HDR hardman resources limited

all your questions answered

  1. 1,747 Posts.
    Ted's interview on corporate file is the most informative yet.

    Regards M.



    HARDMAN RESOURCES LIMITED 2002-12-05 ASX-SIGNAL-G

    HOMEX - Perth

    +++++++++++++++++++++++++
    CORPORATEFILE.COM.AU

    Since 2001, Hardman Resources Limited has made discoveries on the
    Chinguetti and Banda wells (offshore Mauritania), Jingemia-1 (onshore
    Perth Basin) and drilled a successful production well on the Woodada
    Gas Field (onshore Perth Basin). What reserves growth do you expect
    during 2003, net to Hardman (current market capitalisation around
    $230 million)?

    MANAGING DIRECTOR TED ELLYARD

    Following the drilling success during 2002, Hardman's net oil and gas
    reserves has been estimated by our technical staff to be about 38
    million barrels oil recoverable (MBO). We predict that this could
    potentially increase to over 100 MBO net at end 2003 following
    further evaluation of the data and some appraisal drilling on the
    Banda discovery.

    CORPORATEFILE.COM.AU

    How have you calculated these reserve estimates?

    MANAGING DIRECTOR TED ELLYARD

    The main growth in Hardman's reserves will be from the Chinguetti
    (Hardman 21.6 percent) and Banda (Hardman 21.6 percent to 24.3
    percent) fields following the drilling of appraisal wells on Banda to
    delineate the extent of the hydrocarbon accumulation, both in terms
    of area and the proportion of oil versus gas. Two very successful
    wells were drilled on Chinguetti during 2002 and we expect the
    reserve size to be upgraded to over 100 MBO in the near future and
    possibly as high as 150 MBO (Hardman net of 32 MBO).

    Subject to further studies, we expect to drill two appraisal wells on
    Banda during 2003 and we estimate that these might confirm reserves
    of approximately 100 MBO and up to 1.0 TCF gas (approximately 160 MBO
    equivalent - MBOe). Therefore the total reserves for Banda are
    estimated at 260 MBOe (Hardman net of about 63 MBOe).

    The reserves attributed to Hardman's interests in the Perth Basin are
    more modest, but still significant. We expect to upgrade the reserves
    at Woodada following further drilling in 2003 to about 3 MBOe net for
    Hardman's 75 percent equity. We've also calculated a preliminary
    reserve estimate for the Jingemia oil discovery of 5 MBO (1.1 MBO net
    to Hardman).

    The new oil and gas discoveries in the Perth Basin have been a
    pleasant surprise, some of which might be quite large. The potential
    is unknown, as yet, but the intense drilling activity both on and
    offshore over the next few months will give the lead. Hardman has one
    of the largest overall net positions in the prospective areas and
    we're also upgrading our own rig to take advantage of some of the
    shallower plays emerging.

    CORPORATEFILE.COM.AU

    Can you make a prediction on the possible scale of oil production for
    Hardman in future years?

    MANAGING DIRECTOR TED ELLYARD

    Hardman's only production at present is from the Woodada gas field.
    With the addition of production from the Jingemia oil field in early
    2003, our Australian net production will be about 1,000 barrels of
    oil per day (bopd).

    However, the major increase will be with the first oil production
    from Chinguetti, which we hope will occur during 2005. Preliminary
    field development models have used an initial production rate of
    75,000 bopd, which would provide Hardman with an additional around
    15,000 bopd commencing in 2005.

    CORPORATEFILE.COM.AU

    How close are you to committing to a development in offshore
    Mauritania and what is the development timetable?

    MANAGING DIRECTOR TED ELLYARD

    A development team has been working on the Chinguetti project in
    Agip's office in Milan, Italy since the middle of 2001 and is aiming
    to complete basic design and feasibility studies by April or May
    2003. The Joint Venture will review this information in mid 2003. The
    next step would be the preparation of the field development plan and
    the issue of tender documents for the surface facilities (probably a
    floating production storage and offtake vessel - FPSO), development
    drilling and other capital equipment by September 2003.

    The final decision to go ahead with Chinguetti is expected during
    2004 with completion and first production planned for 2005 or 2006.
    The timetable for start of production will be greatly influenced by
    whether the FPSO is to be leased or constructed. This decision and
    its impact on the timing of first oil production will become clearer
    in 2003.

    CORPORATEFILE.COM.AU

    How did the 2002 exploration confirm your earlier expectation that
    Chinguetti contained 100 MBO recoverable reserves and why do you
    think that it may be further revised upwards?

    MANAGING DIRECTOR TED ELLYARD

    The second Chinguetti well (C-4-2) was drilled on the northern
    upthrown side of the field (compared to C-1 which was on the
    downthrown side) and encountered a 94 metre oil column. This well
    confirmed that the oil extends across the entire structure and
    provided confidence that Hardman's estimate in 2001, 110 MBO, was
    reasonable.

    The third well (C-4-4) was drilled on the downthrown side and
    encountered a 114 metre oil column. However, the oil column was 69
    metres thicker than estimated from the 3D seismic, giving a total oil
    column height on the downthrown block of 280 metres, as confirmed
    from drilling the two wells (C-1 and C-4-4).

    These results are still being evaluated and correlated with the
    seismic data but we expect that the reserve estimate will be revised
    upwards on completion of this work in the next 1-2 months.

    CORPORATEFILE.COM.AU

    The Banda oil and gas discovery encountered a 110 metre gas column
    and a 24 metre oil column. Approximately 75 percent of Banda is
    situated in PSC Area A (Hardman 24.3 percent) and 25 percent in PSC
    Area B (Hardman 21.6 percent). How do you view the commercial
    potential of this discovery given it's four times the size of
    Chinguetti but around 75 percent gas filled?

    MANAGING DIRECTOR TED ELLYARD

    The actual commerciality of Banda will depend on the results of
    studies currently underway and the subsequent drilling of two
    appraisal wells planned for 2003. However, at this stage, we're
    greatly encouraged and believe we have a large hydrocarbon
    accumulation. The 24 metre oil column could potentially represent 100
    MBO recoverable if the oil extends across the entire structure.
    Alternatively, the oil column could be much thicker in other parts of
    the field when the appraisal wells are drilled. But it's early days
    on this project.

    If a significant oil reserve is proven at Banda it would likely be
    commercial, due to the fact that it's only 20 kms from Chinguetti. If
    the reserve is less than 100 MBO then the Banda oil will probably be
    tied into the Chinguetti platform, thereby improving the economics of
    both projects. If the Banda field contains in excess of 100 MBO then
    it's likely that it will be a separate platform development. In
    either case it's likely that the oil will be produced before the
    large gas resource is developed. Leaving the gas in the structure
    will provide maximum pressure support to produce the oil and allow
    for the long lead time necessary to develop the gas production
    infrastructure and markets for this significant resource.

    CORPORATEFILE.COM.AU

    What exploration might occur in your Woodside JV areas in Mauritania
    in 2003 and which ones attract most interest?

    MANAGING DIRECTOR TED ELLYARD

    Following several days of joint venture meetings in the Woodside
    operated areas, it has been agreed that we'll drill up to 5 wells in
    PSC Areas A (Hardman 24.3 percent) & B (Hardman 21.6 percent). These
    include 2 firm exploration wells and 3 contingent wells (including 2
    Banda appraisal wells).

    In addition, we'll need to decide by April on whether to drill one
    well in Block 2 during 2003. Following the 2002 drilling success, the
    most exciting and low risk prospects are the Miocene sand prospects
    close to Chinguetti and Banda. We expect at least one well will
    target this play. However, we have many prospects defined by the
    extensive 3D seismic shot in 2000 and 2002, and considerable
    technical work needs to be completed by the June quarter 2003 before
    the final drilling prospects can be agreed.

    CORPORATEFILE.COM.AU

    How would you describe the climate for developing Chinguetti and/or
    Banda in terms of capital costs, political stability and
    royalties/taxes?

    MANAGING DIRECTOR TED ELLYARD

    The Chinguetti oil project is a relatively expensive deep water
    development but has sufficiently large reserves (over 65 MBO
    recoverable) and we expect it will have a high production rate of
    about 75,000 bopd.

    A major factor in the economics is the rate of government production
    share and taxes. We're fortunate that the government of Mauritania
    understands the need to have modest levels of production sharing and
    taxes to make the oil developments economically feasible and they
    have a strong desire to attract international investment.

    Politically, Mauritania is very stable with a fully democratic
    government, freedom of the press and a growing economy. Woodside and
    all the partners feel very comfortable with the political and
    economic climate.

    CORPORATEFILE.COM.AU

    Apart from the Woodside JV areas containing Chinguetti and Banda,
    Hardman has interests in the Dana JV areas offshore Mauritania. What
    do you plan in these areas and how prospective are they?

    MANAGING DIRECTOR TED ELLYARD

    Large 3D seismic surveys were shot in Blocks 1 and 7 during 2002 and
    extensive 2D seismic has been shot in Block 8. This data is currently
    being evaluated prior to a decision to drill a well in each block
    during 2003. At this stage, we're optimistic that at least one well
    will be drilled in the Dana JV Areas during 2003.

    CORPORATEFILE.COM.AU

    Your Jingemia-1 oil discovery (Hardman 22.4 percent) is located
    onshore North Perth Basin. You've mentioned potential reserves at
    Jingemia of 5 MBO recoverable. The production test flowed 2,400
    barrels per day during a cased hole test. When do you expect it to be
    in production, what capital do you forecast and what further
    exploration do you plan around Jingemia?

    MANAGING DIRECTOR TED ELLYARD

    The reserve estimate for the Jingemia oil discovery of 5 MBO
    recoverable is the current estimate. Longer term production testing
    of the well is to be undertaken in December to provide a more
    accurate estimate of reserves and production rates. The well will
    then be produced under an Extended Production Test agreement
    commencing in early February 2003 until a full Production Licence is
    granted. We therefore expect to start receiving production revenue
    from the field from February next year.

    CORPORATEFILE.COM.AU

    The other permit in the North Perth Basin where you're currently
    targeting oil is TP/15 where Hardman has the largest interest at 30
    percent. What are your pre-drill reserve estimates for TP/15?

    MANAGING DIRECTOR TED ELLYARD

    The TP/15 joint venture has agreed to drill the Twin Lions prospect
    (firm) with a contingent well planned on the Vindara Prospect, as
    part of the Cliff Head drilling programme commencing in January 2003.
    Both prospects fall across the border into the WA-286-P (Cliff Head
    permit), with about 60 percent being in TP/15. Hardman's Oil in Place
    estimates for these prospects (net to TP/15) are 94 MBO for Twin
    Lions (recoverable reserves of 20 to 40 percent are likely) and 37
    MBO for Vindara (recoverable reserves of 20 to 40 percent are
    likely).

    CORPORATEFILE.COM.AU

    Hardman also has international exploration projects in Gabon (12.86
    percent), Uganda (50 percent), Guyane (97.5 percent), Falklands (30
    percent) and New Zealand (53.75 percent). Which of these projects are
    returning more interesting results at the seismic exploration stage?

    MANAGING DIRECTOR TED ELLYARD

    The most advanced is offshore Gabon where we're currently shooting
    two 3D seismic surveys in the two PSCs. We hope to have one or two
    drilling prospects defined from this work for drilling in the
    December quarter 2003.

    In Guyane, we're about to commence a large 2D seismic survey of 7,500
    kms, from which we expect to define several large prospects to enable
    Hardman to farmout the next phase of deep water drilling. We're also
    planning to shoot a 2D seismic survey in Uganda commencing in
    February 2003, while an important well is currently being drilled in
    the adjacent permit by Heritage and Energy Africa. In summary, we're
    very active in these other areas.

    CORPORATEFILE.COM.AU

    You recently announced that discoveries will enable you to increase
    current Woodada Gas Field (Hardman 75 percent) production from 3.5
    MMcfd to 6.0 MMcfd in late December 2002. The higher rate will
    generate cash flow of A$2 million per annum for Hardman. What plans
    do you have to further increase reserves and production at Woodada?

    MANAGING DIRECTOR TED ELLYARD

    We're planning to drill the Leafcutter-1 exploration well in February
    2003 on the upthrown block west of the Woodada field which may have a
    very positive influence on the project. However, with regard to the
    gas field, we're planning to drill another gas production well in mid
    2003 which we hope will have a similar result to the successful
    Woodada-19 well.

    CORPORATEFILE.COM.AU

    How long will your expected cash balance of A$45 million at 31
    December 2002 fund Hardman and what funding options are you
    considering in the event that your recent oil discoveries move to
    development?

    MANAGING DIRECTOR TED ELLYARD

    For budget purposes, we've assumed that Hardman will participate in 5
    wells in Mauritania and 4 wells in the Perth Basin during 2003. The
    net cost to Hardman (including some testing) is about A$40 million.
    We'll have cash reserves at end December of about A$45 million and
    expect about A$4 million in net revenue from the Perth Basin
    production in 2003. Therefore we're staying within our current
    funding capacity without the need to raise further funds from the
    share market. However, we also don't want to spend all our cash
    reserves and will therefore consider farming out a minor part of our
    equity in some of the Mauritania blocks (eg Hardman has 28.8
    percent in Block 2).

    To raise the necessary project finance for the development at
    Chinguetti, we've already engaged a major bank to conduct a phase 1
    feasibility study on the financing requirements and options
    available. We therefore expect that we'll be able to retain Hardman's
    current equity level of 21.6 percent of the Chinguetti project
    through to first oil production.

    CORPORATEFILE.COM.AU

    Thank you Ted.

 
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