I’m being flummoxed by extremely slow WiFi on my flight today, so can’t get the research completed for the new article I had planned. In case you’re looking for something to read on this lovely Tuesday afternoon, this is a teaser-unveiling excerpt from a Friday File we published in late March. It has NOT been updated or revised, except to note, at the bottom, that I do now currently own shares. To my knowledge there has been no news of consequence from the company since this note was first published, their first well should be drilling for another month or so before they reach their target depth.
We’ve got a bit of a teaser to dig through — and it’s an oldie that has been brought back a couple times over the last few years, but each time the story changes a little bit.
The stock’s sure a heckuva lot cheaper than it was last time the idea was teased — and this week’s teaser pitch says there’s more by way of “real” news catalysts coming soon. So is the story worth buying now? Let’s dig in and see if we can help you make that call.
You’re my favorite people, of course (you can’t buy love, but you can buy fondness), so I won’t make you linger through the whole teaser spiel before I unveil the stock — the pitch is from Byron King for his Energy & Scarcity Investor, and he’s teasing HRT Participacoes en Petroleo, often referred to as simply “HRT” (though that’s not the ticker — stock symbol is HRP in Canada, HRTPY on the pink sheets, HRTP3 at home in Brazil). HRT is the Brazilian oil company run by the ebullient Marcio Mello, and it has been a terrible investment since it went public a few years ago in the height of Brazilian oil optimism, not long after Petrobras had discovered their offshore bounty in the huge deepwater fields (while Mello worked there, we’re told), and it has particularly been falling since they got into the Namibian exploration business in a big way by buying UNX Energy about two years ago, now down more than 90% from the highs.
If you missed our earlier pieces on UNX Energy and later on HRT when King teased them in 2010 and 2012, our article on the original pitch for UNX is here, from back in July 2010, and the March 2012 teaser unveiling when the pitch switched to acquirer HRT is here. That buyout looked good for UNX Energy shareholders at the time, since if they bought around the time of the first Byron King tease they would have seen their shares run up from $1.50 or $2 to about $6 on the takeover bid.
But the takeover was paid for with HRT shares, not with cash, so if you continued to believe in the excitement of the Namibia story (or HRT’s other assets, mostly exploration blocks in remote northern Brazil), your UNX Energy share that you bought for $2 (for example) is now worth about 50 cents (it turned into .55 HRT shares, and HRT is at about 90 cents in Canada right now). HRT has been on pretty steady downward trajectory from $8-9 at the time of the takeover to the current sub-$1 price, though it has bounced a couple times on the way down (and even almost doubled at one point, early in 2012 when King again teased them as they were approaching $4).
But that’s the past — what’s going on now? Well, let’s just take the teaser info from Byron King’s latest version of this pitch and see what he thinks is shaping up:
“Energy’s Last Great Frontier
“The Untold Story of a .91 Cent Per Share Company That Just Placed a Drill Bit Into The Deep Sea Mud…Hoping To Hit A $703 Billion Oil Jackpot
“Major News Of This Promising Play Could Come At Any Moment ….
“If this under $1 per share company hits the $703 billion jackpot, the geologist we’re about to speak to says that ‘Rockefeller riches’ could hit a few bank accounts.
“But as you’ll see, this isn’t a situation for the faint of heart. We’re talking about a penny stock play here with news that could break any moment.”
And then we get the story from Byron King about the urgency of this expected news:
“… this past Monday night, after dinner, here in Pittsburgh.
“As I was getting ready to call it a night, I received an urgent message….
” It was one of my contacts at an oil company I’ve been following for three years.
“This moment is a milestone in the history of our company,” he told me. He went on to proudly announce the “spud-in of the first offshore well.”
“The spud in basically means that the drill bit has hit the earth’s floor.
“What does this mean? Well, it’s do or die time for this low-priced, penny share sort of company.
“We’re at the point where all the talking, arm-waving and speculation stops. It’s time to make or break things.
“You see, this drill bit is aimed about 12,000 feet under that seafloor — in about 3,700 feet of water, by the way. We’re looking for a massive, oil reservoir that looks much like one of those ‘reef’ structures that you find in West Texas, in the great Permian Basin.
“This is the first of several planned wells, in a locale where this one company’s acreage might hold as much as 7.4 billion barrels of oil.”
And he makes the “lottery ticket” argument — that it might be risky, it’s an exploration well and they might get disappointing results, but ….
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“Would you risk a few bucks on this kind of play? Heck, the guy that won the Powerball Lottery, last week, scored over $300 million, out of odds like 150 million to one.
“But this oil play? We’re lookin