Hyperdynamics Corporation (OTCMKTS:HDYN) Is A Turnaround Opportunity

Did you see the abrupt share price collapse in the stock of Hyperdynamics Corporation (OTCMKTS:HDYN)? If you did not understand what happened, we will help you do so in this new piece.On August 8, 2017, the oil and gas exploration company issued a new press release noting that Fatala-1 exploration well, drilled offshore the Republic of Guinea, had reached its total drilling depth and had not encountered hydrocarbons.The announcement was a complete disaster for the stock, as market expectations were quite high. We believe that the company had released a number of positive press releases that seemed to push up the share price to illogical levels. The new announcement along with the trading activity of some short sellers seem to be major causes of the share price collapse.In this article, we will provide more details about it. HDYN Daily ChartRecent DevelopmentsLet's review the business objective of HDYN.For those who get to know the company for the first time in this article, HDYN is a Houston based company with 35 years of experience drilling for oil and natural gas.The market became quite excited about this particular stock after the company signed a deal with SAPETRO to drill in Guinea. The operations were run in August and September, 2017. We appreciated that the company informed about every single new development. When so many millions are involved, the market is always interested in knowing every detail. Have a look at the communication efforts:Aug 30, 2017Hyperdynamics Provides Latest Update on Drilling Status of Fatala-1 Well Offshore GuineaPress ReleaseAug 28, 2017Hyperdynamics Provides New Update on Drilling Status of Fatala-1 Well Offshore GuineaPress ReleaseAug 25, 2017Hyperdynamics Provides Update on Drilling Status of Fatala-1 Well Offshore GuineaPress ReleaseAug 14, 2017Hyperdynamics Updates Drilling Status of Fatala-1 Well Offshore GuineaPress ReleaseAug 2, 2017Hyperdynamics Makes Final Preparations for Fatala-1 Exploration Well Offshore the Republic of GuineaPress ReleaseJul 18, 2017Hyperdynamics Reminds Shareholders to Vote their Proxies on Reverse Stock Split ProposalPress ReleaseJul 17, 2017Hyperdynamics and SAPETRO receive Guinea Government assurance of its consent to the appraisal periodPress ReleaseSourceWhat happened?We believe that the large amount of press releases positively affected the stock and the market reacted by pushing up the share price to illogical levels. Additionally, we believe that the data being received from the engineers working in the oil well was very good, but the market overestimated the probability of finding crude oil. We need to remind that most of the times oil companies don't find anything; only approximately 4% of the wells are positive.On September 7, 2017, the company announced that it has successfully sold shares and equity warrants to purchase three-quarters ( 3/4 ) of a share of the Company's common stock within two years at an exercise price of $1.825 per whole share. In September, the total gross proceeds from offerings were of $3,741,846.22. This communication may also have created some pressure on the stock. You know how it works; equity dilution reduces the value of the stock.On September 8, 2017, the company noted that the Fatala-1 exploration well had been negative. The company provided the following technical details:

"Fatala-1 was drilled in 2,897 meters of water and reached a total depth of 5,117 meters below sea level. The well encountered a 75-meter-thick Cenomanian sedimentary channel sequence, but it contained predominantly siltstone and clays with no hydrocarbon shows. The well will be plugged and abandoned." Source

Additionally, Ray Leonard, Hyperdynamics' President and Chief Executive Officer, explained that the team was very disappointed, as the geophysical data on the prospect had been promising.What will happen now with the project?The company did not note any new activity, but communicated that SAPETRO and Hyperdynamics currently hold rights to the Guinea concession through September 21, 2017 and will evaluate new options after studying the results of the well.Short SellersWe checked the activity of shot sellers in the stock and found short sales executed at the beginning of the year. In our opinion, some market participants helped push down the share price.DateShort Interest% ChangeAvg. Daily Share VolumeDays to CoverSplitNew IssueJul 31, 201715,382-89.5890,6861.00NoNoJul 14, 2017147,610-50.4289,5981.65NoNoJun 30, 2017297,713-17.4447,2146.31NoNoJun 15, 2017360,601-18.1863,8755.65NoNoMay 31, 2017440,71518.8966,1346.66NoNoMay 15, 2017370,700-18.8055,0676.73NoNoApr 28, 2017456,508-18.4051,7698.82NoNoApr 13, 2017559,444-13.5145,52012.29NoNoMar 31, 2017646,8009.3470,3749.19NoNoMar 15, 2017591,565-1.17285,3242.07NoNoFeb 28, 2017598,57432.32133,6934.48NoNoFeb 15, 2017452,3605.3242,83410.56NoNoJan 31, 2017429,529140.9644,6609.62NoNoJan 13, 2017178,260267.86145,5291.22NoNoDec 30, 201648,459-4.7974,7691.00NoNoDec 15, 201650,89924.43153,2101.00NoNoSourceFinancialsOn the Yahoo Finance website, we found the following information about the balance sheet:Total Cash (mrq)701kTotal Cash Per Share (mrq)0.03Total Debt (mrq)N/ATotal Debt/Equity (mrq)N/ACurrent Ratio (mrq)0.47Book Value Per Share (mrq)0.15SourceWhat did we see?The company has large amount of cash and its book value per share is almost equal to share price in the market; $0.17. Additionally, the company has no long term debt. Hence, the company is trading close to liquidation levels. It is quite undervalued. We believe that short sellers would not sell anymore at this price. That may be the reason to explain why the stock price did not go lower.[embed]https://www.youtube.com/watch?v=eikfArKjQ50&t=[/embed]ConclusionCurrently trading with a market cap of $5 million, HDYN was seriously damaged in September. We believe that the share price could not go lower and any good news about new drilling plans in Guinea could make the share price rebound again. Additionally, if short sellers commence to close their positions rapidly, a short squeeze could happen affecting the stock price positively. To sum up, be alert on the new announcements, the company may surprise soon again!We will be updating our subscribers as soon as we know more. For the latest updates on HDYN, sign up below!Image courtesy of david styles via FlickrDisclosure: We have no position in HDYN and have not been compensated for this article.