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Year
End Wrap Ups in December |
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It's getting to that time of year
when I start publishing year end reviews on the microcap companies we follow.
Of the nine the OTC Journal currently follows, several will be dropped
to make room for others will more upside. In the microcap world you are
inevitably going to have some losers and some disappointment. The best
microcap investors know and accept this fact of life, and are not afraid
to move on without spending too much time looking in the rearview mirror.
Before year's end you might want to lock in some tax losses on one or two
that haven't worked out, or add to a position if the stock provides a favorable
entry level.
As if on cue, HyperDynamics issued
a press release today after the close which gives me the opportunity to
share it, review this year's achievements, and make some educated guesses
about next year. I feel HYPD is one of the riskiest stocks I cover,
but also has the most upside.
Next year we are also going to be
introducing a new component to the OTC Journal service which will
provide live commentary during active trading days. This should help us
maximize return and minimize trading mistakes. Stand by for more details
before year's end. We are working on the technology right now.
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HyperDynamics
(OTC BB: HYPD); Satellite Image Results and Year End Review |
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I never tire of showing this satellite
image of HYPD's concession off the coast of West Africa which they have
via an arrangement with the Republic of Guinea. It's a cool picture, and
gives you an visual image of the delta formation which is similar to the
Gulf of Mexico.
In 2004 HYPD made a lot of
progress towards the eventual development of this concession, and it shows
in the stock chart pictured below. At the beginning of 2003 the company
was working off some old seismic data. This year HYPD completed
4,000 kilometers of 2D seismic studies, took 57 core samples directly from
high probability zones (55 proved out), and we learned today has gotten
more outstanding evidence of significant hydrocarbon deposits from satellite
images.
In addition, the company is doing
more that sitting around waiting to develop the concession. They raised
some capital, bought and refurbished three drilling rigs, and have acquired
11 leases in Louisiana. They will start producing revenues out of those
leases in the near term, and generating revenues from the use of the drilling
rigs.
I have learned a lot from following
the progress of the West African concession. I have learned that these
new oil field projects are a lot like a biotech company developing a new
drug.
New drug development can take many
years. Studies are required for the FDA in three phases. In Phase I, they
simply prove the stuff won't hurt or kill humans. In Phase II they prove
it works to some degree with a small study. In Phase III, the last one
prior to FDA Approval, they must prove it provides a significant benefit
for a much larger sampling. Small companies often team up with big pharma
names during Phase III for the capital and expertise to complete the process
and handle the eventual commercial deployment.
The stock market does not wait for
FDA Approval to start assigning an appreciating value to the new drug.
As clinical data becomes available the stock will rise if the data is good.
Generally, by the time the final FDA Approval is issued, the market has
already priced in the majority of the value.
And so it is with the development
of a major oil field by a small company. The market doesn't wait for oil
to start coming out of the ground. As evidence is disclosed of the viability
of the project, the market starts assigning a value early on.
HYPD has provided a lot of
evidence this year for the Guinea concession, and it is being reflected
in the stock price. Today after the market closed, HYPD announced
results from the recent satellite studies. According to today's press release
which you can read in its entirety below, HYPD learned the satellite
imagery revealed 108 oil slicks on the surface. 98 of those slicks were
believed to be of "natural origin", meaning the oil is seeping out of the
ocean floor in this region. This new evidence is like another positive
result from a clinical trial, and will probably put a charge in the stock
in tomorrow's trading. It might even trade to a new high for '04.
As you can see from the chart, it
has been a reasonably good year for HYPD. The opening trade of 2004
was at $1.58- the stock was at $3.20 as of today's close.
That's a 98% move. It made an all time high in March, followed
the rest of the market down in the summer, and tried for another all time
high in October. It has traded in a large range on a percentage basis,
and took some courage to hold through the summer sell off. The stock has
not come back and filled the mid October gap, which is a very bullish sign.
2005 should prove interesting for
this stock. Just like the biotech company that teams up with a major pharmaceutical,
I believe an arrangement with a major oil and gas company will send this
stock flying up the charts if and when it happens.
The next step for final determination
of drilling sites in West Africa would be 3D seismic studies. They have
the money for the studies, but they don't have the money to drill. They
will need a deep pockets partner to help on that end.
I'm just making an educated guess,
but I believe we will learn of some sort of partnership in 2005, and you
will want to be on board for the event. Eventually, there could be multiple
partners as the concession is large enough for several fields. The addition
of this theoretical partner will be like getting good clinical data from
a Phase III study with a major pharmaceutical company in the picture.
I wouldn't be surprised to see the
company move to a senior listing in 2005- perhaps AMEX or NASDAQ Small
Cap. They qualify in many respects right now.
HYPD has required a lot of
patience, but I am going to stick around in 2005 to find out how the story
matures. With some luck, the outcome on the Guinea concession will take
us into the realm of the five or ten bagger.
Here is the complete text of today's
news release for your review:
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Hyperdynamics’ SCS
Satellite Study Reports 108 Oil Slicks
Study Confirms and Corroborates
Working Petroleum System
Houston - Thursday, December
9, 2004, Hyperdynamics' (OTCBB:HYPD) SCS Corporation announced today that
Infoterra, the European satellite imaging company contracted to provide
a “Global Seeps Study” over the SCS concession, has completed its work.
The results showed that 108 oil slicks were identified over the offshore
concession area.
Each slick was identified
using satellite imagery taken on different dates. Some of the images were
recorded years apart. Every slick was identified by at least 2 satellite
passes using multi-temperal ERA and Radarsat SAR (Synthetic Aperture Radar)
data. Infoterra was able to confirm that, of the 108 slicks, as many as
98 were of natural origin.
SCS president Neil Moore
said, “The satellite study is an integral part of the exploration process
and is a proven method for the investigation of offshore oil seeps. The
study plays an important part in exploration by helping to define a basin’s
prospectivity.” Mr. Moore further stated that, “Infoterra’s study
has provided additional corroborating evidence of a working petroleum system
within our concession.”
For more information
on satellite seep studies the Company directs you to its new powerpoint
presentation “Understanding Satellite Seep Studies” at http://www.hypd.com/powerpoint.htm
About Infoterra
Infoterra is a 100%
owned subsidiary of EADS Atrium, Europe's leading space company. Infoterra
is also one of Europe's largest suppliers of geo-information products and
services, derived from both satellite and airborne Earth observation sensors.
Based in the UK, Infoterra employs 150 staff, the majority of whom are
specialists in the processing and analysis of Earth observation data for
a wide range of market applications. A team of approximately 15 geoscientists
form the Oil, Gas & Minerals (OGM) Group, dedicated to servicing oil,
gas and mineral exploration clients worldwide. Together the team has more
than 137 years experience in the application of remote sensing data to
geological and associated applications.
About Hyperdynamics
Hyperdynamics invests
in companies with substantial potential for growth. Hyperdynamics' internationally
active oil and gas subsidiary, SCS Corporation, 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 Corporation
focuses on domestic oil field services and low-risk shallow production.
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, 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 SEC.
Contact:
Hyperdynamics
Kent Watts, 713-353-9400
kent@hypd.com
or
Stock Enterprises (Investor
Relations)
Jim Stock, 702-274-5400
stockenter@aol.com
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