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capital raising - reflections

  1. hardmano

    15,791 Posts.
    I've got over the initial annoyance at HDR's placement and reflected on this capital raising and its implications. My perspective has also been improved with the UK's response but this was I believe as much to do with Dana's enthusiasm for Pelican and Mauritania as it was a response to the placement (by the brokers et al involved in the placement).

    HDR now has a lot of cash in the bank and this will go a long way towards getting them through to Chinguetti production. Given that the sp was around 70 cents in Novemeber last year (only 4 months ago) - a large placement and rights issue at $1.10 now is overall a good performance. I am also prepared to accept that there may be more to the story than what we know at present - just as there was when HDR sold ENI's equity to BG. For instance there is now a good chance that a lot of the otherwise "stranded" gas will be developed and sooner rather than later - and HDR will need cash to be involved in these developments. Having the cash now also strengthens HDR's position in negotiating farm-outs as they are not desperate and can ask for better terms. Here I'm thinking of Matamata in Guyane, the Uganda drilling and farmouts in blocks 1,7 and 8. These all have very large potential and if HDR can hang onto a large percentage of their current holding through drilling (i.e farm-out less) and get good terms for what they do9 farm-out, then that will be a very big plus.

    Long-term the capital raising is a good thing but my initial response was because of my short-term positions, and because HDR management said they would do a capital raising around mid-year (in which case I would have lightened up on my large short-term positions ahead of this timing).

    I think that with all the potential HDR has in this year's drilling campaign in Mauritania and elsewhere - the placementees and shareholders should do very well!!!


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