HRT Plunges to Record After Abandoning Brazil, Namibia Wells

HRT Participacoes em Petroleo SA plunged to a record after abandoning dry oil wells in Brazil and Namibia, its main areas of exploration.

The Rio de Janeiro-based company’s shares sank 13 percent to 2.85 reais at the close of trading in Sao Paulo, the lowest price since its October 2010 initial public offering. Trading volume was ten times the three-month daily average. The Ibovespa stock benchmark added 1 percent.

HRT is abandoning a well in northern Brazil’s Solimoes Basin and another in Namibia after finding no oil to produce, according to a regulatory filing. The company will keep drilling three additional offshore wells in the African country, Nilo Azambuja, the company’s exploration and production head, said today in an interview.

“The blocks in Namibia are the most valuable for HRT, so not finding oil in the first well they were drilling there is a bad sign,” Luana Helsinger, an analyst at brokerage GBM Brasil, said in a phone interview from Sao Paulo. “Similarly, the well in the Solimoes Basin is located at the eastern part of the block, where the company says it is more likely to discover crude. All this negative news today may change investors’ perception of the stock’s value.”

Stock Valuation

HRT trades at 0.22 times its book value. In an April 10 interview, when the price-to-book ratio was 0.37, company founder Marcio Mello said that investors were undervaluing the stock because they were underestimating HRT’s licenses in the Amazon, where it has discovered commercial volumes of gas, and off the coast of Namibia. The company’s market value mostly reflected cash holdings and the $75 million it will receive from the sale of its aviation unit, he said.

“That is absurd,” Mello said. “HRT is very cheap.”

He stepped down as chief executive officer on May 10, keeping his position as board member.

HRT’s press office declined to comment on the stock valuation when contacted by e-mail by Bloomberg News.

Shares fell 40 percent this year, while the Ibovespa retreated 7.7 percent during that same period.

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