Tomorrow morning Hyperdynamics will cease trading on the OTC BB and make the jump to the American Stock Exchange. New ticker symbol: HDY
Clearly the market likes the move as the stock is behaving extremely well, closing at $2.94 today. The stock has added about 40% to its value since the announcement was made.
I still continue to believe the move to the AMEX portends much better results out of their Louisianna properties than anyone realizes.
After reviewing their last quarterly financial filing, HDY falls a little short in a couple of categories for the AMEX listing. Therefore, I am assuming the revenues coming out of the Louisianna properties, which are not reflected in the last filing, played a role in the successful upgrade to the AMEX.
As you can see from the chart, the market clearly likes the validation. If making the jump to the AMEX creates this kind of credibility, imagine what a partnership with a major oil company would do for the stock value.
Congratulations to those who hung in there through the recent downturn. Your patience is being rewarded.
Comments, questions, and high fives are welcome.
Are you going to miss covering this stock? I’m sure you’ll be holding onto a few shares to see how this one settles out. Yes, congratulations to us all. HIGH 5!
Editor: I intent to continue covering them until the West African concession plays out one way or another.
Will you continue to follow Hyperdynamics now that it is listed on the AMEX? You have been my one legitimate source of info for this stock – so I’m hoping the answer is yes.
Editor: Absolutely.
Have you done any math concerning how high Hyperdynamics can go – assuming they find predicted oil, don’t sell out, and all contracts with Guinea remain good? I have heard some rather crazy figures and would like a more sane opinion.
Editor: I believe the price of the stock could be greatly affected if they announce a partnership with a major drilling and exploration company on the Guinea project. It believe $5 could be in the realm of possibilities. Looking years down the road, if the oil is there, the company could be worth billions. It’s much too hard to quantify without proven reserve numbers, and they are a long way from that.
The next big news from HYD probably will be out of Louisiana. Their initial reserves report in January listed only 66.000 barrels in reserves, or about eight cents per outstanding share. But the March 11 press release stated much greater resources. When studies allow estimates of recoverability of these resources, these can be classivied as reserves – and the P2 reserve totals will rise dramatically.
Editor: Good point. I am told to expect some new hard numbers over the next several weeks, and I have heard they hit producing wells everywhere they drilled.
Are you going to continue to follow Hyperdynamics now that it is AMEX?
Editor: yes
Will you continue to watch HDY aftter its move to the AMEX?
Editor: Absolutely- I am going to cover this company until the West African project pays out one way or another.
Will you continue to follow Hyperdynamics?
Editor: Certainly.
Why hasn’t this stock moved upward more with all the recent news?
Editor: I can’t say for sure. Perhaps the news has already been priced in. I am a long term holder, so I don’t care. I’m hanging it there for some results out of West Africa.
On 05/16/05 HDY releasesd some long-awaited SEC filings. What do you think about these filings, and how do you feel they will effect the company and its performance on the market? Thanks Again, KAMDOAN
Editor: The recent Q filing simply bears up what I have stated in recent editions on HYD. Based on the 10Q I just read, this company did not have the qualifications for an AMEX listing. Therefore, they must have been able to convince the AMEX they were going to begin generating some serious revenues out of their Louisianna properties, and had the ability to raise capital. I have been saying the June numbers will be interesting, as they will be the first look at the revenue stream out of Louisianna.
Any more updates on Hyperdynamics? I’ve always valued your opinions about the stock.
Editor: I can only react to the company’s public disclosure. As stated previously, I believe they are doing well in their Lousianna properties, but the wholly grail for this stock will be partnering up with a major name to begin a drilling program in West Africa. If and when that happens, you will be happy to be a shareholder.
Robert: FYI- if you want reliable updates, please convert from a hotmail email address to a yahoo email address. hotmail is notoriously unreliable.
The lack of information in the quarterly filing was a big disappointment, and I think that’s a big part of the dip in the stock price. Have you heard anything about a possible conference call ?
Edit: There is no conference call scheduled that I am aware of. They have never held one, so I doubt they will now. If you are holding this stock, you are betting they can begin developing the West Africa property. Therefore, the trailing financials don’t have much to do with the upside on this one.
The quaterly report is noted in the link below. Any comments anyone? http://biz.yahoo.com/e/050516/hdy10qsb_a.html
Editor: My comment simply conforms with what I have been saying all along. The company is doing better in Louisianna than their current public disclosure reveals. I come back that conclusion because they were granted the AMEX listing. I am told hard numbers will come out in the June quarter.
Actually, it’s the current reserves I’d want to hear in a conference call, not the trailing financials. The quarterly report had no discussion of reserves in the Louisiana leases. For an exploration company, valuations are largely driven by reserves. They announced probable resources in the press release in March, but to date there has been no update to the mere 66,000 barrels in reserves they announced in January. If we can get an updated figure, the stock *will* jump.
Editor: I spoke directly with the company concerning this very matter. When I was informed that the June numbers would be our first look at the hard numbers, I pointed out to the company that June was their fiscal year end, and market participants would therefore not see the numbers until the end of September. They responded by stating there would be formal disclosure long before the audited numbers are out. We can only wait for it to happen.
You keep on saying the stock will move when HDY partners with a “major.” Why couldn’t they hook up with a mid-tier player who is a little bit more nimble? Do you think Poling is pulling out all the stops for HDY and loading the big guns?
Editor: Sure they could. They have told me the concession is big enough to have several zones and several partners. I have no information about Poling’s activities on behalf of the company, but he is on the Board and a shareholders.
I remembered that in reading HDY’s 10ksb, that they felt they might be drilling and potentially pumping oil as early as the first half of 2005. Now given that the 1st half of the year is almost over, has Management given you any sense of when they might reach an agreement with an oil company? They have been in negotiations (I believe this is true), for about 2 years with various oil companies. Know what the potentail hold-up could be?
Editor: I can’t enlighten you on that issue. I know they are confident they can cut the right deal for shareholders, but it hasn’t happend yet. I am under the impresssion something could be close, but I can’t say for sure.
For anyone who hasn’t noticed, Yahoo created a message board for HDY a couple of days ago. I have been in this stock for about a year, and I feel better about the company and the stock than ever before. I think we longs may be pleasantly surprised in the fairly near future
Editor: Thanks for pointing this out to everyone.
Can you comment on the royalty that will be paid to Guinea if hydrocarbons are discovered. I thought it was 15%, but the 10 QSB is not clear on this issue. It appears it could be as high as 85%. Naturally, if HDY can only keep 15% (of which would have to be split with a partner), this investment is less appealing. Thanks.
Editor: Since no deal has been cut with any partner, at this point HDY would keep 100% of the profits after paying the royalties to Guinea. I believe HDY takes the hard costs off the top, then pays Guinea a percentage of the revenues after costs. I believe it could be 50/50, but I will have to check. I believe it was disclosed in the last 10K.
Have you checked on those percentages we will be paying to Guinea and US Oil? This has been a really hot topic on the Message Boards lately. Some say as low as 18% – some say a lot more. I believe a good source for the info is the Sept. 30, 2002 10-QSB…..page 6 (released in November). Thanks, Robert
Editor: I checked and got the facts for you. Once hydrocarbons are harvested, 100% of the hard costs associated with getting to that point come off the top. From there, Guinea and Hyperdynamics, or whomever they partner with, split the cash flow 50/50. Any taxes are impuned into the royalties the developer receives as well.
I have owned this stock since 1998. I have always believed in the game plan. With the crisis in the internet sector, I believed it was wise of management to change from its original business plan. This change helped the company survived and to increase shareholder value. I just regret I did not buy more shares when sharevalue was down to 20+ cent.s
Editor: It is quite amazing that these guys successfully evolved from what they were. Most of them simply went down the tubes. I like to see them step it up on the West Africa property. Nice to know there are still a few long term investors out there.
How about another briefing/commentary about the stock? Your opinion is very respected and long awaited on the message boards.
Editor: I think that’s a good suggestion. I’m travelling this week, but will call the company next week and see if they have anything to say.
I bought HDY at 65 cents–sold half of my holdings at a nice profit… was able to restrain my impulse to buy back to soon– caught it at close to its low point. I beieve that the month of Aug 2005 will offer a opportunity to take some profit off. Will retain the biggest portion of my shares for long term profit.
Editor: Excelllent strategy.
I am kind of surprised that after Watts comments about “possible two billion barrels of oil” off Guinea that the stock hasn’t reacted in an more upside emotional manner. With so called experts saying the world is running out of oil and some calling for $100 a barrel oil this stock would move into the $4.00 range or higher.
Editor: The market is telling you that it is not prepared to believe it yet. This is why I believe a deal with a major would give these claims the credibility the market wants to see. The other alternative is to drill and find oil and deliver proven reserves. However, that will take years instead of months. It will be interesting to see which way they end up going. It could be a hybrid of the two.
Hyperdynamics’ SCS Corp. Requests Drilling Permit(s) from the Republic of Guinea for as Many as 4 Exploration Wells Monday July 11, 4:46 pm ET Planned Drilling Dates Range Between November 2005 Through December 2006 HOUSTON–(BUSINESS WIRE)–July 11, 2005–Hyperdynamics Corp. (Amex: HDY – News) today announced that its wholly owned subsidiary SCS Corp. has requested a drilling permit on June 27, 2005, from USOil Corp., the official contractor for the December 2002 production and sharing agreement. The request for a permit was made in the form of a letter to the president of USOil, Dinesh Shukla. Shukla has explained to us that this request is being formally sent today along with certain other information that has been requested by the Guinea government. This request for permit covers potential drilling dates ranging from November 2005 through December 2006. When asked to comment, Neil Moore, president for SCS, stated, “Our request letter represents another milestone toward our serious efforts toward discovery of hydrocarbons offshore the Republic of Guinea. The tight availability of drilling rigs, supply vessels and well head equipment are some of the most important items that we are working to nail down with potentially significant lead times. This prompted us to get ahead of the curve by requesting the permits now.”
Editor: FYI everyone.
A BUSINESS WIRE article on the 12th writes 4 drilling wells off the Republic of Guinea in which two may contain Natural Gas. Has there ever been a valuation for the potential Natural Gas deposits in this region?
Editor: When they look for hydrocarbons, they are never sure if it will be natural gas or oil. Then can make an educated guess. They believe the oil is in the deeper drilling areas and the natural gas in the shallower areas. The natural gas is not as useful because it is harder to transport, but Guinea will be needing it for industrial purposes.
Anonymous is “right on” about Guinea needing natural gas for industrial purposes. In fact, considering the industrial expansion noted in the two following articles, it actually appears that natural gas my have a much greater short term effect on revenues than oil would. I wish I had an extra $100K right now to get in at $2 and change. It looks to me like HDY could easily hit $20 – $80 by years end. Comments anyone? PITTSBURGH–(BUSINESS WIRE)–Nov. 24, 2004–Alcoa (NYSE:AA) today announced that its Alcoa World Alumina LLC affiliate, Alcan Inc. and the Government of the Republic of Guinea have signed a protocol for developing jointly a 1.5 million metric ton per year (mtpy) alumina refinery in Guinea, West Africa. This protocol sets out the items and framework for the alumina refinery project that will be negotiated over the next few months as part of the memorandum of understanding (MOU) signed by Alcoa World Alumina and Alcan in May. A detailed feasibility study for the refinery is expected to be completed by mid-2005, with construction to begin shortly thereafter.
Editor: I believe $20 to $80 is completely unrealistic by year’s end. It would require major cash flow from producing properties to achieve that level, and that won’t happen by the end of the year. If they have a major developable oil find, it could happen years down the road. That is just my opinion.
Given the potential, but lower value of Natural Gas. If one of these wells produced could bring the underlying stock to the $5-6 range. An oil gusher, on the other hand could set off (by virtue of speculation) a frenzy to the $20-80 range. It seems to me that is all that would be needed, a small sample of discovery!
Editor: It seems to be a small sample combined with a large partner would create the desired result.
HDY is pretty confident they are going to hit gas in the shallows. All data supports this. If they drill the wells between Nov ’05 – Dec ’06, and they do hit gas, what do you think will happen to the stock price?
Editor: A few shallow gas wells probably won’t do it. The market hasn’t developed in Guiniea for natural gas if they make a major find, but should in the future. The company’s market value is already approaching $100 million, so what’s the upside? It’s too difficult to transport natural gas greater distances. A major oil discovery is what is needed here. I believe if they announced a deal to develop some deeper oil wells with a major exploration company, the stock would run to $5 or $6. That’s just a guess.
Are you still bullish for earnigs this quarter? Is there any reason for you to believe the wells in LA are not producing and generating cash that will reflect positive on the stock price?
Editor: I don’t believe earnings is the correct word. I believe it is cash flow- anotherwords revenues. I doubt they will have earnings. I am hearing about $5 million annually will come out of LA, but that is just an estimate. We won’t know for a little while, because June is their year end, and numbers won’t be out until the end of Sept.
I don’t believe the cash flow will be enough to really effect the stock price. How they invest the money in Guiniea is the big issue. We need developments from there to see much higher levels in the stock in my opinion. I could be wrong, but that’s the way I see it.
Well, what do you think about the 8K and termination of the PSA form Guinea?
Editor: See next BLOG entry