After researching this company this week and giving it some thought I have decided to start a new thread with a header that perhaps more accurately reflects where this company is at present.

Hardman has interests in production at its Chinguetti field, offshore Mauritania, where it is currently producing a net 7,000 barrels of oil per day (bopd). This is set to increase as more wells are drilled towards in Q4 2006 and into 2007.

The exploration portfolio is also very strong, with numerous fields being tested over the next eighteen months (see below for more details).

The share price has taken a bit of a battering in the last few months, in common with many E&P stocks, but could in my view be ripe for a turnaround (further explanation follows).







I have done my best to evaluate HNR's prospects.

I was helped by info from the Report to Shareholders for the Quarter Ended 30 June 2006 - see Hardman's website www.hdr.au.com for details

Current Chinguetti production of 37,000 bopd (7,030 net to HNR) and 6,000 from recently-tested Waraga could together justify a market cap of 407 mil using an oil price of $64 as in the last quarter, profit ratio 17% of turnover, P/E 15.

HNR also had 57 mil of net cash at quarter end after debt is taken into account.

Add the cash figure to production-related capitalisation and you have a co with a justifiable market cap of 464 mil, or 63.8p a share. Current SP is 59 / 61.5.

Basically the SP dropped earlier in the year due to the uncertainty over Chinguetti's production figures, caused by unexpectedly low well pressures. The field was supposed to produce 75,000 bopd and is now only producing half of that. Remedial drilling is due to be carried out to create another three wells which should generate another 30,000 bopd total (5,700 net to HNR).

It would seem that the Ching problems have been pretty much priced in now and that the market is looking to further good news from continued drilling.

On my modelling of the situation you basically get all of HNR's other prospects for free. Juicy ones include the potential for a number of 1-billion-barrel-plus discoveries offshore Guyane, which I have been following through my interest in Northern Petroleum (NOP). However, it may be a while before a number of these are drill-ready, plus of course they do have to find commercial hydrocarbons.

To my mind the portfolio seems broad enough to offer a real chance of some big successes.

The SP may jump if Mputa-1 is successful. There is also the possibility of a net 900 bcf of gas at Flamant-1, which spuds shortly.

With lots more drilling promised into 2007, the programme looks to be capable of producing a lot of good news.

Having been bearish on this stock before, I'm now beginning to like the look of what I'm seeing. The current SP is a test of the 59p level hit in mid-June and also December 2005.


DRILLING TIMETABLE.

I have attempted to put together a drilling calendar. It's probably a bit rough and ready, but here goes:

NB No liability will be accepted for the content or accuracy of this list as drilling schedules, etc, may be subject to all kinds of changes. Please refer to Hardman's website and/or news releases for confirmation.

Current (Aug 2006) Drilling Mputa-1, Uganda. Possible net potential 6,000 bopd similar to Waraga-1? Operator: HNR

Current (Aug-Sep 2006) Drilling Flamant-1, Mauritania. Net 900 bcf gas. Operator: Dana

Q4 2006 Chinguetti EDIT: Drilling 1 additional well, Mauritania. Net 1,900 bopd Oil. Op: Woodside

Q4 2006/Q1 2007 Drilling Aigrette-1, Mauritania. Net 16.2% primarily gas. Operator: Dana

H2 2006 Tevet, Labeidna and Banda (estimated net 500 bcf Gas) discoveries, Mauritania, to be evaluated as tie-backs to the Chinguetti facilities. Tevet fast-tracked for development decisions by end 2006. HNR net interest 21.6% or 24.3%, Op: Woodside

Q4 2006/more likely Q1 2007 onwards, Suriname onshore 25-well programme, HNR net interest 40% in a prolific S. American oil province (adjacent fields total 1 bn bbl oil in place, producing 13,000 bopd). Op: Staatsolie

?Q1/Q2 2007 Drilling Kibaro-1, Mauritania. Net 31.5 mmbl oil. Op: Woodside

Q2 2007 onwards. Chinguetti, Mauritania. Up to 4 additional producing wells, plus two injectors to be drilled. Net 7,600 bopd Oil, possibly. Op: Woodside

Proposed 2007, Guyane, drilling various prospects 1 bn bbl oil or more (6 targets according to NOP), HNR net interest currently 97.5% but likely to be reduced on formation of JV. Op: HNR

H1 2007. Tiof, Mauritania. Net interest 21.6% Op: Woodside. Decision due on investment in Tiof. First oil possibly due in Q3 2009, possible initial 10,000 bopd net to HNR.

Late 2007 - Tanzania: Maturation of seismic prospects to drillable status. Net interest 50% Op: HNR

2008 at the earliest: Falklands, drilling. Net 22.5% Op: FOGL


Comments on errors or admissions are welcome. This summary does not include a range of seismic prospects and other potential leads for which dates have not been finalised, many of them in Mauritania.

The potential for the Falklands prospect is huge and I acknowledge Xmortal for having drawn attention to this on his thread of July 2004, however I feel that there is a lot more strength in the portfolio as listed above which will provide both cashflow and a significant lift in the SP long before the Falklands prospects become a reality.

Counting on my fingers (!), there are between now and the end of 2007,something like 13 drilling and/or production instances.

Considering that many of these prospects could add 10p per share in NAV, even if only a few are succesful (and we know that many are dead certs, e.g. Ching and some of the other Mauritanian prospects), one could easily see 1 a share on the basis of a couple of good new discoveries. Something like Flamant-1 could add 20p per share NAV by itself if estimates of recoverable gas are proved correct.

Note: EDIT: We are awaiting a review of reserves for Chinguetti due to the production issues metnioned above. This could halve the previous estimates and accounts for much of theSP wekaness at present.

All in all, I consider that Hardman is getting to the stage where it could be due a turnaround in its SP performance, and where forthcoming exploration and production lend the company an air of credibility as a potential multi-bagger with interests in billions of barrels of oil. EDIT: this may take slightly longer than previously anticipated as the run of disappointing news at Chinguetti is stretching the timetable.

As always, please DYOR, all IMO.

Uganda

Great result, and more to the point it looks like better is to come.

Well done Tullow and Hardman

http://moneyam.uk-wire.com/cgi-bin/articles/200608220700139366H.html

Uganda: Mputa-1 Flow Test Update (Block 2)

Hardman has completed a successful testing campaign at the Mputa-1 discovery
well. Since our last announcement on 15 August, the upper sand interval has now
been tested on natural flow. Results from both zones tested are summarised
below:

Test Perforated Interval Choke Flow Rate Oil Quality
(metres) (bopd) o API
Lower Sand Zone (DST 2)1,118.0 - 1,126.0 32/64' 300 32
Upper Sand Zone (DST 3)966.5 - 974.5 40/64' 820 33
TOTAL 1,120

The test results prove not only that the oil at Mputa is mobile, but also that
the reservoir sands are capable of producing dry oil under natural flow at
potentially commercial rates. The latter aspect is particularly significant,
given that the Mputa reservoirs are at shallower depth, and are hence at lower
pressure and temperature than the corresponding reservoir units at Waraga. This
positive test result therefore expands the operating envelope over which typical
Waraga and Mputa crudes (32 degrees API) can be produced and eliminates pre-test
concerns over oil viscosity and fluid properties at these shallower depths.

Although laboratory confirmation is still awaited, the gravity of all oil flowed
at Mputa is similar to that found in the lower units of the Waraga-1 well and is
likely to be of similar origin. The Mputa-1 well is located 220 kilometres
northwest of the Ugandan capital Kampala and 8 kilometres from the shore of Lake
Albert. The Waraga-1 well is located 19 kilometres to the northeast of Mputa-1.

This concludes the testing programme at Mputa-1. The well is presently being
suspended and the rig and test crew are being stood down. Initial guidance on
volumes will be included in the company's Half Yearly Report on 29 August 2006.

Hardman Resources Managing Director and CEO, Simon Potter, commented:

'The positive test results from Mputa are particularly important given that we
map more oil in place in this resource than at Waraga. Natural flow from the
reservoir at these pressures and temperatures are indicative that production
rates could potentially be commercial. Further, collectively the results to-date
indicate that oil from the source interval deep under the lake can migrate all
the way across the rift valley to the boundary fault and thus potentially over
the whole licence, considerably upgrading remaining prospectivity.

The joint venture has presented potential forward options to the Government and
is currently in discussions concerning the way forward on each of exploration,
further appraisal and potential development concepts.'

Equities in Block 2 are:
Block 2
Hardman Petroleum Africa Pty Ltd (Operator) 50.0%
Tullow Oil 50.0%

nice result! ..... happier to have TLW rather than HNR though .... it may be that HNR will provide more fireworks, though as we have seen elsewhere with small stocks, it can be up like a rocket and down like the stick.

Quite right cynic.

This has worked out well for both today.

Tell you what, have a look at my other interest in Uganda, TRP.

http://www.moneyam.com/InvestorsRoom/posts.php?tid=10226#lastread

Morning all, I'm happy with the Mputa results which seem to indicate that HNR's Uganda projects have a bright future.

Good to see that Flamant appears to be making very quick progress towards its target depth.

Nice rise too: HNR Bid: 63.5p Offer: 65.5p Change: 4

From HB's Broker Round Up today:

KBC Peel Hunt has buy ratings for Hardman Resources (HNR.L), Tullow Oil (TLW.L) and JKX Oil & Gas (JKX.L),

Good stuff!

Hardman Resources Ld - Half Year & Chinguetti Update
RNS Number:9918H
Hardman Resources Limited
23 August 2006

STOCK EXCHANGE / MEDIA RELEASE

RELEASE DATE: 23 August 2006

AUSTRALIAN CONTACT: Simon Potter
Hardman Resources Ltd
+61 8 9261 7600

LONDON CONTACT: Patrick Handley
Brunswick Group (UK media relations)
+44 207 404 5959

RE: ADVICE REGARDING HALF YEAR 2006 RESULTS AND
CHINGUETTI UPDATE

Advice regarding Half Year 2006 Results & Chinguetti Update

Hardman Resources Limited ('Hardman') wishes to advise that it will issue its
Interim Results for the Half Year ended 30 June 2006 at 7:30 am WST on 29 August
2006. A copy of an Investor Presentation relating to these results will be
placed on the Hardman website www.hdr.com.au shortly thereafter. The Interim
Results announcement will include additional details on the performance and
outlook for the Chinguetti field offshore Mauritania and provisional estimates
of oil volumes discovered to date in Uganda, following the successful test
results announced earlier this week.

To date, the Chinguetti field operator, Woodside, and Hardman have advised that
the estimated reserves of the field are under review following the significantly
lower-than-expected production. The operator has now advised that the updated
reserve estimates, reflecting the re-appraisal of its geological and reservoir
models, will be provided by the end of 2006.

As an interim measure pending more detailed data being available, Hardman will
provide in its Interim Results announcement its view on those aspects of the
field's potential which can be commented on reliably at this stage. This will
include volumes of oil in place, which as confirmed by the operator have not
materially changed, and estimated recoverable reserves from the existing Phase 1
and planned Phase 2 wells which formed the original development plan. The wells
in this original plan are not likely to recover significantly more than 50% of
the original 2P (proven and probable) reserves estimate of 123 million barrels.
It is not possible at this time to provide a reliable estimate of complete 2P
reserves as this will have to take into account additional recovery from other
future wells in a re-assessed development plan. Ultimate recovery will also
depend on the benefits from the proposed 4D seismic programme in early 2007 and
application of different technical solutions (eg well designs) from those in the
original development plan. The corresponding net entitlement reserves under the
production sharing arrangements are expected to be reduced by a lesser
proportion than changes to the gross field reserves.

Not good news for the SP - a pity as I had thought that this might have been priced in already.

Still, the prospects for the firm going forward rest on more than just the issues at Chinguetti, and once these have been clarified and the uncertainty reduced this may pave the way for more consistent SP growth. I hope!

IMO, PDYOR.

soul - this news really is nothing new.

The problem is someone has said it, and that was ROC.

It'll bounce short term imo, but it is not time to buy on the lows imo.

Clear direction from Woodside is now needed in respect of reserves, mind you Hardman are having their own asessment done.

We shall see. I remain hopeful for Flamant-1 and the rest of the portfolio, but you may be right - there may be opportunities in the future to average down!

Today's take on the ongoing Chinguetti saga from Peel Hunt...

Hardman put out a form of warning on reserves in its Chinguetti field to the effect that the early phase production wells will recover not much more than half of the original estimate of recoverable reserves i.e. around 63 million barrels. The proper review of reserves being conducted by the operator Woodside is unlikely to result in a definitive answer until late in 2006. It now looks likely that the reserves will not turn out to be better than our running estimate of 90 mmbbls, with possibly more wells required to extract them. The fall in the shares overnight in Australia is understandable but we think prices in the bad news. Our Core NAV estimate (currently 68p) may come back a bit but probably not to below 60p once we have re-cast the numbers again. Hardman is releasing its interim results next Tuesday, 29th August and will provide more guidance then. Meanwhile, it may be a brave call but we are still buyers.

Entrust

ML downgrade...to neutral:

Snip:

We have reduced 2007 and 2008 production forecasts by 23% and 36%
respectively (refer chart 1) given the change in the timing of drilling additional
development wells and suggested reserve reduction.
Previously we had been assuming that up to three wells would be drilled in 4Q06
lifting production to around 45,000bopd. The most likely outcome is that now only
one well will be drilled late 2006 given availability of subsea trees. If the JV
elected to drill more wells in 4Q06 it would be required to retrieve subsea trees
from northern wells and with current rig rates, this is unlikely to be an economic
option.
Whilst no individual well location or budgets are yet to be approved by the JV we
understand that long-lead items for up to four producer wells have been ordered
for the 4Q07 drilling program. Choosing optimal well locations is likely to be
deferred until results from the proposed 4D seismic program are interpreted."

....NAV estimate A$1.70 per share.


ee (From TMF)

SWW - thanks for those posts; that helps to clarify the situation a little.

In the light of this I am not surprised that the SP has dropped, however I guess the god news is that it may not take much (Flamant!) to perk things up a little.

I stand by what I have said in the past about the strength of the portfolio and will consider adding in the future, although I may prefer other stocks as priorities!

All about balance soul, so that is a correct view imo.

Hello there soul.

What I was referring to is not new, we have seen it all now in respct of Chinguetti, Big Al has not got a handle on the story and the reason I cross referred between HNR and GBP is the common denominator, Woodside.

It is my best guess, that they have drilled in the less optimal positions on the northern flank of Chinguetti, allowing sand and water to enter the wells thereby damaging them and reducing output.

They have not understood the geology of the field in my opinion.

Did they drill deep enough?

Did they understand the target?

Can they put it right?

Unfortunately, only time will tell as they will not get to all of the intervention wells till the end on 2007. They are performing one drill this year.

In the meantime, we as holders have the high probability that reseves could be downgraded by anything up to 50%.

Revenue is 50% down, but we know all this anyway, and you buying in now, and me with my 61 pence avarage do not really worry too much about all that as it is definietly all in the price at the moment.

The Oz market is much more fickle than here, because if Flamant fails to find anything useful, what do you imagine they will do with the Hardman sp?

There will be another big hit on the sp, which we will know only too well will take a while to recover.

The question is as always, to prepare for that evenuality do we buy at the discounted levels and average down, or let it be and shut our eyes for a while?

I probably won't avarage down should that event occur.

If Flamant comes in, the story will be very different and my negative thoughts will not apply.

Thanks SWW - I guess we'd better hope that Flamant comes good, otherwise HNR is going to look like a very long-term holding! My current stake isn't going to make or break me, though, so there'll be no tears.

No nor mine soul.

NOP went up 11p today after doing very little for a while - that's enough of a good finish to the week for me. Wish you a good weekend!

Results out today from HNR. Lots of detail, too much to post.