Hurricane Energy Share Price Forecast October 2021 – Time to Buy HUR?

Shares of Hurricane Energy (LSE: HUR) are in the red today, currently trading at 4.736p (as of OCT 19, 08:24 GMT+1). HUR shares have been enjoying a good run since it released its half-year results, increasing 20% in a single day. As a result of this, the company’s 12-month performance has been pushed to almost 85%. This move has pushed the company almost back to its pre-pandemic 2019 levels which have got investors interested.

Hurricane Energy – Technical Analysis

According to the financial statement released by Hurricane Energy, the market cap of the company is at £94.502 million with total assets worth £319.718 million. Revenue for 2020 was at £140.43 million with a profit margin of -347.24% compared to £113.48 in 2019.

Moving averages for Hurricane Energy such as Exponential Moving Average (10)(4.313), Simple Moving Average (10)(4.227), Exponential Moving Average (20)(3.995), Simple Moving Average (20)(3.977) and  Exponential Moving Average (30)(3.756) are indicating a buy action. Oscillators such as Relative Strength Index (14)(64.703), Stochastic %K (14, 3, 3)(77.767), Commodity Channel Index (20)(97.58), Average Directional Index (14)(50.942) and Awesome Oscillator(1.009) are neutral.

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Recent Developments

For those of you who aren’t aware, Hurricane Energy is an oil exploration company that faced financial turmoil when a series of prospective projects did not materialize in 2019. HUR hares plummeted by over 85% due to this and of course the global pandemic. But things are starting to look positive for the company as evidenced by its revenues in the first 6 months of 2021 which was $124.5 million compared to $81.9 million in 2020. Other positive metrics include a total loss of $42.8 million, which is an improvement from $307.8 million in 2019.

Due to forecasts of supply restrictions, oil prices have increased to reach a three-year high of $85 per barrel.  This has let Hurricane Energy achieve a 70% profit margin thanks to its production cost of $24.8/barrel. This margin will only get wider as analysts at Goldman Sachs have raised their oil price forecast to $90/barrel. However, Hurricane Energy still has plenty of hurdles to overcome especially its debt. Before these are addressed, the company is at the mercy of external forces which will be discussed below.

Should You Buy HUR Shares?

Investors interested in HUR should first look at their enormous debt, which was $250 million as of the end of June. As the debt pile is generating a substantial interest bill, management has already started remedying this situation by spare cash to repurchase its outstanding bonds. In spite of this, their balance sheet is not in the best shape right now.

Another factor is the primary driving force behind the company’s profits, which is rising oil prices rather than increased production volumes. The company’s production at its Lancaster oilfield decreased by 24% due to one of its wells suffering from reservoir pressure decline. The increase in oil prices might just be temporary due to the short-term disruption in supply. Once these disruptions are resolved, oil prices may decrease again which will squeeze the company’s 70% profit margin.

With that being said, it still seems like Hurricane Energy is on the right track. The HUR share price looks ready for a steady recovery as profits and revenues are climbing and debt levels are being addressed. However, the fate of the business remains in the hands of external market forces beyond the control of the management team. Because of this, it would be wise not to buy HUR shares and add to just to your watch list for now.

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