Hyperdynamics’ Chief Executive Writes to Shareholders As Video is Published of Visit With Guinea’s National Assembly President
Hyperdynamics Corporation’s (AMEX:HDY) Chief Executive Officer writes to shareholders as follows:
To our Shareholders:
The most positive way to look at our current situation and potential is to realize that during the current time of a retracting volatile stock market and oil prices, the work we have accomplished in the last year has greatly enhanced the value of our unique asset offshore Guinea. That value is growing dramatically regardless of the current market conditions.
Our accomplishments in the last year have positioned us with great timing to now take the next major step forward towards our goal to make a world class discovery. We entered this major exploration project when the price of oil was $18 per barrel, and no other company was interested in the Guinea offshore. Now we are positioned to make a discovery and be producing when the world demand is far greater and the price of petroleum much higher. I don’t proclaim to be an economist, but I want to make a few comments on some interesting and relevant questions. Some of the questions will build on others and I hope to get to more relevant questions as I progress, so please bear with me. Here are a few facts to consider and questions that I believe are pertinent now to ask and answer:
1. Does the world still have an energy supply problem?
Yes, the burgeoning world demand, while it may slow during a recession, will continue. New sources of petroleum are more scarce, harder, and costly to come by. Alternative sources of energy will take years to perfect, become economic, and assimilate into the equation of increasing supply enough to make a significant difference. The world demand for energy creates a consistent and growing natural demand for our asset, even during a period of downward fluctuation of oil prices.
2. At what price of oil does the world slow down consumption?
I think that price is $145 per barrel because when the price gets over $100 per barrel, people my age and older get out and ride motorcycles without helmets to get around town. When you see older people riding motorcycles in the USA, you know the price of oil is too high.
3. Can the price of oil go higher than $145 per barrel?
Yes, but in my opinion, not for an extended period of time.
4. What caused the recent drop in oil price?
The price of oil reaching an all time high causing people to just stop using gasoline in the USA coupled with the world credit crunch, related slowing economies and recession worked together to cause a reduction in the world consumption. This reduced overall world demand and put a downward spiral on the price of oil.
5. Is the price of oil going to stay at the current price?
Earlier today OPEC just cut daily production to start in November, by 1,500,000 barrels or about 5%. I believe that a healthy and more stable price for oil, all other things being equal, will be between $85 and $115 per barrel. However, there is plenty of profit to be made, even at lower prices than we have currently.
6. Is there a benefit for Hyperdynamics to have a lower oil price?
Yes. I don’t think the price will drop to lower levels than we have seen in years past and so I will take it either way at the moment. Actually, I would prefer the price of oil to stay lower until we make a discovery, and then I would like it to go up for the benefit of Guinea and our shareholders. I know this is a capitalistic statement and I apologize to any Socialist reading this. The lower the price of oil, the easier it is to secure some of the critical resources necessary to do the exploration work, such as drilling rigs. Moreover, we can secure the resources at lower costs. Obviously, if the price of oil is $147 per barrel, drilling rigs are receiving a premium and are working continuously. A lower price of oil could actually allow us and our partners to obtain a rig sooner and at more reasonable cost. This is especially true for us due to the economics of our prospects. The potential volumes in our prospects can make up for much of a lagging price of oil.
7. Is this the best time to be acquiring new oil and gas assets?
Yes, if you are cash rich, I believe you should grab bargains in the stock market that tie to valuable commodities and renewable cash flow and income sources. Likewise, many oil companies are cash rich and are in a buying mode because they realize the timing of the opportunity. They realize one of their competitors will reach out and beat them to it if they don’t make it a priority.
8. Will you get as good of an offer from a Joint Venture Partner now that the price of oil is lower?
Yes, I believe that since we have such a unique and rare asset, the level of interest and competition to buy into our contract area is high and will remain so. The deal we have put on the table with all our potential partners is to convey up to a 75% working interest and be carried to the point of production on our remaining 25%. Also, most of the companies, 35 so far on our list, are in superior cash position and see that this as a good time to acquire more assets and to diversify their own risk in their oil property portfolios.
9. Do you know of an opportunity, other than offshore Guinea, for an oil company to obtain a substantial working interest in a significant portfolio of prospects that are already 2-D delineated, with which each drilling prospect has the volumetric potential to hold world class reserves, and the acquisition price isn’t heavily into the billions of dollars (because there are already proven reserves), at this time?
My answer: No.
10. So, do others want the asset you have in Guinea?
There is no doubt that others want what we have very badly. Most are willing to a take legitimate approach to acquiring it, but there are those that try to implement manipulative, petro-politically driven, illegitimate channels to obtain our increasingly valuable asset. We are catering to the legitimate and prepared to deal with the others as necessary. From a positive perspective, it is nice to be wanted.
Even with a retracting and volatile stock market, yielding the weakest financial support we have seen in years, we have been able to achieve the most important goals that we planned for last year, greatly enhancing the value of our most substantial oil and gas asset offshore Guinea. We are now in the middle of the mission critical process to bring on joint venture partners that realize it is a good time to acquire new assets. As we make progress we plan to keep our shareholders posted. I will be writing you again soon.
Incidentally, we just published the video of our visit with the President of Guinea’s National Assembly, Mr. Aboubacar Sompare. The video speaks for itself.
Warmest Regards, Kent Watts Chief Executive Officer Hyperdynamics Corporation
Hyperdynamics Corporation provides energy for the future by exploring and producing sources of energy worldwide. The company’s internationally active oil and gas subsidiary, SCS Corporation, owns rights to explore and exploit 31,000 square miles offshore the Republic of Guinea, West Africa. HYD Resources Corporation focuses on domestic production in proven areas. To find out more about Hyperdynamics Corporation, visit the corporate website at http://www.hyperdynamics.com.
Statements in this news release are “forward-looking” as defined by the U.S. Securities and Exchange Commission and are based on expectations, beliefs or projections that are subject to numerous risks and uncertainties. Investors are cautioned that these statements are not guarantees of future performance, and actual results could differ materially. Please refer to “Risk Factors” in the company’s Form 10-K filed with the SEC.
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