Having both fallen 35% in value since last June, I wouldn’t blame holders of stock in Hurricane Energy (LSE: HUR) and Sirius Minerals (LSE: SXX) from becoming rather disenchanted with their investments. Maintaining belief in a company’s long-term prospects isn’t easy when the share prices of others are charging ahead.
Nevertheless, with both beginning to make progress with their respective assets, I’m quietly confident that a sustained reversal in market sentiment could soon be on the cards.
Ahead of schedule
Earlier today, oil and gas company Hurricane released an update on the Early Production System for its 100%-owned Lancaster Field, stating that a “key project milestone” had been completed “a week ahead of schedule“. Encouragingly, buoy ‘dry’ trial fit testing — requiring the connection and separation of the buoy cone with the turret mooring system of the Aoka Mizu FPSO (Floating Production Storage and Offloading) vessel — had gone ahead without a hitch.
The buoy will now be painted, attached to the base buoyancy structure and transported to the UK in Q2. It will then be installed at some point in Q3 when the aforementioned Aoka Mizu — currently undergoing repair, upgrade and life extension works — arrives on location. The fact that everything went to plan in Dubai gives the company a “high level of confidence” that there will be no issues when the offshore hook-up campaign commences.
While market reaction to this morning’s statement was rather subdued, it’s clear that Hurricane is doing everything it can to speed the project along. With CEO Dr Robert Trice remarking that the Godalming-based business remains on schedule for producing its first oil from the field in H1 2019, I wouldn’t be surprised if the company’s share price began to climb over the rest of the year.
Also making an announcement today was fertiliser future-producer Sirius Minerals (LSE: SXX).
In an update that clearly pleased the market, the company revealed that it had signed a contract with DMC Mining Services for the design and build of four shafts at its Woodsmith mine in North Yorkshire. The latter is regarded as one of the world’s leading contractors in this line of work.
This development follows on from Sirius’s decision to engage with other shaft-sinking companies following “protracted discussions” with Scarborough-based AMC UK Ltd. Unsurprisingly, today’s statement also confirmed that previous arrangements with AMC had now been terminated.
While some investors may be relatively unconcerned by who Sirius chooses to undertake this work, surely all are likely to be encouraged by the fact that the company now believes this part of the build can be delivered “significantly earlier than planned“. Indeed, as a result of its technical expertise and shaft-sinking methodology, Sirius believes that the appointment of DMC “opens opportunities to accelerate first polyhalite by up to six months.” Given the size of the project, any kind of reduction to the timescale to get the mine up and running can only be welcomed.
To be clear, there’s still an awfully long way to go before investors can begin to reap the rewards. That said, today’s news, combined with recent offtake agreements, a visit by management to China with Theresa May, and the fact that construction of its mine remains on budget, gives me confidence that 2018 could be kinder to holders of Sirius.
Patience is a virtue
So long as you can learn to sit on your hands, buying shares in companies with highly promising assets can be a recipe for long-term wealth.
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Paul Summers owns shares in Hurricane Energy and Sirius Minerals. 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.