gdn in the new financial year

My comments below are my own thoughts only and are based solely on my experience in the market and with GDN in particular. I tell it exactly as I see it with no attempt to ramp or down ramp the story. I believe any attempt to do so is blatantly transparent to astute traders anyway!

To begin with I believe that too many HC posters think way too much about conspiracy theories and what management and the major 'players' are up to. Despite this it does provide some entertaining reading.

The current short term weakness can be attributed to:

1. Ex Rights entitlement.
2. Fact that stock ran up just prior to rights issue announcement.
3. Weaker broader market.
4. Unwillingness of punters to support or 'prop' share price for fear of being filled in by shareholders looking to switch exposure to options only.
5. Uncertainty about flow test results.

The $4m being raised via rights issue can be explained in three ways: (at risk of ironically sounding like conspiracy theorist myself)

Pessimistic – They simply have spent all the money from recent raisings at 11 cps (4.5m), sale of WCU stock to RBC Dominion (1.2m) and Weatherfords litigation settlement (3m-6m) (extremely unlikely scenario)

Optimistic - The 'sophisticated investors' at Cunningham’s no longer have any stock left after the recent run up through 20 cps and GDN management is giving them exposure as the wells enter production phase via options underwriting (anticipating that some shareholders will not participate). If majority of shareholders take up issue then the broker still receives a 6.6% fee.

Realistic - GDN have enough cash to last until testing complete but know that if results are not exciting that further raisings will be difficult. This issue ensures they can pay themselves a salary etc for at least another 12 months.


The second well (PB#2) fell victim to extremely high expectation and anticipation of what the Pinkerton and Leadville had to offer.

After drilling through to other side of the fault in Alkali Gulch (was always a risk this could happen) and forseeing difficult and costly drilling conditions in Pinkerton, a decision was made by the company to preserve cash and move straight into production testing (a sensible choice I believe).

Following PB#1 and later with the introduction of Rick De Boer, the Upper Ismay is was what interested GDN the most from a commercial perspective (most of the producing wells in Paradox Basin are in the upper zones), the Leadville provided excitement predominately from a market perspective. I make the clear distinction here between commercial and market perspective.

Market perspective is associated with what will excite the day trading punter the most, I feel that it is a positive step forward and a sign of corporate maturity for GDN to now focus on what will bring the greatest commercial return to the company. We all know that when decisions are based on ‘market’ (as they have been in the past) they are very short lived and the share price is back below where it started within weeks. Provided the flow tests are solid, GDN will start to evolve into a different class of company.

The fact is that this well has been very successful (despite where the share price currently rests), Very significant gas shows have been encountered, and the levels at which this occurred implies stratagraphic connection to PB # 1. Porosity across the board was improved. If RPS Energy reflect this in their updated Gas Initially In Place (GIIP) estimates we should see significant increase in the total number of BCF at the Golden Eagle Gas Field.

Going forward the share price will be determined by the production test results and the revised RPS Energy estimates. Flow rates between 2MCF/day and 5MCF/day (post stimulation) should be viewed very positively by the market. I have come to learn that anything is possible with the GDN share price, the price moves and volumes and general interest from traders astounds me. In 2007 when flow tests were being completed share price moves from 13 to over 35cps on massive volumes were seen. The Global Financial Crisis (GFC) has greatly reduced our risk tolerance and is a major determinant into why GDN can still be purchased at 7 cps prior to potentially proving itself as a commercially producing gas field.. I see it as an opportuntity!