HHR - WOW

Wow what a disappointing couple of weeks...but I still have hope!

My views on what is currently hurting the stock.

1) A crowded trade with a lot of short term traders in the stock, who were expecting (probably unrealistically) a big pop post the well publicized farm out agreement, who are not prepared to sit in the stock long term and wait for production.
2) Some of the insto's who took up the 500m 4 cents shares, cutting and running in this tax year. Again they thought they could make a quick buck, but don't want to sit in the stock long term and wait for production.
3) With such a big chunk of the stock tied up with management, liquidity in $ terms is still quite low, so it doesn't take a whole lot to move the price a cent or two.
4) A general weak macro backdrop, especially in small caps and falling gas prices as we move into the northern hemisphere summer.

What I still like about the stock.

1) I see this stock as call option on higher UK gas prices. If you are bullish gas fundamentals like I am and the company get themselves into production as planned, there is potential for the share price to go much higher especially if they can bring online further phases. With the current situation in Ukraine the North Sea is the ideal place to be positioned.
2) Although management has been heavily criticised for the cap raise, I think they are playing things right. The opportunity in gas is now, they could waste time and money exploring but to me the quicker they can get their gas to market the better the long term prospects are for the stock They have done the farm out because it's not easy to raise the amount of capital needed to get production up and running quickly, so many spec stocks fail because they can't, so I like the fact they are de risking. The management are highly leveraged to the stock themselves (17%) so their interests are aligned with shareholders.
3) Fundamentals, the invasion of Ukraine has sadly been a game changer. Even if the war ended tomorrow I don't think Europe will switch back to Russian gas for years. With soaring inflation, the UK government will need to do whatever possible to keep energy price as reasonable levels. While it looked like production in the North Sea was winding down they are now going to need to get production back up and running quickly. HHR seems to be in the right place at the right time, they just need to make it happen.

For disclosure purposes I am long and wrong at the moment, but I feel with time fundamentals will win out in the end. If management can get this thing to production, the market can't argue when $$$ start rolling in the door.

Good Luck To All Holders!