Getting back to HNR above.
I asked a friend who has pro experience investing in mid/large cap North American Energy stocks to give his opinion on the above stock. There is not much to go on but he came back with some interesting perspectives. I tend to view small cap investing as a prospecting exercise where you try to uncover mispriced optionality and hope that 6/10 you are right and the occasional 1/10 which is right turns out to be mega right and makes up for most of the losers. It's quite a risk-seeking approach and probably only worthwhile for a small part of ones portfolio. My friend takes a more Institutional risk-averse approach consistent with proper Professional money managers who want to avoid any 'drawdowns' to capital. After all the first, second and third rules of investment are capital preservation.
Some of his comments below in italics :-
- "The North Dakota lease is likely worthless or worse - nothing is economic unless oil get back up to 60-70."
- "On the technology it's impossible to say. If it was genuinely good they would have bought it or go an exclusive, 50mm is nothing to them."
- "Refracking itself makes sense in an energy bull market when there is a scarcity of resource, now there's a huge inventory of wells that haven't even been fracked the first time. That doesn't mean to say the technology won't be valuable, it still will, but you have a time delay which is time for competition to develop I suppose so it adds to risk. "
- "Finally with regards to management ownership, high percentage of small market cap isn't that much skin - what is important is how much of their net worth is tied to it. If the ceo is worth big millions, it's not as impactful obviously as if he put his life savings in it."
- "there's so many unanswered questions though on the technology, management wealth, nature of SLB interest, evidence of technology being disruptive and working, milestones, competitive risk, what sort of fracked wells it works for - presumable not multiple well pad type wells?"
