Hi Guys,Sorry for keeping such a low profile recently. Having...

Hi Guys,

Sorry for keeping such a low profile recently. Having two young boys and a very demanding offshore job does not leave much time for share analysis. I no longer invest directly in stocks, I have moved everything to mutual funds with one exception, HDR, in which I retain a significant investment.

No one can deny that the past 24 months have been very dissapointing. Two years of exploration in Mauritania have yielded little. Woodsides competence has been bought into question by the fiasco with the Chinguetti production wells. There is still lots of uncertainty regarding Tiof and no gas agreement with the government in Mauritania. With Guyana we've had empty promises for years. HDR is overplaying their hand and their exploration rights will lapse unless they get a drilling partner soon.

Uganda has been a rare bright spot but I have reservations about the political risk. To the North of lake Albert is South Sudan which is torn by civil war. To the east is an area of Uganda controlled by the Lords Resistance Army, one of the most cruel and brutal rebel groups in Africa. To the west are the Congo provinces of Ituri and Kuvi which are also in pertpetual civil war between different rebel factions. Any of these factions could target drilling operations in Lake Albert in the hope of being paid to go away.

The Ugandan government is relatively stable but they will need to garrison many troops around the drill sites and pipelines to protect them. The corruption levels and risk of attack will be very high. Any reserves found in this part of Uganda will be discounted heavily by the market.

So why do I hold? 1. The long term oil price will be higher than $US100, 2. HDRs share price barely covers Chinguetti. There is very little blue sky factored in for Uganda, Guyana, Fauklands, Tiof etc, 3. Historically HDR has been a great share to buy on dips like the current one.

My advice for those hurting, is to stop looking. I've ridden through dozens of painfull corrections where HDR has lost half its value or more. My solution was not to look at the share price for 6 months. Out of sight out of mind. I have not looked at HDRs share price for 2 months. The only clues I've gotten are from HC posts. I'll ride this wave, just like the others.


Cheers

Chinguetti