BK Impact Last week, Travis Johnson (the Stock Gumshoe) did a detailed HRT analysis for his subscribers. Just as Travis does on a weekly basis for other “teased” securities, he thoroughly examined HRT for the paid subscribers to the Stock Gumshoe by considering the points made by BK. His recommendation ended with Travis writing that he would be buying HRT on today’s opening as part of his personal portfolio.
I anticipate the Stock Gumshoe readers represent a distinctly different group of investors from BK’s lot. When combined with BK’s regular readers, we see today's US and CAN volume over 3.5M.
I have been following the material decline in HRT stock price for some time. Many readers consider the stock a short target, which certainly tells part of the story. I believe, however, the greater impact has been from pre-placement ownership changes.
Pre-placement, HRT had material equity fund early money. As I recall, the pre-placement HRT investors contributed little more than a few tens of millions into HRT, and in return, they held what I believe to be about 40% of its stock with a cost basis that feels like $0.10-$0.20 per share. Based on their extremely low basis, it was foreseeable to early longs that in the absence of immediate high value drilling success that HRT would spiral down, as it has. Simply selling the stock realized an enormous spread, and a covered short position would have been another option.
We can all hope that HRT enjoys a future valuation based on proven reserves. As longs, we are all waiting for –
- a fourth rig drilling partner,
- positive results on the Amazonas frack job,
- cash on the Amazonas air unit transaction,
- monetizing the prior gas discoveries (for a county importing around one-half of its natural gas consumption),
- discovery of oil in a material quantity onshore Brazil, and
- Wingat-1 success, with success on Murombe and Moosehead to follow.
To date, oil has been discovered along the western coast of Africa from South Africa north to Mauritania with the near singular exception of Namibia. As we have all read on this site, the coast of Namibia has oil shows near the Kudos field. Someday someone is going to discover oil off the coast of Namibia, and at about $1.00 per share, we are all holding a stock spectacularly under priced or diving to pennies.
2013 and 2014 could be very exciting or very disappointing.
Have a super day!