hdr won't b e a boring stock ..davidg davidg et alI know a lot...

hdr won't b e a boring stock ..davidg davidg et al

I know a lot about HDR that's true but guru may be too strong a term!! And I'm not keen on "seeing into the future" and predicting what HDR is going to do. But I can suggest what we can expect in terms of drilling and market reactions to developments in coming months. Most analysts give HDR over $1.50 potential upside with this year's drilling campaign .. I reckon that's conservative and even 3 out of 7 will see HDR pushing $5 (in the current high oil price environment and with production imminent). Today there's a little profit-taking in oilers generally and some pre-results (possibly) selling in HDR specifically. Here's some ideas on the program:

(1) Sotto .. results end of this week or early next week. They have said its "high risk" and "will provide valuable information" on Block 3 prospectivity.. so we have been warned!!! A good result and HDR will head towards $3.00 and beyond because CSEMI was used (as far as I can make out) and that would imply the other 5 wells also chosen on this basis may also be gushers, and because there's plenty of buyers on the sidelines who know HDR is undervalued but don't want to take the drilling risk .. they will jump in. If negative the downside is 20-30 cents IMHO .. because we have been forewarned that Sotto was high risk and because over 60% of HDR is held by institutions and they won't dump it (like they didn't during the coup), and because there are 6 more wells to go.

(2) Colin and Colin Deep .. late August to early September .. also high risk but a double dipper. All upside and little downside IMHO.

(3) Espadon .. moderate risk .. should be a goer.. 30 cents upside.

(4) Faucon in the Dana JV block 1 .. its a committment well so could go either way but Dana have said CSEMI was used and its "exciting" and could hold 1 billion barrels in place .. upside 30-50 cents.

(5) Other 3 WPL JV wells each could add 30 cents+ with limited downside on failure. But ... if we haven't had much success with the first 3 wells then the sp will be struggling that's for sure!

There's plenty of other possible developments as well .. eg a farm-in to Guyane and a drilling intention announcement (20-30 cents upside IMHO), drilling in Uganda (Tullow Oil have said its to be drilled in October???). On the downside there will be funding considerations, but to counterbalance that we are expecting production to be ahead of schedule in early 2006 or before.

I reckon the sp has limited downside with production coming and heaps of upside. ROC is the only other Aussie oiler with the same potential over the next 6 months.

Cheers

H