09
Mar

Hemi Energy – I’ll Pass

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Subscriber Request: Hemi Energy Group (HMGP) - pink sheet listed, very hard to find information on except from the company website and they appears to be the hypey style I run screaming from. They PR'd Hillary Clinton coming for a campaign visit to Fort Worth! Oooohh, aaahhhh. Let me share some of the rules I paid quite a bit to learn when I was younger:

  • 1) avoid the pinks like the plague.
  • 2) avoid penny stocks    "    ".
  • 3) avoid situations were management of a "development stage" anywhere on their website mentions the word "billions".
  • 4) avoid stocks where there is an almost daily string of press releases (these guys are not too bad in this respect) AND the language sounds like its written by someone who doesn't read about or belong to the industry.
  • 5) avoid companies that don't report on time or simply don't report results at all.
  • 6) avoid companies that show you a picture of their HQ but don't mention their people, which are often as important as the assets under the ground.
  • 6) avoid the pinks like the plague (can't stress that enough).

From what I can tell of this 6 cent stock, they are operating stripper wells (wells with < 10 bopd of production) in Kansas and buying leases in the Barnett Shale in Texas, attempting to get in the way of larger oil companies as the play expands.  I'm not saying this won't work but the stock action will be dominated by:

  • 1) the price of oil,
  • 2) stock hypsters/manipulators,
  • 3) the dream of someone like CHK wanting to drill on one of their bits of acreage in Texas, which may or may not ever happen.

On a reserves per share basis they have no where near the underlying assets (2.15 mm BOE as of a semi-annual report? ) to carry the number of shares (51 mm, I think) they have outstanding. According to the company they were cash flow positive in December and January on production of 461 and 669 barrels (that's the whole month folks, not per day)  so I guess they don't pay themselves much which is admirable but also makes you wonder why their talent doesn't go somewhere where it can get paid more. Not the head guy, he's obviously got a dream and he's sticking to it, but the rest of their team you gotta wonder about.

There are so many high quality, high return names to get to know and play that I just have to pass. Can it go back to 17 cents from whence it came last Fall? Sure but it can also easily go to $0.03 and no one anywhere will say "holy smokes, that's not right, that shouldn't be". 

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