I love the sector because of the gains that I have seen there and they are very easy to explain and understand.  A term I use is “Value proposition”.  I always ask myself “What is a particular company’s value proposition”?  What is going to take them from being an exploration company to a producing company?  And, when they get to production, what is going to be the scale?

Today’s alert company has one of the strongest value propositions that I have seen so far: Holloman Energy Corporation (HENC)

The company describes itself as in the following manner:

A little perspective might be in order here….1.7 MILLION acres is a land area larger than either Rhode Island or Delaware (and almost as big as them put together).

Before I launch into the “meat” of my analysis, here is a list of site that you can do your own DD on:

• HENC Corporate site - HENC likes full disclosure.  You can get a great deal of info on their site:  Project maps, technical reports, investor presentations
• Yahoo! Finance - Lots of info there, too!
• SEC Filings - I recommend reading this section if you are having trouble falling to sleep at night
  

Here is a bullet-point list of the value proposition for HENC:

1. HENC’s “Sugar Daddy” -  The Company’s controlling shareholder is privately-held Holloman Corp., a global company specializing in engineering, procurement and construction companies and is headquartered in the United States.  They own approximately 48% of HENC.  Holloman Corporation did almost $750 Million in revenues in the last full fiscal year!  Not a bad partner!
2. HENC is going to the Outback (not the restaurant) - All of HENC’s current properties are located in the Australia in one of three well known oil producing regions: Cooper, Gippsland and Barrow basins.  The company considers the region politically stable, has a liquid currency and the government has been shown to be pro-development.
3. Management Team - To further illustrate Holloman Corporation’s commitment to this endeavor, two of its key officers are also holding down similar positions with HENC: Mark Stevenson (President and CEO) and Eric Prim (COO).
   
4. Australia as an oil-producing region - According to the company it is estimated that only 5% of known Australian oil reserves have been exploited.  With its location on the doorstep to Asia (China and Japan), HENC believes the markets will remain strong for any oil they do produce.  In addition, most tier 1 oil companies have a drilling and producing presence in Australia.
   
5. A great deal of HENC’s known reserves are P90 - P90 is a bit of oil industry jargon that means VERY GOOD THINGS for HENC.  P90 is a term used for the probability of reserves in a surveyed area.  P90 means that there is a 90% probability that the surveyed section contains the oil that was estimated.  That becomes a big deal with the news that a June, 2009 report authored by internationally recognized ISIS Petroleum Consultants PTY Ltd. suggests that HENC could be sitting on as much as 25 million barrels of P90 prospective recoverable oil resources. You can read the full ISIS report by clicking on the HENC site link.  I warn you, though, it is 120 pages of technical data that is quite impressive, but boring as dirt.

To the Chart:

HENC has an attractive chart (detailed below).

I am always saying that “Due diligence is key for all my members!”.  HENC has a great deal to recommend it.  I like the close relationship with Holloman Corporation.  If you took a look, their key competencies are in areas that complement the mission of HENC.  Holloman Corporation has also funded HENC from its own coffers to help bring HENC to this point.

HENC could be a strong trading stock this week.  The trend is certainly there.

Be sure and put the appropriate stop losses to your position.