To say the least, it has been an interesting week for HDY. The company issued a press release describing in detail how their Guinea project had gotten derailed from crooked internal politics. I have never seen disclosure like this from a public co. It reads more like a John Grisham novel than the real world. Click Here if you want to check it out and didn’t catch it.
It would appear the game is back on in Guinea, and HDY has some very compelling seismic data and core samples from the concession.
I believe the company is signalling the market that it is on the cusp of getting the permits to drill test wells. This will be the first step in the process of restoring the project.
My guess is that HDY is going to announce they have received drilling permits in the near future- my guess is anytime between tomorrow and the end of the year.
I believe an announcement of this type will probably add $.50 to $1 to the stock- I don’t know if it will be a spike or it will hold. I know if I am paying attention when it happens I will be a seller of some or all of the 20,000 shares I have accumulated for my own account, and be looking to buy those shares back.
I believe if you don’t own some of this stock, you should own it now. I am recommending an event driven trade, and in event driven trading you have to remember to sell when the event happens.
The bigger questions come down the road- if they get the permits to drill, where are they going to get the money? Based on their last quarterly filing for the end of Q3, they don’t have anything close to the resources, and they are generating very little cash flow out of the Lousianna properties.
The ideal scenario- get the permits, then get a deep pockets partner to help develop the concession. If that were to happen, I believe the stock would trade at a new all time high- perhaps $4 to $6.
As you can see from the chart, HDY has been in a nice uptrend since disclosing things were getting back in track in Guinea. The stock has demonstrated it’s propensity to rocket up the chart on good news related to Guinea. The way this is setting up, you really need to own some so you can benefit from the pending developments the company is signalling.
So let me get this straight. You panicked when HDY had problems with its PSA and sold all of your shares instead of buying more at a bargain basement price. Now you reacquired a bunch of shares at a price higher than you sold the original shares. Now you are telling us how you think this stock should be bought for a quick trade. Pardon me but I think I will ignore that advice and hold on to every single share I’ve accumulated at those low prices for the long term. I don’t think too many of us are in this stock to make chump change trading it. We are in it to make megabucks when HDY hits it big in Guinea, if and when that happens. You said that HDY was generating very little cash flow from Louisiana. Wrong. Last quarter did not include any gas sales and very little in oil sales. HDY is generating considerable cash flow as we speak from its Louisiana properties. You also said the HDY does not have anywhere close to the resources to drill alone. Wrong. If you had done your homework you would know these wells are in relatively shallow water and will be drilled to a relatively shallow depth. The Dutchess line of credit in fact would provide them with enough capital to drill some of the intitial wells on their own if they so choose. Having said that, I believe they may in fact sign on with a partner. The interest from outside companies to partner with HDY has been HUGE. They will have no problem whatsover in signing on a partner if and when they decide that taking on a partner is in the best interest of the company and its shareholders.
Editor: Generating revenues? Really? According to the SEC filings, the company generated $78,000 in revenues in Q3, which by the way are the only revenues they have ever generated in their history as a resource company. Beyond that, there have been promises, but no formal disclosure of any additional revenues. If you know differently, you are trading on insider information, and that is not appropriate for this comment section. If those wells are doing so great, why do they need money from Dutchess?
Furthermore, it is simply my opinion concerning the best time to be in or out. I’m not perfect. It’s simple- it is still my opinion this stock is not worth being in without Guinea. Now that Guinea appears to be back on the table, I am back in the stock. If it works out, it won’t matter if you own it at $.90 or $2. There is plenty of upside from either level. I preferred to be out when Guinea was off the table. So, you will make a few cents more than me- big deal.
I don’t believe they have the resources or capital to go it alone in Guinea- perhaps they can get a few shallow wells drilled, but even if they do those are primarily natural gas which has little value at this time. A partner is the long term solution.
I wonder what you’ll say tomorrow or the next day. You made some pretty strong statements against the company when this came to light initially. I’m glad I didn’t listen to your trading strategy and researched the company further. Your credibility for this forum is lacking and I suspect you’ll jump on any “elephant”, as you put it, to showcase your website making it appear you’re on top of emerging companies. Recall this comment: You’ve done a great job covering the stock in the past and were ostensibly onboard with their program. You have failed to remain objective as an analyst, however, and have injected your trading strategy without letting the story unfold. Read the PSA, you’ll see why I think this isn’t over. Editor: Perhaps you are correct, but as I mentioned, there will be believers who are in denial. I can always change my views if this get straightened out, but for the time being I believe the Guinea deal is dead. Let’s see how you feel in 90 days when there has been no resolution to the situation. Comment by TM — 7/29/2005 @ 6:23 pm
Editor: It appears the Guinea deal is back on and I am covering the situation again. What’s the problem? I’ll give positive commentary when it is earned, and negative when it is not.
No doubt in my mind: the company is sending as strong signals as they possibly can without actually promising anything. Were this a private conversation at the Watts home among the primaries, I have NO doubt the statement would be much more overt. Barely need to read between the lines here. The Watts have never overstated anything…one thing I have always liked about them…so these releases need to be read with that in mind. I say we’re gonna run and hard. And I say that they have majors out the wazoo that have approached them and that they are trying to decide how far to use their equity line to advance the project to get as good a deal with a major as possible. And to top that off, I think we’re going to start getting more and more $$ PRs coming from La. Gotta be in it to win it. jt
Editor: Thank you for some positive commentary. These other morons that objected to me being negative on the stock at one time need to get a grip.
I don’t know if they are into natural gas well production, but if they are then revenues will or should increase with the current gas price rise. Also, if they have a significant oil supply find in Guinea and can state that they have x number of gallons in the ground then they could be sold to a major company like Exxon. I have seen some indications that the cash rich oil companys are looking for new reserves and will spend money on aquisitions.
Editor: All quite true.
$4 – $6 would be nice, but I think it is a bit too conservative if they get permits and announce a partner. Consider the extremely high insider ownership (61%), extremely low float, the fact that more institutions will jump in (they’ve already been accumulating), and the expertise at SCS. Fair value should be a $1 billion marketcap. Where’s that, $20+? That could still be conservative. If HDY gets permits and drills, that’s all she wrote.
Editor: All good observations except one- the low float could change- there’s tons of 144 paper that could become free trading, and the company is close to being effective on their registration of the Dutchess financing. They are in registation on 8.5 million shares.
Morons? C’mon friend, no need to resort to that. As a journalist in a public forum, it’s imperative to remain objective in your coverage to allow people to make an informed decision. Not inject your personal trading strategy or opinions that could mean the difference to those that rely upon impartiality. That’s what I find at issue here. Name calling is completely unprofessional and further proves my point questioning your credibility.
Editor: Sorry- quite right
First let me comment on your unprofessionalism. Going around calling people morons because they critisize your faulty advice is not really very professional. I think you owe your readers an apology. Second there are numerous sources of determining production from Louisiana besides two and half month old SEC filings. Field visits, state reports, company disclosures all included. Substantial amounts of natural gas are being sold from LA right now and are generating substantial revenue. Just because you don’t know how to verify it, doesn’t mean it is not happening. Trust me, it is. And calling me an insider is plain ridiculous. Kent Watts could tell me that Guinea drilling permits will be isuued tomorrow and if I trade on that info they can do nothing to me. I am not an insider. Remember they could not get Martha Stewart on insider trading. They got her on lying to a federal agent. Kent Watts and HDY might get in trouble, but not me. Third HDY has not obtained any addtional funds from Dutchess other than the original amount to set up the deal. The 20 million LOC remains untouched. Your comment about LA must not be doing well or they wouldn’t need Dutchess is ridiculous. They got Dutchess so they could possibly go it alone in Guinea and to put them is a stronger bargaining position with potential partners. Fourth, the gas does have value. They are building a huge aluminum plant which will use huge amounts of energy. Their preferred energy supply would be natural gas. In addition, the whole country is starved for energy supplies. Fifth, if we’ve both got 10K to spend on HDY stock and you buy at 2 and I buy at .90 I’ll have 11,111 share and You’ll have 5000. That might not matter a lot today, but if the stock goes to fifty it will make a BIG difference. You do the math. And lastly. I have no problem with you being negative about the company. But I would prefer that when you are wrong, you admit it. And I would also prefer you not make off the wall statements that have no basis in fact. There are many people that have a lot more info about this company than you. I suggest you try to verify that info and use it rather than dismiss it as being incorrect.
Editor: Please show me the exact location of public disclosure that states exactly what they have in Louisianna- you can’t because there isn’t any. If there isn’t any, I can’t report it. 2.5 month old disclosure is all there is, and all there has ever been on this company.
And- you are wrong- if Kent Watts tells you they have the permits in Guinea without publicly disclosing it, and you buy the stock, you are guilty of acting on insider information, which is a violation of federal law. If you don’t act, but you have the information, there is no violation. I’m guessing you don’t have Martha Stewart’s resources to defend yourself.
It would appear your main agenda is to get me to admit I was wrong about getting out when they lost Guinea. You won’t get it no matter how much you argue. In my view, it was the right thing to do, and I still don’t care whether I own it at $.90 or $1.50.
BTW- I’m up to 20,000 shares, and may buy more if it gets much cheaper.
I have been a long time follower of the Journal. Just want to say thanks for highlighting HYPD back in 09/2000. Have traded it several times. ERES was another good trade. You presented them I did the DD. IT worked out well! – sal
Editor: Thanks for bringing it up. Tough to find good trades now. Haven’t had a really good one since GEPT in July.
Remenber when i commented that i felt there was something going on behind close doors at Guinea. Well there certainly was !! The strange part was that one man can cancel a contract and the rest of the administration is not aware of it ??? what i would like to know is what oil corp or country was involved in that unscrupulous misconduct. “Watts” the real story, I am sure he knows by now.
Editor: The company put out a fairly comprehensive overview of the entire situation. It was unlike anything I have ever read from a public company. More like a thriller novel. Click Here to read it.
It makes sense, tin horn gov., personal profit, all of it. I falut HDY for trusting a third party (U.S. Oil) with all the government contacts. Now it seems they have learned their lesson.
Editor: Time will tell- the stock is getting attractive again price wise.