HDR hardman resources limited

media comment(ex oilbarrell)

  1. 329 Posts.
    Most of the commentary below is what we have seen released in the last couple of weeks but its good to see the media and brokers recognising the stocks success. Check out Canaccords view.

    Hardman Resources Has Lots Of Positive News About Its Activities In Australia And Mauritania
    The news flow from Aussie explorer, Hardman Resources, which is quoted on London’s Alternative Investment Market (AIM), as well as in Australia, is like a successful oil discovery - it seems to be spurting out in all directions.

    The main story is the progress being made with Hardman’s company making discoveries in the Chinguetti field, offshore Mauritania. According to the company's activities report for the third quarter ending September 30, 2003, the Chinguetti 4-5 appraisal and early development well intersected 38 metres of net oil bearing sandstones. Production testing of the high quality reservoir section has flowed oil at rates of up to 15,680 barrels of oil per day.

    The preliminary development plan envisaged six production wells to achieve the initial peak field production rate of 75,000 bopd. This would require each well to produce at 12,500 bopd. However, the current well 4-5 being tested is a vertical well, which intersected only a part of the reservoir section, and production is limited by the surface test facilities. Some of the production wells to be tested later will be directionally drilled (inclined) and designed to intersect a greater proportion of the reservoir sands and therefore should be able to produce at even greater rates. Suffice it say, the initial production target of 75,0000 barrels a day is comfortably attainable. Hardman has net interest of 21.6 per cent in the Chinguetti field.

    So what happens now? To achieve first production by the end of 2005, the Chinguetti Development Plan includes the leasing of a Floating Production Storage and Off-Take Vessel (FPSO) for an eight to ten year period, the drilling of six production wells (possibly more), a gas injection well and water injection wells. The development plan envisages costs will be US$400 million, of which Hardman is expected to find US$86 million.

    By the end of 2003 Hardman is hoping to have analysed the test data on Chinguetti 4-5, finalised the Chinguetti Development Plan, commenced the tendering process for facilities (FPSO) and completed the technical and legal due diligence work with the ANZ and IFC banking groups ahead of the project loan financing which Hardman hopes to finalise by February 2004, with the final investment decision (FID) in March 2004. The company also hopes before December 2003 to have joint venture agreement for the Declaration of Commerciality.

    The 2P (proven and probable reserves) of Chinguetti have been put at 142 million recoverable, which means just over 30 million net to Hardman. If the initial production estimates turn out to be correct then it would mean 16,000 barrels a day net to Hardman which would immediately punt it in to the top half dozen of the small cap producers listed in London.

    Chinguetti is just the first discovery. On the basis of only one well at Banda, which is close to Chinguetti on the same block, there are thought to be 100 million barrels of proven and probable reserves recoverable. This excludes the large gas reserve. Hardman holds 24.3 per cent of this licence.

    There are also many more prospects to be looked at. In terms of the exploration drilling programme, on October 28, 2003 the company started the drilling of the first two wells on the Woodside operated Production Sharing Contract (PSC) Area B licence (Hardman 21.6 per cent). This first well is on the Tiof prospect, which is a Miocene aged sand prospect associated with a salt structure and is similar in type and size to the Chinguetti discovery. The second well is in Poune prospect, which is a test of a deeper Upper Cretaceous structure. However, this well will also test a shallower Miocene sand channel target.

    Hardman is still hoping to drill a third exploration well on the Pelican prospect in the Dana Petroleum operated PSC Block 7 (Hardman 18 per cent), but this may depend on whether everything can be organised in time for this well to be included in the current schedule to drill the well in November 2003. Hardman has A$40 million cash in the bank with which to fund its share of this programme.

    Back home in Australia, Hardman does have some small production from its Woodada gas field in the Perth Basin. This is around 4.5 million cubic feet of gas a day. There was some disappointment that the Leafcutter-1 well on the Woodada licence had to be plugged and abandoned. Ted Ellyard said: “I was certainly disappointed. We always considered the Leafcutter to be a relatively high risk but cheap test of the up-dip potential in the Woodada area. However, the well had several zones of residual oil shows and we need fully to consider any follow-up potential before dismissing the play.”

    Any disappointment here, however, is probably compensated by the progress of the Jingemia discovery in the Perth Basin. The completion of extended production testing at Jingemia-2 and Jingemia-3 has seen oil flows at 2,000 barrels a day and confirmed original estimates of 5 million barrels a day recoverable. Hardman has 22.4 per cent of Jingemia. This not may sound much, but the point about the discovery is that it is onshore and therefore cheap to produce and easy to commercialise. On the basis of 448 barrels a day net to Hardman, and a West Texas Intermediate price of US$25 a barrel, with all-in costs around US$6 a barrel, then Hardman will gain US$3 million net cash flow on an annualised basis.

    To develop larger reserves in Australia, Hardman announced an expansion into the Timor Sea with the purchase of adjoining permits AC/R1 (100 per cent equity) and AC/P26 (49.375 per cent equity). These cover the undeveloped Talbot field plus an option over another permit WA-316.

    The attraction of these permits, besides giving the company the opportunity to develop beyond its existing holdings in the Perth Basin, is that purchase cost and current commitments are modest, and this allows the company to continue concentrating its funding on Mauritania. Its initial estimate of the field’s recoverable reserves range from 4 million to 6 million barrels.

    Hardman has other projects, which are longer term, in Guyane (French Guiana), New Zealand and Uganda. As things stand, on its own estimates, the company has company wide 2P reserves of 60 million barrels. This is made up of 50 million in Mauritania, plus 2.5 million of oil equivalent to Hardman in the Woodada gas field and Jingemia oil field, and the 4 to 6 million barrels In the Talbot field.

    It obviously takes a long time and is expensive to develop deep-water offshore assets. But Hardman has created value through the drill bit which outweighs its current share price. Broker Canaccord has said: “Despite its drilling success Hardman shares have performed weakly. We believe the market will begin to see considerable additional value in Hardman.”

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