HDR hardman resources limited

HDR - Rig Contract, page-8

  1. 321 Posts.
    HARDMAN RESOURCES LIMITED 2002-05-09 ASX-SIGNAL-G

    HOMEX - Perth

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

    Hardman Resources Ltd announced today that studies indicate the most
    likely (P50) recoverable reserves of the Chinguetti Field (Block 4,
    PSC Area B - Hardman 21.6%) is in excess of 100 million barrels.
    That's for the primary reservoir target only. In January 2002,
    Woodside advised that the Scope For Recovery reserves was 65 million
    Barrels. What were the main differences between your evaluation and
    Woodside's?

    MANAGING DIRECTOR TED ELLYARD

    The Woodside estimate of reserves for Chinguetti of 65 million
    barrels was a risked reserve estimate. That is, parts of the field
    that have not yet been evaluated by drilling have had a risk factor
    applied, thereby reducing the oil volume estimates. Hardman's reserve
    estimate, which was over 100 million barrels recoverable, was a most
    likely or P50 estimate, based on the interpretation of the results
    from the Chinguetti-1 well and the 3D seismic data available over the
    field.

    CORPORATEFILE.COM.AU

    What risks remain in Hardman's estimates for recoverable volumes of
    100 million plus barrels?

    MANAGING DIRECTOR TED ELLYARD

    The estimate of 100 million plus barrels recoverable is the most
    likely estimate and incorporates the entire area of the primary
    reservoir sand and an oil column of 300 metres gross thickness, as
    interpreted from 3D seismic.

    The first well, Chinguetti-1, has proven the reserves for part of the
    field and a minimum gross oil column of 120 metres. The joint venture
    is planning to drill two appraisal wells which will test the northern
    and eastern sides of the field and also prove the total thickness of
    the oil column. After drilling these two wells during the 2002
    drilling campaign, the Chinguetti Field reserves will be more clearly
    defined.

    CORPORATEFILE.COM.AU

    When might you expect first production from offshore Mauritania and
    what type of field development would be expected in this deep water
    environment?

    MANAGING DIRECTOR TED ELLYARD

    Following the drilling of the two appraisal wells this year we'll
    know the size of the field development required and be able to
    immediately start development work. The platform would most likely be
    a floating production storage platform or ship called an FPSO. This
    may take a year to build, but we could save time and capital cost by
    leasing an FPSO vessel.

    At this stage it's difficult to give a precise estimate of the time
    for development but I would hope that we could achieve first
    production within two years from drilling the appraisal wells.

    CORPORATEFILE.COM.AU

    What's your assessment of the risks involved in developing a project
    in offshore Mauritania?

    MANAGING DIRECTOR TED ELLYARD

    We consider the political risk to be low in Mauritania, which enjoys
    a fully democratic government and is economically stable.

    The main risks are those common to deep water developments which
    require high production rates to offset the large capital costs for
    drilling and development. At this stage we're confident that we have
    a high quality reservoir that will produce at high production rates
    and the field is well defined by 3D seismic. However, the results
    from the next two appraisal wells and production testing at one of
    the wells are required to confirm these aspects.

    CORPORATEFILE.COM.AU

    As you mentioned already, Hardman also announced the 2002 drilling
    and work programme for offshore Mauritania. This includes the two
    appraisal wells on the Chinguetti field and two exploration wells
    (one firm and one contingent) plus large 3D seismic programmes. How
    do the two exploration prospects planned compare with Chinguetti?

    MANAGING DIRECTOR TED ELLYARD

    The firm exploration well is to test a structure in Block 6 (Hardman
    35.5%) to the north of Area B. This prospect is a Cretaceous sand
    channel over a large structure that's well defined by 3D seismic and
    has good seismic indications of potential hydrocarbons, similar to
    that shown at Chinguetti before it was drilled.

    The second exploration well is planned as a test of a similar aged
    reservoir in a salt structure near Chinguetti. Currently three
    prospects are being considered and further 3D seismic has recently
    been shot over one of these. A final decision on the prospect to be
    drilled as the fourth well in the 2002 programme will not be made
    until the seismic data has been evaluated later this year. Therefore
    this well is still contingent.

    CORPORATEFILE.COM.AU

    Oil was recovered from the flank of the Block 6 prospect in a
    previous well drilled by Shell in the 1970's. Why didn't Shell pursue
    drilling in the area?

    MANAGING DIRECTOR TED ELLYARD

    Shell drilled the structure back in the 1970's when they did not have
    modern 3D seismic data to identify the sand channel reservoir and
    therefore did not intersect the main prospect reservoir. Shell
    recovered oil from thin sands on the flank of the prospect, but in
    sub-commercial amounts. As a result they abandoned the project. The
    fact that we have oil on the flank of this prospect reduces the
    exploration risk.

    CORPORATEFILE.COM.AU

    How important is it to increase the size of the current recoverable
    reserves for the Chinguetti Field, or to discover more oil within
    tie-back distance?

    MANAGING DIRECTOR TED ELLYARD

    We consider that the Chinguetti Field will be economically viable at
    the current most likely estimate of 100 million plus barrels.

    There is potential to increase the reserves by discovering oil in
    deeper Tertiary sands which were not drilled by the first well and
    also in the B Sands which contained a 7 metre gas column in
    Chinguetti-1. If the reserves are larger, the profitability from the
    field will improve.

    In addition, we're planning to drill a similar type of prospect to
    Chinguetti, within a 25-kilometer radius of the discovery, as the
    fourth well in the 2002 programme and if successful this field could
    be tied into the Chinguetti FPSO, which would further improve the
    economics and profitability.

    CORPORATEFILE.COM.AU

    What will the current programme cost Hardman and what farmin
    obligations remain?

    MANAGING DIRECTOR TED ELLYARD

    The net cost to Hardman for the 2002 drilling programme is about A$40
    million.

    Woodside will free carry Hardman for 12.25 % of the cost of the Block
    6 exploration well to complete its farmin obligations in Area C,
    while Hardman will fund 24.25% and retain 35.5% of the Block 6.
    Hardman is in discussions with some large oil companies to farmout
    its remaining cost of this well which would reduce its retained
    interest in Block 6 to about 23%. If a farmout deal is signed it
    would significantly reduce Hardman's net cost in Mauritania to about
    A$30 million.

    CORPORATEFILE.COM.AU

    What drilling plans do you have beyond the current programme?

    MANAGING DIRECTOR TED ELLYARD

    This year we'll shoot large 3D seismic surveys over Block 2, 3, 4, 5
    and 7 in Mauritania, which will increase the total 3D coverage to
    about 8,200 sq kms. This additional seismic will be used to define
    many high quality prospects for drilling in 2003 and beyond. I expect
    that during 2003 we'll again have an active drilling programme in
    Mauritania comprising several wells.

    CORPORATEFILE.COM.AU

    What are your observations now that Hardman shares have traded since
    mid-March on the Alternate Investment Market (AIM) in London?

    MANAGING DIRECTOR TED ELLYARD

    The share trading in London has been steady but on fairly low volume
    compared with the daily trading of Hardman shares on the ASX, due to
    the fact that the company has not issued any new shares to the London
    investors at this time. I understand that some London brokers have
    been buying shares in Australia to get stock and this may have
    fuelled the rise in price over the past few weeks. I believe there
    will be increasing interest in Hardman shares in London as the
    companys prospects are better understood.

    CORPORATEFILE.COM.AU

    Thank you Ted.
 
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