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Highlands Natural Resources (HNR) Significant Overlooked

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Highlands Natural Resources (HNR) Significant Overlooked

Post Sun Feb 19, 2017 9:37 pm

"HNR has shown a keen eye for potentially game-changing technology and significant, overlooked resources in an industry which, until recently, has largely been in retrenchment mode,” analyst Jack Allardyce said in a note.
oil operations
Work programmes promise upside for Highlands Natural Resources
Highlands Natural Resources Plc (LON:HNR) offers investors access to significant upside, so says City broker Cenkos which has initiated coverage with a ‘buy’ recommendation.

With a 66p price target Cenkos sees almost 150% upside to the current price of 26.7p.

“Since listing in 2015, HNR has shown a keen eye for potentially game-changing technology and significant, overlooked resources in an industry which, until recently, has largely been in retrenchment mode,” analyst Jack Allardyce said in a note.

“With sentiment apparently on the rise, we believe it offers investors access to significant upside via a combination of disruptive IP, near-term production and exciting new resource plays.”

Allardyce added: “Highlands has built up a portfolio of projects, seeking innovative new solutions to tackle industry issues and overlooked opportunities which require more ‘out of the box’ thinking.”

The analyst describes HNR’s flagship asset, DT Ultravert, as a ‘potentially disruptive’ new oil field services technology and he highlights that it has “caught the eye” of major industry players such as Schlumberger and Calfrac.

He also points to the group’s other interests, the large Helios Two acreage position in Montana and its acreage east of Denver where extended lateral wells targeting the Niobrara shale is slated for 2017.

“We see the active forward work programme – which includes further drilling at Helios Two, development at East Denver and further DTU trials - as presenting a number of potential valuation catalysts over the next 12 months,” Allardyce said.

The cost of the programme was estimated at around US$20mln for six wells or US$40mln for a full 24-well development, according to Allardyce, and he says that clarity on the financing plan (the company is in talks with potential industry and financial partners) will provide a major valuation driver.

The 66p per share target price set by Cenkos is based on the broker’s assessment of HNR’s core net asset value, though with a 215p per share ‘fully unrisked valuation’ Allardyce suggests there’s potential for very substantial upside.

“On the strength of this upside potential and the unique opportunity set HNR shares offer investors, we initiate with a ‘buy’ recommendation.”
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