sold across four cargoes, to generate $124.5m.

Over the period, the Group generated positive cash flow from operations of $75.9 million, as a result of the low operating costs and production efficiency of the company’s Lancaster EPS. 

In regard to the operations at the Greater Lancaster Area (GLA), Aoka Mizu FPSO continued to deliver excellent uptime, with an average field production uptime of 96% reported in 1H21.

At Lancaster EPS, where a  10-million-barrel production milestone was reached, production averaged 11,100 bopd for 1H21 (1H20: 14,600 bopd), primarily from the 205/21a-6 well alone, with the 205/21a-7z well remaining shut in to manage reservoir voidage and pressure decline.

At 30 June 2021, the Group had $132.3m of net free cash (unrestricted cash net of payables and accruals and including trade receivables), a rise of $20.9m from 31 December 2020.

Despite the swing to profit during the period, Antony Maris, Hurricane Energy’s Chief Executive, said uncertainty still remains regarding the group’s ability to repay its bonds.

Addressing shareholders, he outlined that “recent stronger oil prices combined with the impact of the bond buyback, internal cost cutting, and other cost reduction measures, has brought the possibility of bridging the funding gap for the repayment of the bonds within reach.”

“However, the challenge of funding investment in our assets remains,” Maris concluded. 

Hurricane said it continues to evaluate options to bolster production from its Lancaster field. The field, which is 100% owned by Hurricane, is the UK’s first producing basement field.

In July 2021, Hurricane completed the plug and abandonment of the 205/26b-14 well, which Hurricane operates on behalf of the GWA joint venture, fulfilling its regulatory obligation. It said it continues to engage with the JV, and OGA, on the timeframes for future GWA activities.

Post period in September 2021, Hurricane repurchased and cancelled just over one third of its outstanding Convertible Bonds at 78% of face value for cash consideration of $62m including accrued interest. This repurchase will save around $22m in future obligations to bondholders. 

Commenting on the issue of debt, Hurricane Energy informed shareholders that it continues to evaluate options to further reduce its debt and improve the viability of its balance sheet.

The Company said stronger oil prices and current production forecasts combined with the impact of the bond buyback, internal cost cutting exercises and other cost reduction measures, have reduced the anticipated funding gap for repaying the convertible bonds. 

In terms of outlook, Hurricane Energy outlined to investors that whilst there remains uncertainty in regard to it having sufficient net free cash to repay the convertible bonds, it remains optimistic that even if a shortfall remains it may be possible to bridge the gap

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