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HyperDynamics
(OTC BB: HYPD); Discloses Next Step |
|
HyperDynamics was out with
news after the market closed today which describes the next step in the
exploration and development of their 33,000 square mile concession off
the Coast of the Republic of Guinea.
The company completed both the taking
and reading of 4,000 kilometers of 2D seismic data over the last several
months. As results unfolded, the stock doubled.
The company anticipated the next
step would be to take 3D seismic readings in order to target the best areas
for the test wells. This will not be the case. Apparently, the company
discovered over 100 "trackable seeps" while taking its 2D seismic readings.
A "gas seep" occurs when there is so much hydrocarbon just below the surface,
it is literally seeping into the water.
HyperDynamics is currently
negotiating with contractors to bring an offshore scientific geochemical
vessel to the area to take readings of the seeps. Management feels this
move will speed up the process of identifying the ideal zones for the first
test wells and allow the company to target areas for 3D seismic more accurately.
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Valuation
Comparison; Envrionmental Remediation (OTC BB: ERHC) |
 |
I have been receiving numerous emails
about Environmental Remediation, a Houston based company with a
working interest in the JDZ (Joint Development Zone) exploration region.
ERHC
has a working interest in 6 of the 9 zones. If you want to, read my October
23, 2003 edition for more information on the JDZ. Here's a comparison
of the two companies.
Two years of comprehensive seismic
studies were made available to bidders last Fall, and 8 of the 9 blocks
were auctioned off at costs ranging from $123 million for Block 1 by Chevron/Texaco
to $10 million for Block 7. The JDZ is located in the Gulf of Guinea, approximately
1500 miles Southeast of HYPD'S West African concession.
ERHC has a working interest
ranging for 15% to 30% in six of the blocks. The stock has been on tear
this year, making a 2 1/2 fold move since the beginning of March from the
$.38 range to the $.90 range.
There are some interesting comparisons
and contrasts between the two companies. On the plus side for ERHC
there are several factors. The seismic data made available to the bidders
on the JDZ was 9 months ahead of the current seismic data available on
the HyperDynamics concession.
The seismic data was strong enough
to attract bids from major household names like Exxon and Chevron/Texaco.
This reassures the market that ERHC owns a working interest in something
that has significant value.
There are several factors in favor
of Hyperdynamics. Since ERHC only has a minority working
interest in the blocks, they have no control over their own destiny. They
are at the mercy of the schedules of these behemoths before the first test
wells are drilled.
From a valuation perspective, one
would have to acknowledge HYPD has considerably more upside. ERHC
has 600 million shares I&O. At $.90, the market is currently valuing
this tiny company at over $500 million. ERHC's only asset
is the $5.7 million value it carries on its books for the value of its
working interest. On December 31, 2003 which is the last publicly available
data, ERHC only had $18,000 in cash.
On the other hand, HYPD owns
100% of its concession, and therefore is the master of its own fate. The
company has about $6 million in cash, and sports a market valuation of
$112 million, about 1/5th of the value of ERHC.
ERHC has the endorsement of
major players in the oil & gas market, but sports a very high market
value. HYPD doesn't have the same kind of endorsement at this time,
and is about nine months behind the JDZ on seismic data gathering.
If you have been a shareholder in
either stock over the last several months you have done well. Both are
highly speculative. Both are trading on the theme related to the development
of offshore West African oil reserves.
If HYPD were trading at an
equivalent valuation to ERHC, it would be $12 per share today.
The company isn't partnered with Exxon or Chevron yet, but
if and when it does, the market is telling you through ERHC how
much it could be worth.
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Technically
Speaking, HYPD Looks Favorable For Accumulation |
|
Today's news provides investors a
road map for the next leg in the journey. I had expected the company to
be getting ready for 3D seismic studies at this point in time.
However, the 100 plus gas seeps detected
in the 2D seismic studies is going to allow the company to pinpoint its
target areas much more quickly. There will be fewer and more precisely
targeted 3D studies. Geochemical detection studies will happen before 3D
seismic studies, which is the last step before test wells.
I expect HYPD to continue
to go it alone for the time being. The company has plenty of cash, and
will maximize shareholder value by waiting until it has overwhelming seismic
evidence to bring in a partner.
West African oil exploration will
continue for some time. With oil prices at a new all time high, the entire
free world wants to get out from under the Middle Eastern domination of
the market.
The stock has now completed a perfect
50% retracement of this year's move, a point at which I like to see accumulation.
Volume has been very light on this pullback. Look for investors to jump
back on the bandwagon tomorrow as they learn there were over 100 gas seeps
detected in the 2D seismic studies.
Here is the complete text of today's
news release for your review:
| Press Release Source:
HyperDynamics Corp.
HyperDynamics' SCS
Plans Geochemical Program Offshore West Africa
Tuesday April 20, 4:00
pm ET
More Than 100 Gas Seeps to Be Tested
for Hydrocarbon Content
HOUSTON--(BUSINESS WIRE)--April
20, 2004--SCS Corp., the energy subsidiary of HyperDynamics Corp. (OTC
BB: HYPD - News) is now making plans for a geochemical work program to
be conducted in its concession off the coast of West Africa. After completing
its study of gas migration of more than 4,000 kilometers of seismic acquired
in November 2003, SCS is now negotiating with contractors to bring an offshore
scientific geochemical vessel to the area.
The company's plan includes
acquiring samples from the sea floor where the best trends appear to be
developing. It is expected that the results of this work will reveal natural
gas and higher carbon content gases. Geo-experts believe that the higher
carbon content gases have likely been dissolved in oil at great depths.
The geochemical study will also seek to establish the existence of oil
within the core samples. The samples will allow us to establish specific
hydrocarbon signatures for typing and run carbon dating procedures to establish
aging.
Neil Moore, president
of SCS, stated, "We are continuing to find and specify new direct hydrocarbon
indicators. This extended analysis includes correlating evidence of gas
seepage in the water with the seismic response." He further stated, "Since
these effects can be related to other phenomena, they must be tied to deep-seated
faulting. The migration can be 'tracked' at depths greater than 10,000
feet up to the sea floor. We also see the charging of porous zones along
associated faulting. A high percentage of these phenomena cause visible
effects on the ocean floor and form 'gas plumes' in the water. Many of
the oil and gas fields producing offshore today initially utilized surface
seeps as an exploration tool for locating petroleum accumulations."
Robert Bearnth, senior
vice president and the company's chief geoscientist, also pointed out,
"The presence and type of oil and gas analyzed from seeps greatly assists
us in establishing the most favorable hydrocarbon trends. Since the concession
is so large, hi-grading it with combined geochemical, geophysical and satellite
technology saves time. This will increase efficiency and help achieve maximum
success when drilling starts. SCS' 2003 seismic grid covers a prime area
of approximately 10% of the 33,000-square-mile concession. The present
work is pinpointing specific features that we will likely detail using
3-D seismic before drilling. With over 100 'trackable seeps' having now
been mapped, our confidence and excitement is growing."
Kent Watts, chairman
and CEO of HyperDynamics Corp., stated, "Expectation is building in the
stock market about companies like ours who are involved in exploration
off of the coast of West Africa. As an example, Environmental Remediation
(OTC BB: ERHC - News), whose major asset is a minority working interest
in offshore blocks south of Nigeria, has seen their stock price rise more
than 300% in the past few weeks. Investors are speculating on the upside
potential that their company would experience in the event that a world-class
oilfield is discovered." Watts went on to say, "The fundamental driving
factors of the exploration business favor accelerated development of our
concession. We are proceeding aggressively with this in mind."
About HyperDynamics
HyperDynamics uses integrated
information technology to help manage and invest in companies with substantial
potential for growth. HyperDynamics' wholly owned oil and gas subsidiary,
SCS Corp., owns rights to explore and exploit approximately 16MM acres
offshore territory off the coast of West Africa. SCS also provides NuData(SM)
services together with proprietary data for oil and gas companies.
Safe Harbor Statement
under the Private Securities Litigation Reform Act of 1995: The statements
contained herein that are not historical are forward-looking statements
that are subject to risks and uncertainties that could cause actual results
to differ materially from those expressed in the forward-looking statements,
including, but not limited to, certain delays beyond the company's control
with respect to market acceptance of new technologies or products, delays
in testing, and evaluation of products, and other risks detailed from time
to time in the company filings with the Securities and Exchange Commission.
--------------------------------------------------------------------------------
Contact:
HyperDynamics Corp., Houston
Kent Watts, 713-353-9400
kent@hypd.com
or
Stock Enterprises Inc.
Jim Stock, 702-614-0003 (Investor Relations)
stockenter@aol.com
--------------------------------------------------------------------------------
Source: HyperDynamics
Corp. |
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