HyperDynamics Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil and gas exploration company HyperDynamics (AMEX: HDY  ) jumped as high as 11.4% in morning trading today, extending the stock's 10% popping streak to three straight days.

So what: After an analyst upgrade and an impressive presentation at its annual shareholder meeting, HyperDynamics did an encore by appointing a VP of business development.

Now what: New VP Andrei Orlov comes with a fine pedigree of increasing responsibility at engineering firms Foster Wheeler (Nasdaq: FWLT  ) and SNC-Lavalin (Pink Sheets: SNCAF.PK) -- both highly appropriate stopovers for an explorer of natural resources. Still, HyperDynamics' stock has gained 500% over the last six months and looks risky to me based on inflated prices, especially when you take into consideration the company's history of signing farm-out letters of intent only to have them canceled before a drill ever gets planted. Fellow Fool and energy expert Toby Shute can think of several peers with more attractive stocks.

Interested in more info on HyperDynamics? Add it to your watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.


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  • Report this Comment On February 18, 2011, at 4:52 PM, Researcher23 wrote:

    Is this a personal opinion that "it looks too risky" based on "farm-out letters that get canceled?" Please! Perhaps the farm-out letter was not accepted because a better deal is out there? The history here is ONE deal not accepted. That alone gives HDY a "history?" Perhaps, when the stock goes up 500% there is something good happening with this company? When two different rating agencies give it $8 and $9 valuations, how can you say it has "inflated prices" over the past 6 months?

  • Report this Comment On February 18, 2011, at 5:49 PM, Inigma53 wrote:

    Ordinarily I would be in agreement with you on the stock being overpriced, but not this time.

    Revenues = Zilch

    Assets = Limited

    Potential = LIMITLESS

    The draw is the huge potential the situation affords. HDY has the exclusive rights to explore and exploit an area 8,000 suare miles LARGE of its hydrocarbons.

    I believe there are established and proven hydrocarbon systems in the waters of bordering countries raising the likelyhood of a hydrocarbon system existing of the the Guinea coast as well.

    All they got to do is prove that the system exist and, well, $6/share won't be squat.

    They were on negotiations with only one driller that I am aware and it did fall through.

    SO PLEASE PROVIDE A REFERENCE OR LINK INDICATING WHERE YOU GOT THE INFORMATION THAT THERE HAVE BEEN MULTIPLE DRILLER NEGOCIATIONS. OR, YOU CAN ADMIT TO MAKING IT UP KNOWING IT WAS DAMAGING OR MERELY ASSUMING THAT WAS THE CASE..

  • Report this Comment On February 18, 2011, at 8:05 PM, davelfla wrote:

    There was a deal with Repsol in 2010 that fell through. Anything before July, 2009 doesn't count because there were amateurs steering the ship.

    The Repsol deal fell through because Repsol refused to finalize it until the Presidential Decree was signed. The deal expired before the decree was eventually issued. The price Repsol was going to pay had the risk of not signing the decree built in, but they let it lapse. Note that Repsol contributed about $4million towards the cost of the 2D, which they did not get back.

    The Noble (unofficially) deal probably fell through for other reasons, but CEO Ray Leonard officially announced that HDY is happy it fell through.

    Bottom line is that HDY is still carrying 77% of the concession. They may well dilute to continue to hold on to 77%. That's how much they think of the potential.

    I asked the CEO at the SHM if HDY has the technical staff and ability to operate the drilling project, and was told that they do.

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