The HRT dry hole is disappointing to those of us (certainly me!) who believed — and that’s the right term — in what the HRT team was working to accomplish offshore Namibia. That is, over the past three years I looked at the same geology and geophysics as everyone else. In my mind, I saw a Namibian analogue to offshore Brazil. The oil “should” have been there. But probability aside, now we know. There’s nothing where we thought we’d find it, and those were three very good prospects. I mean… Very! Good!
Are there other plays out there, offshore Namibia? Maybe, but it’s not for us to know just now. It’s not like HRT has money or a follow-on drilling program to go back into Namibian operations. Not now.
Carbonate Rocks Lack Porosity
So what exactly happened? Well, according to HRT:
“The Moosehead-1 well encountered approximately 100 meters of carbonates at the primary target. The nature of the reservoir, though further analysis of data collected will be necessary, appears similar to the ‘pre-salt’ reservoirs as predicted. However, porosity was less developed than expected in this location, and is being considered a dry-hole. Wet gas shows were encountered in the section that increased in wetness with depth. At least two potential source rocks were penetrated, including the well-developed Aptian-age source rock. Indications of source rocks in the deeper rift section were also apparent, though not penetrated.”
OK, so maybe there’s something down there. But HRT didn’t drill into it. There’s more tech-talk in the company press release, but you get the picture. HRT found geological clues, but not the oil strike the company needed (let alone its investors).
Looking ahead, according to Milton Franke, CEO:
“We conclude this campaign with the understanding that both the Orange and Walvis basins, tested with drilling, are oil and gas prone basins, new exploration efforts will bring commercial hydrocarbon discoveries and that HRT will be part of the future of Namibian exploration.”
Painful Share Selloff Looms
In other words, HRT is putting on a brave face in light of drilling disappointment. And now? As I stated above, I expect a share selloff. HRT shares will tumble .
Looking ahead, it’s going to be tough for HRT to raise more money. A lot of credibility went down those dry holes, along with drill bits and drilling mud.
I assure you that I wince in pain every time I look at the HRT share price. Like I discussed earlier, if HRT had found just some of what the geologists thought was there, we’d all be very happy. So I rode this bus to the end of the line, until the third well of three came out. That was the only way to know.
In the future, I’ll keep an eye on HRT. But right now, it’s a badly broken story.
So it’s a bad day for HRT. This latest news is a hard hit. It’s depressing. Indeed, I’ve had geological and investment disappointments along the way in my life. But I have to admit that this one really stings. I expected more from the HRT effort. Frankly, I expected success. I expected oil. I really thought that HRT would beat the odds and give us something great. Nope. Didn’t happen. On this one, we fell from grace with the sea.
Action to take: Sell HRT Petroleo (HRP: TSX-V).
That’s all for now. Thanks for reading.