HDY rocketed back up the charts this week. News came out today to explain the dramatic rise in the stock, and I’m a little behind the 8 ball catching up with this one.
As all of you know who follow my commentary on HDY, I turned negative on the situation after the company announced their applications for permits to drill in the West African Guinea waters was denied and they were informed their arrangement with the government was off. I suggested liquidating in the $1.40 range.
Subsequently, the stock found its way well below the $1 level, but has rebounded dramatically out in front of today’s news.
HDY announced the management had been in Guinea for two weeks, and Conte, the head of the government, had nothing to do with the denial. Here’s a quote from the press release:
“ Watts reported that, “The Ministre was extremely understanding and gracious. In both meetings he gave a consistent message of support to continue our work in Guinea. He also was very clear in both meetings to explain that the termination letter reported in July did not come from his office and he had no knowledge of it. With that clarification, he then outlined the process whereby SCS could obtain everything necessary to restart our work.”
It would appear on the surface that the Guinea deal is back on, and the upside has returned to this situation.
HDY is a classic example of what I have been harping on for microcap stocks in general this year. Buy them when they are cheap, no one wants them, and no one is paying attention. Sell them when everyone wants them.
Even though I was completely off the mark on HDY, and had no inkling they were reviving the deal, the point still holds.
As you can see from the chart, the stock has now eclipsed the gap created when the news came out and it gapped down. This is a very bullish development.
However, I wouldn’t buy the stock right now. I would wait for it to quiet down and buy at a 38.2% retracement or a 68.1% retracement. I would sell right now if I had the courage to buy it under $1 and was interested in a trade.
I do feel this is one to own once again, and hopefully will be able to pick a solid entry point. The upside that makes this one worth the risk is back, and I am hoping someday to see this one in the $6 to $10 range.
Your comments and questions are welcome. I’m sure many of you would relish the opportunity to point out I was wrong to suggest getting out. I’ll save you the trouble. I don’t have a crystal ball, but as it turned out, I was wrong. I was also wrong about the Mets in ’69 along with dozens of microcap stocks. Sometimes the dog bites you.
The upside that makes this one worth the risk is back, and I am hoping someday to see this one in the $6 to $10 range. The company said, that only one target could potentially have over 2billion barrels of oil! Why do you ony say 6 to 10.00 dollars? If they have this I think it could go much, much higher than that
Editor: If they find 2 billion barrels of recoverable oil, and they cut the right deal, $6 to $10 could be very low.
You have a great website with excellent information. I look forward to reading your thoughts. The best advice I got from you was to “stick this one under the pillow.” That’s where my shares are staying … boom or bust.
Editor: A man, or woman, with convictions. I like that. I took it out from under my pillow becauase they lost the Guinea deal, which was why I put in under the pillow in the first place. With the deal back on, I’m going to have to lift my pillow at some point in time. However, my common sense prevents me from buying stocks that double in a few days.
If what you are saying is true, I do not think that any retracement will happen, especially a 38 or 68% retracement. That would erase all the good news. I think that drilling permits are eminant, it would be better to buy on now. We are off to the races! BTW, if more good news is reported, how would a retracement occur?
Editor: Perhaps it won’t pull back. We’ll see. That’s what this BLOG is for- so people can express their views.
I like this stock over 3. That means it needs to go up about 45%. I see it acting in a fashion that you describe…re-tracement. I have been in other “energy” related stocks where I exited way to soon. Much depends on good management and in this stock foreign interference.
Editor: With the Guinea project back in the pipeline, $3 seems a slam dunk at some point in the future. However, before everyone gets overly giddy, a longer term perspective might be in order. Despite having the best energy environment possible, this stock is still only trading at the same level it attained 18 months ago. We are back to hoping for a major name partner.
I do no think it will retrace to 38%-68% noway. News on Friday is what we been waiting for. It may drop to $2 or worst case $1.85 And breakout over $3 . Or it could continue to go up and pass $3 and retrace to $2.75 area. IMHO.
Editor: Then perhaps $2.75 is the level I would buy it at if it chugs over $3. In either case, it’s not like the stock is a run away freight train- remember- it was over $3 last February, so on a longer term perspective the stock hasn’t done all that much except give people an opportunity to buy it really cheap thanks to the third world beating they took. I could be wrong, but I will wait. We are back to the same agrument I was making in the Spring- they need a deep pockets partner to have real credibility in this project.
Thank you I bot it at .95 and 1.15 a day or two later. Happy
Editor: Good for you- now it looks promising for the long term as well.
WE MAY BE ABLE TO BUY HDY AT $1.00–THERE IS SOMETHING NEGATIVE GOING ON BEHIND CLOSE DOORS. ” THE MINISTRE OF GUINEA DOESN’T KNOW THE LETTER OF TERMINATION WAS SENT ” I HAVE A FUNNY FEELING THAT SOME GROUP IS MAKING A MARKET IN HDY. BUY AT SELECTED TIMES AND RUN PRICE UP AND BAIL OUT . LEAVING THE DREAMERS WITH EMPTY WALLETS.
Editor: I am not as pessismistic at this point as you are. The company is very forthcoming about the steps they are taking. Nobody makes a market in the stock anymore- it is on the AMEX. Keep some money handy- things could brighten up.
I can’t help but wonder what’s going on here? What is USOil up to? Where did the original termination letter that was sent to USOil (that was supposedly from the Guinea govt) really come from? Maybe I will send USOil a letter… Just who did the USOil officials meet with back in July when they went to Guinea to have the letter rescinded actually meet with? Good thing HDY did not wait on USOil to take action. If nothing else this I would feel a bit more confident that the management of HDY is capable of pulling off the necessary acitivities that need to be done in order to get the oil flowing out from under the floor of the ocean.
Editor: A very confusing situation. The kind that can only be associated with third world countries. Keep your fingers crossed.
I never sold, and I’d love to take the press release at face value, but does nobody else find the guyanese president’s comments illogical. the article seems to suggest that neither the president nor the secretary general had any knowledge of the termination notice. if it was a hoax, or without power, then the status quo should have returned and HDY should be unencumbered. instead, HDY was given steps to follow to regain their property rights. if the president thought the termination notice was legitimate but unfounded, then one might have expected that he would have merely cancelled the notice. he did not, so it seems likely that the government is playing a game, and there is more pain coming. at best, HDY figures to lose a greater share of the property ownership. at worst, the red tape continues, making it next to impossible for HDY to fulfill the steps necessary to regain their property, and this failure will be used by the government as their defense in any legal challenges that HDY should launch later (WTO)
Editor: Hence my caution on chasing the stock. An ironclad deal with Guinea combined with a partnership with a major developer is what the doctor is ordering here for health.
From latest filing “On August 12, 2005, we closed a private financing transaction with Dutchess Private Equities Fund II, LP. The financing included a subscription for a $1,500,000 two (2) year debenture that was funded $1,000,000 upon closing and funds $500,000 upon filing of a registration statement which we plan to file in October 2005. Upon effectiveness of the ensuing registration, Dutchess may elect to convert the payments coming due on the debenture at a stock price of the lesser of the fixed floor conversion price or $1 per share. ” Wondering if this registration is contributing to pullback and if it will continue to pressure trading. I’m sure Dutchess will try to recoup with price action well above $1.00. Still not ready to buy back in, but getting close to my target.
Editor: I can’t say what will happen with the Dutchess financing in the future. At the current time, HDY is funding payments out of cash flow from their natural gas properties, which is a positive for the stock. By way of full disclosure, I am an investor in the Dutchess fund. It is disclosed in every edition we publish. They are very good guys, and rarely a major negative factor in a market.