Monday, July 2, 2012

I bought some HRTPY today

HRT Participacoes is a stock with a fair amount of risk, but its two main assets each have huge potential.

Asset #1 - Solimoes Basin

The Solimoes Basin is located in the Amazon.  TNK-BP recently paid $1 billion for a 45% stake in HRT's acreage.  This implies that HRT's 55% stake is worth $1.2 billion.  With a market cap of approximately $1 billion, you can have a fractional ownership of this asset for less than TNK-BP paid and get asset #2 for free.

Asset #2 - Offshore Namibia

I wrote a Seeking Alpha article on HRT's next door neighbor in Namibia, Chariot Oil and Gas, back in March.  I have since sold Chariot to book the tax loss and to buy HRTPY because I believe HRT offers almost as much upside as Chariot, but with much, much smaller downside.  HRT has indicated that they are seeking a 33% farm-in for their vast Namibian acreage and there is a lot of interest (20 companies have visited the data room).

CEO Marcio Rocha Mello has a 5% stake in HRT and is an owner manager.
Dr. Mello wrote the book Petroleum Systems of the South Atlantic Margins and was a key player in helping his former employer, Petrobras, discover giant oil fields offshore Brazil.
Mr. Mello believes that HRT could be as big as Petrobras someday (approx 100X larger). 
Petrobras' giant oil discoveries offshore Brazil have an analog in offshore West Africa as both sedimentary basins were formed at the same time when the South American and African plates were separating.

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