Everyone wants to know what is going to happen with HDY- including me. I am currently in at $3.215 for 5,000 shares- down $5k.

I have been reluctant to add to my position despite the stock’s history of rebounding off low points. Here’s why- In my view this company is pretty much worthless without obtaining the drilling permits. The previously highly touted natural gas properties in Lousianna generated a whopping $134k in revs in Q1- these properties were supposed to generate about $5 million in annual sales. There is a law suit with jv partners in the Lousianna properties alleging they misappropriated funds earmarked for Lousianna towards their Guinea project. I have no idea if this lawsuit has merit- I just know their Lousinna properties appear to be one big joke so far.

The Lousianna situation pales in comparison to the problem in Guinea. In my view, the majority of the market value of this company is tied to the eventual awarding of the drilling permits for the Guinea concession off the West shore of the African continent.

The market was optimistic a revised contract and drilling permits would be awarded early in 2006. The company has not been able to deliver the goods. Earlier in the year, HDY traded extremely well when any rumor surfaced management’s presence of communication with the Republic of Guinea goverment officials.

As time goes by, the market is less reactive to these peripheral events. In fact, I believe investors have reached the point where they will only bid up this stock if the company delivers the deal. No more free ride in the stock price. That appears to be over.

Drawing on many years of experience in microcap stocks, it is my belief and conclusion that the price of this stock will continue to slowly erode as they take longer to get a deal signed. Furthermore, the longer it takes, the less likely it is to happen in my view. I have seen this time and time again in 20 years of investing in microcap stocks.

Here’s the chart:

For those looking for the ever important 61.8% retracement level to add to positions, here’s a long term weekly chart. The longer term the time frame, the more powerful the chart.

As measured by week since last August when the stock began a rebound phase, the ideal entry point now would be about $1.92. Any signficant drop below that level on a weekly basis would be a major technical negative, and suggest it is all over.

I’m going to hang in there for now. If the stock blips up on fluff information I will sell it. If the stock blips up on the awarding of drilling permits, I will buy more.  If they don’t deliver something in the next few weeks, I will probably sell it with an eye towards buying it back if the tide turns.

Comments and questions are welcome. I’m sure there will be many, as this stock has developed a bit of a cult following with religious believers.