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Tiny SAO TOME
Gets Major Windfall |
|
I've gotten numerous inquiry emails
about Hyperdynamics (OTC BB: HYPD), the idea I first published in
the September
20th edition. Since making a new all time high of $2.14 on September
22nd, the stock has been slowly grinding south, a few cents per day. Those
of you who are concerned would do well to remember SHEP Technologies
(OTC BB: STLOF) which was my offering last February at about $1.80.
After grinding down to about $.80, the stock made a breathtaking run to
$3 over a two week period in June.
The tiny Western African island nation
of Sao Tome had a major windfall this past week when bids were opened
to explore the Nigeria/Sao Tome Joint Development Zone you see picturedon
the map.
Sao Tome is one of the poorest countries
in the world. Its 170,000 people have a per capita income of $280 per year.
Under the terms of a 2001 agreement with Nigeria, Sao Tome will receive
40% of the oil revenues generated from the joint development region.
The Joint Development Zone has been
gathering seismic data on this area for some time. It is estimated there
are between 3 and 8 billion barrels of oil in the zone.
In a unique closed bid auction format,
bids were opened yesterday from major oil companies for the rights to explore
the individual numbered zones. US and Nigerian Oil companies bid over $500
million in bonus money. The bids on the zones broke down as follows:
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Block 1: $123 million from Chevron/Texaco
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Block 2: $60 million from Fobil Engineering
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Block 3: $35 million from Sahara
Energy
-
Block 4: $100 million from ECL International
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Block 5: $35 million from Sahara
Energy
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Block 6: $55 million from Murriel
Brown
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Block 7: $10 million from Fusion
Zurich
-
Block 8: no bid
-
Block 9: $45 million from Fobil Engineering
These figures only represent signing
bonuses only. Both countries will participate in ongoing revenue streams
once the oil begins to flow. For tiny Sao Tome, this is a windfall beyond
belief- the country's entire exports added up to $3.9 million in 2002.
It is anticipated the agreements will be drawn up and signed by March of
next year, and Sao Tome will then receive its first check.
This kind of activity bolsters the
Bush Administration's position on increasing oil production for Western
Africa. In testimony before the Senate Subcommittee on International Economic
Policy, Export and Trade Promotion on October 21st, deputy assistant secretary
for international energy policy John R. Brodman stated:
"West Africa, is one of the
world's fastest growing sources of oil and gas. Oil production generates
a large share of government revenue in countries such as Nigeria, Angola,
Gabon, Equatorial Guinea, Republic of Congo, and Cameroon, and much oil
remains to be discovered and developed in some of these countries."
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Hyperdynamics
(OTC BB: HYPD): Could Guinea Be Next? |
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After reviewing the results of the
JDZ auction, is it any wonder I am fascinated with the opportunity offered
off the coast of the Republic of Guinea?
Depicted on this map is the 64,000
square kilometer concession owned by Hyperdynamics. As I covered
in the last edition on this company, a boat is currently taking seismic
readings over 10,000 square kilometers of the concession.
Hyperdynamics is six to nine
months behind the seismic data that had been compiled on the Joint Development
Zone located in the Gulf of Guinea to the south. However, preliminary indications
show the potential for as much oil as is expected out of the JDZ.
My recommendation on Hyperdynamics
is unique. There is no time frame, target price, or stop loss. I have no
idea how long it may take for other investors to catch on. If a company
like a Chevron/Texaco signs on for a $123 million rights bonus,
I don't know where the stock could go from a mere $40 million market cap,
nor how long it might take.
Hyperdynamics will have a
partner at some point in time if oil is going to be extracted from the
concession. The company's only real asset is the rights to explore the
concession. I don't know how to place a value on the asset, but I do know
major oil companies were willing to pay $1/2 billion in bonus fees
just to get the rights to exploit a similar concession to the south. There
won't be a public auction. Hyperdynamics already owns the exploration
rights.
As you can see from the chart, the
stock is moderately schizophrenic. There is no discernible trend line.
Just a couple of spikes, the second being slightly higher than the first.
However, looking at support/resistance
lines, you can see that the stock is drifting down to the high end of its
support range. It is now digesting the enormous gains it has made since
coming up from the $.30 level earlier this year.
As more investors catch on to the
continued expansion of oil exploration off the coast of West Africa, the
audience for this stock should improve. Perhaps more seismic data will
do the trick, or a deal with a major name in the oil industry.
In any case, it is evident from the
results of this week's auction of the parcels in the JDZ that large oil
companies are willing to invest in deep water wells off the coast of West
Africa. As long as the seismic data shows potential, big money is on the
way. The bonus fees on the JDZ alone came in over $500 million.
Along with recognition should come significant profits for shareholders
of Hyperdynamics.
Charts Provided Courtesy
Of TradePortal.com |
