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Hurricane Energy plc: a perfect ‘buy and hold’ pick for your ISA

With the end of the tax year in sight, it’s more important than ever to transfer any remaining cash into your stocks and shares ISA before the window closes. But what to do with the capital when its safely in your account? Here’s one suggestion for all risk-tolerant, long(er)-term investors.

“Exciting times”

What an extraordinary week it’s so far been for oil exploration firm, Hurricane Energy (LSE: HUR)

In addition to announcing its discovery of a 1,156m oil column at its Halifax well, the £680m cap also stated its belief that this was linked to the Lancaster field some 30km away, making for one huge hydrocarbon accumulation and the largest undeveloped discovery on the UK Continental Shelf.  

With one billion barrels of oil now believed to be recoverable from the Greater Lancaster Area (located in the West of Shetland), this result towers above the average 25m-barrel finds by companies over recent years.

And the share price reaction? Relatively muted given the significance of Hurricane’s news. While a 7% rise since Monday will no doubt be welcomed by existing investors, I think it’s fair to say that most expected more. However, I believe the fireworks could be just around the corner.

What happens next? 

Hurricane’s update on the Halifax well will be followed by the Competent Persons Report (CPR) on the Lancaster well – “due imminently” according to the company. The aim of this will be to provide an independent and unbiased evaluation of the asset. Given that management has already hinted that previous estimations were “conservative“, this update will surely make it harder than ever for prospective investors to remain on the fence.

By the end of H1, Hurricane is also due to provide more information on the Final Investment Decision (FID) for the Lancaster Early Production System (EPS) with first oil currently pencilled-in for mid-2019.

But the news doesn’t stop there. By the end of this year, and having processed all the data collected, Hurricane is forecast to release another two CPRs, this time relating to the currently-suspended Halifax and Lincoln exploration wells.

One to tuck away

To be sure, many questions still remain with regard to Hurricane’s 100%-owned assets. Nevertheless, with both Royal Dutch Shell and BP recently securing licences in the surrounding area (raising the likelihood of a farm-out agreement with an oil major) and Hurricane likely to receive support from the UK Government in light of Brexit, the prospects look bright indeed.

While no company is immune from setbacks, the probability of its shares multi-bagging from here — despite their already impressive 500% rise in 2016 — appears high, regardless of what CEO Dr Robert Trice has planned for the company. The possibility of it receiving an audacious takeover offer is still not out of the question either.

Should this be the case then it’s more vital than ever that investors take full advantage of the fact that all profits made on investments held within an ISA are free from capital gains tax. Failure to do this and any money made above the annual capital gains tax allowance  — £11,300 for 2017/18 — will have the taxman rubbing his hands with glee. For those above the higher rate threshold and invested in Hurricane, this could really eat into any returns. 

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Paul Summers owns shares in Hurricane Energy. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.