I’ve been asked to comment on the recent news and subsequent price movement of HDY. Those following the story know the company was out yesterday with a news release promising “Expansive Exploration”.
In times past, one would have expected this news to move the stock in a favorable direction for those who are long. The stock blipped up briefly on fairly anemic volume, and then continued drifting down slightly.
The action in the stock was quite telling. Here’s what I believe the market is saying: Get the drilling permits if you want us to buy the stock.
I believe CEO Watts has now made two or three trips to Africa and still does not have the new agreement or the drilling permits in hand. Based on the way the stock is trading, my guess is the market will continue to view any news as lackluster until the deals are signed.
So- we’re back to a guessing game. I believe they will eventually get the permits, and the stock will respond in kind.
I believe the stock will continue to drift down in listless trading until they get the permits, then it will be game on again.
Here’s a current chart:
Here’s a couple of observations about the current chart.
1. As circled in green on the bottom, the volume is drying up considerably- this makes for a positive accumulation point.
2. There was a big gap on the chart when the company announced the CEO was in Guinea. If the company does not deliver the drilling permits in the reasonably near future, I believe the stock will want to come back and fill that gap.
3. The Fib retracements show high probability entry points at $2.94, and then $2.55. If we saw $2.55 again in this stock, it would be heaven sent.
HDY has a habit of confounding the charts. The stock tends to react more to news, and less to technicals. This week’s anemic reaction to the news tells me the market wants to see the drilling permits.
I have begun accumulating again. I now own 5,000 at $3.215. I will probably pick up another 5k in here somewhere, and keep my powder dry for a deeper drop if I’m lucky enough for it to come.
If you’re not a trader like me on this one, just buy it, hold it, and pray.
Comments and questions are welcome.
There seems to be a good amount of time needed to deal with these Gov’t officials. This seems reasonalble to me considering the amount of upfront “dividends” may have been reduced to the extent of providing incentive for the company to continue along with the concession. I see the play to be once the drilling permits are obtained to immeadiately partner (with a major) in the concession and payoff the verture capitalists. In my opinion they (VC) are about to outlive their usefulness. In my experience, vc may have great business acumen but lack in the execution department reagrding drilling and one thing a major finds most irritating is going into a deal that is not clean. The partnering would be a huge cash amount to the company for a smaller revenue share. The way I see it, if the company (because of lack of cash) goes away, the deal and concession would then go to the shareholders/ board of directors and choke the process (without payoff) for drilling with anyone else. This is becoming more fun as we go along with this saga! What do you think?
Editor: Not a bad overview, however, you have some misconceptions. 1. There are no VC’s involved in this company. They have raised some money in a “Pipe” transaction, but those investors have nothing to do with running the company. 2. There is no way the board or anyone else could take the concession away from the company as you could argue the company doesn’t even have the concession today. They applied for drilling permits under the old deal they bought from another company, and were declined. Now, they say there is going to be a new deal, and Guinea “made a mistake”. We need to see that new deal come to fruition and the company get the drilling permits under a new, direct relationship. That’s where we are.
If a new investor were to start looking at this company. (s)He would find: Negotiations for new PSA and drilling permits; discussions with major oil partners that include confidentiality agreements; mgmt with over 100+ years of oil experience; Harold Poling on the board; largest virgin concession in the world, positive core samples results, satellite imagery, gas bubbling out of ocean, seismic corroboration by PGS; new VP Guinea Affairs with ties to the top; multiple visits to Guinea by mgmt; a dry well from 1978 only becuase they didn’t drill deep enough … and on and on and on. The picture I’m painting is a friggin’ Rembrandt. Question: Why is this stock still thinly traded and below $5? Why isn’t there more interest?
Editor: Can you spell the following: 1. No confirmed deal they even have the concession. 2. No money. 3. No revenues to speak of . 4. Lawsuits from joint venture partners on misappropriation of funds on their Louissiana wells, and 5. Already trading at a market value of roughly $130 million. I would say the market is certainly giving the company the benefit of the doubt. This stock has an almost cult like following. I hope it plays out favorably for all concerned including me.
I personally think this is a very, very high risk situation because almost all African countries are corrupt beyond belief. The desperation for money is so pervasive that what we would view as criminal is just the normal course of living and doing business over there. If, as you say, they have no money, then they have not enough for the necessary bribes. Those folks don’t bet on the come, they want it up front and they aren’t talking petty cash. They will want several million deposited in Swiss bank accounts, or Cayman accounts, certainly not in the country. It is undoubtedly corruption that is holding up the agreements. If HDY can’t come up with a few million, they’ll never see the concessions. That’s just the way it is in Africa. I have too many friends trying to deal with that cesspool. I personally bought and sold HDY and won’t buy it back until the concessions are a fact. BD
Editor: I won’t comment on the corruption angle because this is a public forum and it would be inappropriate in my role. However, the purpose of this BLOG is to provide a forum for varying opinions- every can now read your comments and I won’t dispute them. I also view this as a high risk situation- however, it has a cult following and has been a great trading stock. Therefore, I am prepared to take the risk and buy on dips and sell on surges around a core position.
Another possible reason why the permits have been held up. They are bargaining with China and will yank the concessions, thus don’t want to sign at this time. http://news.yahoo.com/s/nm/20060427/wl_nm/nigeria_china_dc BD
Editor: No question.
I SEE THAT SOMEONE ELSE HAS COME TO THE CONCLUSION THAT CHINA COULD BE THE COUNTRY BEHIND THE SCENES. LOOKING AT WHAT TOOK PLACE IN BOLIVIA WITH THEIR TAKE OVER OF ALL OF THEIR COUNTRIES GAS RESEVERES IS A PRIME EXAMPLE OF HOW UNSTABLE THESE 3RD WORLD GOVERMENTS ARE- I AM GLAD I BOUGHT AT .65 A SHARE AND SOLD AT 3.07. THIS IN MY OPINION THAT 3.25 IS NOT A WISE MOVE TO PURCHASE AT THAT PRICE !!! MOVE ON THERE BETTER INVESTMENTS OUT THERE .
Editor: Duly noted. Thank you for your contribution.
Seems to me you have not done well with HDY. If my memory serves my correctly you sold out under 1.50, failed to load up on the rise over 3 and now are buying over 3. Considering your poor performance on this stock, why should anyone listen to what you have to say about it. Everyone gets it wrong sometimes, but you seem to get it wrong every time.
Editor: I’m pretty sure I’ve admitted I didn’t trade it perfectly. However, I have made net profits in my own account on trades of $15,504.16 so far this year. How does that compare with you? If they were all that bad, I would be a lot richer. And, of course, it’s not the only stock. If you followed DXCM, I netted over $56k on that one, and last week we had HYFS from $.28 to $.41 in two weeks. Both were covered in the OTC Journal as well.
Nevertheless, perhaps there is no reason to listen to me. Perhaps you should be the trading guru. Why don’t you post your thoughts on the perfect time to trade. That’s what the BLOG is for. Right now, it is dropping every day. People are losing patience.
Hi: No comment on the news regarding the meeting with U.S. Ambassador / HDY / Conte?
Editor: Here’s a comment. It would seem the market is getting impatient. At this point, the market is saying don’t give us anymore fluff releases because we won’t buy them. Give us a signed deal with drilling permits. The longer this takes, the less likely it will actually happen. Without the Guinea deal, this company has little value.
Are you still buying this stock at below your target price or do you feel it is going to continue to slide.
Editor: I can’t say for sure, but if it gets to $2.56, I will load up the boat. There is one concern- the market seems unwilling to give them the benefit of the doubt on “fluff” news releases. They have to deliver the new signed deal and the drilling permits to get the stock moving in my view.
You mentioned you started to acquire @ 3.21 and would buy some more if it drifted lower, and that if the stock price reached 2.55 it would be “heaven sent.” Are those still your sentiments. It appears to be drifting towards 2.55. Should I be loading the truck? Can you also confirm your still holding 5,000? Thanks.
Editor: $2.57 was my number. Yes, I am still holding my 5k shares. Will I be loading up the boat? I believe so. However- the stock is going down because they can’t get the Guinea deal signed. If they get it signed, you should make a lot of money from these levels. If not, I believe the stock will keep drifting down and you will lose money. Without the West Africa project, this company has very little value. I will be buying more, but I am a risk taker.
The market action today is saying that they can’t get the deal signed, despite ‘help’ from the US consulate guy. As I said in an earlier post, unless one has millions to feed the corrupt government leaders, one gets no where. Hyperdynamics doesn’t have millions. BTW, it isn’t just in Africa that corruption is endemic, although that is a particularly bad place, we have it right here in the good old USA. http://www.cbsnews.com/stories/2006/05/17/opinion/main1624835.shtml Viisage should be a hot competitor for the TWIC contract (I own IDNX, the merger partner) but they don’t live in Kentucky. This will be a multi-billion dollar award. It may have such a high profile that it has to be done right but I doubt it. So, I say that Hyperdynamics is dead in the water unless……the phoenix rises from the ashes. It is a long shot. HUGE risk. BD
Editor: Thank you for the contribution. I believe the longer it takes, the less likely it will happen. Looking bleak despite the market’s former optimism.
Is this the bottom or the end, seems like alott of investors are getting inpataience.
Editor: Simply too tough to call. I believe the longer it takes, the less likely it will get done. I am going to draw a line in the sand in about one month.
I think you are absolutely correct: “The longer this takes, the less likely it will actually happen. Without the Guinea deal, this company has little value.” It is down again this morning, approaching $2. Looking mighty grim. BD
Editor: I am thinking a leash of about one month, then out if they don’t deliver a signed deal. The current one expires at the end of 2006.
LOOKS LIKE -U.S. REPRESENTIVE VERNON JEFFERSON HAS PIN POINTED THE PROBLEM IN GUINEA–”CORRUPTION” HONEST VERNON TOOK A $100,000 BRIBE FROM A F.B.I. INFORMANT TO GET FAVORMENT TREATMENT FROM THE GOV. OF NIGERIA !! WHATS GOING TO BE THE REAL STORY FOR HDY IN THEIR DEALINGS WITH GUINEA. GEE I THINK I WILL WAIT FOR ANOTHER .65 PRICE ON A SHARE OF HDY STOCK !!!
Editor: Since they found the money wrapped in his refrigerator, it lends a whole new meaning to the phrase “cold cash”.
More stuff on the endemic corruption on the African continent. And on ours. And why, unless HYPD has the big bucks to bribe the officials, their concession is dead because the Chinese will come in and bribe away to get oil supplies. HYPD is also indicating this by falling downwards and will likely penetrate $2 in the next few days. All my stuff sucks, for sure. It is a very nasty market now and will be for a while as the imbalances get worked out. And they are huge. Bush is so incompetent it isn’t even believeable. If you tried to sell a novel based on his administration, nobody would publish it as they would say “too implausible, nobody will be interested.” News: Congressman Taped Taking $100,000, FBI Says According to Court Papers, He Hid Cash in Foil in FreezerAs for the $100,000, the government says Jefferson got the money in a leather briefcase last July 30 at the Ritz-Carlton hotel in Arlington. The plan was for the lawmaker to use the cash to bribe a high-ranking Nigerian official — the name is blacked out in the court document — to ensure the success of a business deal in that country, the affidavit said. Two of Jefferson’s associates have pleaded guilty to bribery-related charges in federal court in Alexandria. One, businessman Vernon Jackson of Louisville, Ky., admitted paying more than $400,000 in bribes to the lawmaker in exchange for his help securing business deals for Jackson’s telecommunications company in Nigeria and other African countries. While the name of the intended recipient of the $100,000 is blacked out, other details in the affidavit indicate he is Abubakar Atiku, Nigeria’s vice president. He owns a home in Potomac, Md., that authorities have searched as part of the Jefferson investigation. End News: BD
Editor: So, how far is Guinea from Nigeria?- Culturally, probably not far. Two more weeks I think. Perhaps better to be out of this one wishing I was in, than in this one wishing I was out. I guess this gives a whole new meaning to the term “cold cash”.
DEAR EDITOR !! GREAT REPLY TO MY COMMENTS ON HDY—- LAUGHED FOR 10 MINUTES AT YOUR STATEMENT ABOUT A NEW MEANING OF ” COLD CASH “–YOU STILL HAVE A GOOD SENSE OF HUMOR !! OH ! WHAT THE HELL IF YOU HAVE YOU HEALTH YOU HAVE REAL WEALTH.
Editor: You can’t take any of this too seriously. I make a very good living writing this newsletter and trading the market. However, I do it because I love the game in young companies. Sometimes they overcome the odds. It’s a great feeling to see them make it. NWAV is a great example. Bunch of young guys working their butts off- blew it by making some bad decisions in ’05, but delivering big time in ’06. That’s what its all about.