Gafisa S.A. Message Board

The only good news out of Wingat is that someone in Florida won the Powerball. The rest of us can throw out our lottery ticket at about $.60 per share today.

http://www.bloomberg.com/news/2013-04-25/bank-of-america-raises-natural-gas-forecast-on-glut-elimination.html

....continued part 3

The proposal embeds payment of r $ 8,250 million fixed remuneration for the Board of Directors, which corresponds to a monthly salary of $ 137.5 million for each one.

In 2012, the HRT executives have already received R $ 31,112 million and in 2010 the total remuneration amounted to r $ 10,93 million. In all there are five directors, including a sister of Marcio Mello, the business administrator Maria Emília de Azevedo.

HRT's shares yesterday soared 11 percent, closing the day listed for $ 4.44. This was the third high paper trading this week. On Monday, shares rose 17.42%, followed the next day by a great transfer of direct actions. Over the past four days the HRT ON already rose 33%, with a significant volume of moving well above the daily average. (Collaborated Téo Takar, São Paulo)

Source: Valor Econômico/Claudia Schüffner | The River

The well drilling started 3/25/2013. So it has been about 8 days. In a conference call Mello said we would hear most quickly if they reached total depth and found nothing. Otherwise they will need to do analysis.

I would not expect to hear anything for a minimum of ninety days sometime late June. I believe this is what company said but can't find my notes.

Sorry, didn't check date in that report. I think I saw in passing that details of well were reported last night and it has potential for 1,400 bpd of oil.

This is why it is up:

"(SeeNews) - Feb 4, 2013 - Brazil's oil and gas giant Petrobras (SAO:PETR3) notified local oil sector regulator ANP about the discovery of an oil and gas reservoir in one of its two prospecting wells in Solimoes basin, northern Amazonas state, ANP said on Friday.
In its notification to ANP, Petrobras does not estimate the potential capacity of the accumulation. The discovery well is registered as 3BRSA1106DAM and is located in Solimoes' SOL-T-171 block.
Petrobras is 100% owner and operator of the well.
Under Brazilian law, oil companies have to report any potential oil discoveries to ANP. The routine notifications are not an indication of potential reserves or whether commercial viability could ever be declared."

http://www.marketwatch.com/story/hrt-shares-surge-after-positive-report-on-namibia-2013-04-01-154852913

HRT, along with OGX, was mentioned briefly in passing in an article in Brazil business press as a company PETRONAS was taking a look at. That might account for surge. No substantial information just a passing mention.

Thanks for this great model of possible outcomes. My only question comes with your assumption of $7.00 valuation for in ground oil. Right now the market is valuing OGX's oil at about $.50-$1.50 (depending on what you assumes but I've assumed 4.3bbls) and that is shallow water oil right next door to good infrastructure and support and much further de-risked than what HRT would have on day 1 of a successful find. OGX has said their goal is to de-risk their assets so that market valuation moves from this level to $10/bbl in ground. I think that maybe $7.00 in the ground on day 1 of a find might be high particularly given market's hatred of all things Brazil oil right now and the need to obtain capital or farm out to develop a find.

Using your numbers I did some expected value calculations (Prob Success * Amount Won)-(Prob Failure * Amount Wager) and came out with positive values for first two scenarios and negative value for third.

Thanks again for this, very interesting.

One possibility is that HRT is suffering spillover from the devastation/market panic/short selling hitting OGX and the entire Batista EBX empire. The market already hated non-producing Brazil start up'ish Brazil oil companies. Mr. Market may now be figuring that if EBX/OGX/etc collapses (which I don't think will happen) then all future funding/partnerships/etc for similar companies like HRT will be gone.

I took a look at correlation between the two stocks - OGXPY and HRTPY - over the past 15 months on a weekly basis. The correlation coefficient is .95 meaning these two trade in lock step - at least over past 15 months - which to me indicates Mr. Market is viewing the Brazil start up oil space the same and HATES it. If you do a one year comparative chart of the two stocks you'll see this demonstrated.

Additionally, HRTPY pretty highly correlated with EWZ (.80) which is the Brazil ETF. So Mr. Market doesn't like emerging markets, really doesn't like Brazil and this carries through into HRTPY. A simplistic way of putting it (not really correct but good enough for this) is that 80% of HRTPY's price action can be accounted for by the general Brazil market. Of course, a good component of the fall this year in EWZ is EBX companies so this gets somewhat circular.

Finally, Brazil, Brazil oil and commodities, etc. are the pointy tip of the risk on/off trade. With EU problems bubbling up and to the front pages, and serious concerns about China's growth/credit/real estate bubble, again I think this ripples right through to these risky, unproven ventures.

All of this is to say I think there are plenty of possible explanations for HRT price action recently without resorting to market manipulation and that there is some rational behind the price action, at least from Mr. Market's (or should it be Mercado Senhor) perspective. As has been said here many times success in Namibia will change this and break this stock out. Failure will clobber it.

GTLA