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HyperDynamics
(OTC BB: HYPD) Starting to Show Its Hand in West Africa |
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I know the OTC Journal subscribers
own a lot of HyperDynamics. I know everyone is concerned about the
recent swoon in the stock price. I know we are all anxiously waiting for
news concerning the development of the West African concession. I know
shareholders are concerned about the pending excess supply of stock. So
let's address all those issues today.
HYPD was out with news today
before the market opened. The company is attempting to give shareholders
some insight as to how they plan to develop the Guinea Concession.
HYPD's President Kent Watts
confirmed that they have been in discussions with some major oil exploration
companies to "partner up" in developing some of the deep water drilling
areas. If they end up in an arrangement with a major oil company, I believe
that will provide the confirmation the market is looking for with regard
to the long term viability of the concession, and send the stock rocketing
up the charts. Based on the language in the press release, I don't believe
we should expect an announcement in the immediate future, but clearly this
avenue is being pursued.
On a surprise note, CEO Watts discussed
the possibility of a self financed drilling program in some of the shallower
areas within the concession. I have always felt the company would require
a deep pockets partner to move forward with developing the concession.
Things have changed. HYPD is now receiving revenues from its Gulf
properties, and in the press release stated: "(HYPD) is now more
equipped and confident with its ability to implement simultaneous tracks
and put strategies in play to both develop higher-risk, deeper targets,
as well as shallower, lower-risk drilling prospects". Translated,
this means the company could drill some shallow wells on its own.
In short, Watts laid out the following
strategy for development of the Guinea concession:
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Continue to gather both 2D and 3D seismic
data to pinpoint high probability drilling locations targets.
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Look at the possibility of developing
some of the shallower targets on its own.
-
Continue to explore the possibility
of bringing in a major oil company partner to help develop the deeper targets.
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The
Tug of War |
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A lot of the chatter on HYPD
concerns the pending excess supply of stock which could be hitting the
market over the next two months. On March 26th, 2004, HYPD filed
an 8K with the SEC disclosing the company had raised a total of $5.45
million by selling 6.8 million shares to accredited
investors.
If you do the math you learn that
6.8 million shares are owned with a cost basis of $.80. Under SEC Rule
144, those 6.8 million shares become eligible to be free trading in the
market after a period of one year subject to certain restrictions.
Those shareholders must file a document
with the SEC declaring their intention to sell the shares, and it must
be accompanied by a legal opinion from HYPD's attorney.
I believe the recent swoon in the
stock price is related to the market's "perception" that those 6.2 million
shares with a cost basis of $.80 will be sold into the market. However,
sometimes perception and reality don't match.
Here are the facts: Of the 60 investors
who own these 6.2 million shares, to date only three have filed the forms
to sell their shares. The total number of shares they have filed to sell
is a mere 74,000.
In fact, board member Harold Red
Poling, the former Chairman of Ford Motor Company, recently converted some
debt from a subsidiary and increased his holdings by 135,000 shares based
on a cost of $3.25 (the market price at the time).
As we are nearly half way through
February, it would appear there is little or none of this potential supply
hitting the market. Those are the facts to date. Those facts could change
as we get into March, but so far so good.
So, here's your tug of war. Will
excess supplies of stock hit the market and overwhelm both the price and
the buyers? Will there be little or none for sale as the private placement
participants are looking for higher levels? - or will the company
deliver the kind of developments that provide the volume to overwhelm any
selling pressure that could materialize? Those are the issues that make
a market and create the risk reward dynamics.
In the meantime, the chart for HYPD
is looking a bit more bullish. The recent downtrend line has been broken
to the upside which suggest the pain could be over.
The next few months could be dicey
as the market will be nervous over the pending supply. However, if you
are a long term investor and believe in the future of the concession, it
seems the wisest course would be to simply tighten your seat belt and wait
for smoother air.
Alternatively, if you like the idea
of benefiting from others' weakness, a couple of 144 filings might temporarily
drive the price down and create an outstanding buying opportunity.
Stepping back from the emotional
side of the stock volatility, I see a company that continues to deliver
evidence that they might have billion dollar potential in the West African
offshore concession. With each piece of geologic evidence, the case becomes
stronger. As I have always said, this is both the riskiest and the stock
with the most upside of all that I cover regularly. Lately, we have gotten
a small taste of the risk side of the equation.
You now have all the facts on which
to base your own decision. I'm just going to hang in there for now and
maybe accumulate a little more if the market gives me an irresistible opportunity.
Here is the complete text of today's
news release for your review:
| Press Release Source:
Hyperdynamics
Hyperdynamics' CEO
Directs Planning for Accelerated Exploration Program Offshore West Africa
Wednesday February 16,
9:00 am ET
Chief Executive Comments
on Increasing Oil Company Interest and Company's Recent Stock Market Activity
HOUSTON--(BUSINESS WIRE)--Feb.
16, 2005-- Hyperdynamics Corp. (OTCBB: HYPD - News) announced today that
as directed by the company's chief executive officer, Kent Watts, SCS Corp.
("SCS" -- Hyperdynamics' wholly owned subsidiary) has initiated in-depth
planning with a goal to accelerate exploration activity in its concession
offshore West Africa.
With SCS' recently announced
technical developments, management has reported that the company is now
more equipped and confident with its ability to implement simultaneous
tracks and put strategies in play to both develop higher-risk, deeper targets,
as well as shallower, lower-risk drilling prospects. The company believes
that lower-cost, lower-risk prospects may be ready to drill much faster
than the larger, more complex targets. The company is also considering
that valuable geological knowledge could also be learned from such multitrack
strategy, increasing the real potential for a commercial discovery of oil
and/or natural gas sooner.
Under consideration for
inclusion in the 2005 work program is the start of a long-term seismic
coverage program to acquire additional 2D and 3D seismic necessary to pinpoint
drilling locations for targets already generally located throughout the
concession and locate new drilling prospects as well. With the possibility
for expanded data acquisition, the company expects to enhance its marketing
strategy to find working interest or drilling partners. While the company
has been speaking with potential drilling partners on an increasing basis
and levels of interest have been growing, consideration is being given
to significantly define a proactive program to solicit partners for the
larger, higher-risk, higher-return prospective areas.
When asked to comment,
Watts stated, "I have had many questions over the last few months regarding
how we are proceeding with our exploration operations offshore West Africa.
Although we have not been actively pursuing oil company partners, we have
indeed been speaking to potential partners as they have been coming to
us. We will continue to do so. Over the last two years it has been made
clear to us that each viable oil company we speak with has their own propensity
for risk. When we find the right partner with the appropriate capabilities
that is willing to stand at least side by side with the risk-reward, we
will not waste time striking a deal. In the meantime, our planning is being
formulated to significantly move our exploration forward, irrespective
of when we sign on a partner."
Watts went on to say,
"Make no mistake about it. We are involved in a risk venture that has the
potential for enormous returns. We are absolutely swinging for the fence.
At the same time, we are doing everything we can to reasonably mitigate
risk. This risk-mitigating strategy is evidenced first by our move last
year to initiate HYD Resources Corp. to obtain our own domestic proven
reserves and production-based revenues. Now we are initiating plans to
accelerate our exploration offshore West Africa." He closed his comments
by saying, "I believe the downward trend in our stock price of recent weeks
is not reflective of our company's performance and potential. As always,
I would ask our shareholders to please keep abreast of our filings and
news as we update and solidify our plans and work programs going forward."
About Hyperdynamics
Hyperdynamics invests
in companies with substantial potential for growth. Hyperdynamics' internationally
active oil and gas subsidiary, SCS Corp., owns rights to explore and exploit
acreage offshore West Africa. SCS also develops and provides state-of-the-art
seismic data management services. HYD Resources Corp. focuses on domestic
oil field services and low-risk shallow production.
More information on Hyperdynamics
Corp. can be obtained at www.hypd.com
Safe Harbor Statement:
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, detailed from time to time in company filings with the SEC.
Contact:
Hyperdynamics
Kent Watts, 713-353-9400
E-Mail: kent@hypd.com
or
Stock Enterprises
Jim Stock, 702-274-5400 (Investor Relations)
E-Mail: stockenter@aol.com
Source: Hyperdynamics |
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