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.

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.

http://www.theaustralian.news.com.au/story/0,20867,20297298-643,00.html

"Hardman hopes for Uganda oil
Nigel Wilson
August 30, 2006
HARDMAN Resources believes it may have found up to 300 million barrels of oil in Uganda but is estimating that recoverable reserves may be as low as 30 million barrels.

Chief executive Simon Potter gave the estimate yesterday when reporting that the company's profit had jumped to $22.9 million from $6.1 million in 2004-05.

The result included a one-off tax credit of $14.5 million.

Reflecting the effect since February of the start-up of the $US708 million ($928 million) Chinguetti oil development off Mauritania in which Hardman has around 19 per cent, the company's sales were reported at $74.5 million compared with nil a year earlier.

Mr Potter, answering questions on below-forecast production from the Woodside-operated Chinguetti field, said that with a net return to Hardman of $US56 a barrel, it was still a good investment for the company.

The Hardman boss said successful testing of the Mputa and Waraga wells in Uganda confirmed excellent reservoir quality and potentially commercial flow rates.

"Oil in place from discoveries so far in the three wells we have drilled near Lake Albert are estimated at between 100 million barrels and 300 million barrels," he said.

Mr Potter added that the company had so far explored only around 6 per cent of its licence area in Uganda.


http://www.smh.com.au/news/business/hardman-trifecta-means-ugandas-the-go/2006/08/29/1156816897980.html

Hardman trifecta means Uganda's the go
Email Print Normal font Large font Jamie Freed
August 30, 2006

ALTHOUGH Hardman Resources insists its share of the troubled Mauritanian oil joint venture remains a "core asset", the company has indicated it will spend an increasing amount of its exploration dollars in Uganda.

Hardman reported a first-half profit of $22.9 million yesterday, up from a half-year loss of $6.1 million last year.

"A year ago we had no production. We had oil in just one country. We'd never operated an international exploration program before," Hardman managing director Simon Potter said. "We are announcing a strong profit, a robust balance sheet and the fact we are fully funded for all our obligations in the coming years."

Hardman last week said the amount of recoverable reserves at its Chinguetti project, operated by Woodside Petroleum, would probably be halved when a revised estimate was released.

The Chinguetti field was expected to produce about 60,000 to 70,000 barrels of oil a day but has instead stabilised at rates of about 35,000 barrels a day.

"It is clear there are no quick solutions, that considerable additional capital expenditure and technological application will be needed, and that a downward adjustment to the recoverable reserves of the field is inevitable," Mr Potter said.

In light of the decreased production, and therefore cash flow, from Chinguetti, Hardman has cut its annual exploration budget by $US15 million to $US65 million.

The company said it would spend more money in its tenements in Uganda than previously expected because it had hit oil in all three wells drilled there so far.

"Uganda is a priority," chief financial officer Peter Thomas said, adding that Mauritania remained attractive because oil prices had more than doubled since the original investment in Chinguetti was approved.

Hardman would like to prove up more than 350 million barrels of reserves to give it the ability to export its oil production but thinks that even with as little as 30 million barrels it might be able to commercialise the oil by selling it locally.

Apart from Mauritania, Hardman is the operator of nearly all of its joint ventures. Mr Potter said Hardman preferred to be in that position in order to control a project's pace and destiny.

Hardman shares closed 0.5c lower at $1.445 yesterday.


Geosul

I have just listened to a recording of the Analysts Conference available from here:

http://www.hdr.com.au/investors_announcements.asp?contentID=476

Some interesting points:

30m recoverables estimate is very conservative. There is considerable upside. Nzizi which is updid of M'puta has the potential to double this figure to 60m barrels.

QuoteAre we in Uganda to recover 30m barrels? No! Plan is to fully explore the whole license which ultimately will have us drilling under the lake. In the meantime, to the extent that we can start generating cash and make our operations cash neutral is both a priority to us and the Ugandan government.

What about Tullow? The agreed strategy with Tullow is to participate as far downstream as generates value upstream

Recent discussions with Ugandan Gov't shows their appetite to be available with both expertise and facilities in order to have power [generation] and electrification lines available to us

The Mini Refinery would be a simple topping unit that allows us to extract Diesel and Kerosene. Much of the diesel would be used in our own rigs and for our own power generation

Apparently a lot of Ugandan electricity is generated from Hydro and there is a chronic power shortage in Western Uganda.

Question Do we move product in terms of crude oil to Kampala [for power generation] or do we move product in terms of electricity? And the preference in discussion with the Ugandans is to move the electricity

So initial plans would involve us supplying electricity from a plant in the Kaiso-Tonyo area although we don't have plans for ownership of these facilities

In terms of scale they are talking about a 50MW Power Station + Topping Plant of commensurate size which would require appox 15m barrels of recoverables and consume about 4000bopd. As its all modular all of this can easily be scaled up to meet additional demand.

Well worth a listen.

xxnjr

Huntley Broker Report

"Event
Last Update - 29/08/2006
Adjusted 1H06 profit of $22.9m was a considerable improvement on the $22.1m pcp loss but less than half of our expectation. Most of the difference was in non cash items including substantially higher depreciation due to Chinguetti underperformance, higher exploration write-offs and higher tax. There was however a realised $5.1m charge for HDR's share of Chinguetti production being overlifted by 56,000 barrels. A timing issue, this charge will be reversed in 2H06. Headline NPAT of $22.9m was almost four times the 1H05 result. On a pre-tax basis it includes a $4.2m write back of realised losses on cancelled oil call options, instead being recognised as the options were originally due to mature. This was partially offset by a $1.8m loss on asset sales.

February start up of Chinguetti saw 1H06 output at 0.98mmbls, considerably lower than expected due to poor field performance. Sales volumes of 0.86mmbls generated A$74.5m of revenue on an average realised price of US$63.9/bbl, a US$5-6/bbl discount reflecting new crude status and production uncertainty.


Business Impact: We retain our Buy recommendation on HDR - excluding risk averse investors. Attractions are the share price discount to NPV, strong balance sheet, single digit forward earnings multiples and strong exploration program. Detractions include increased development risk, potential for market sin binning due to Chinguetti underperformance and very real sovereign risk. Our production forecasts are unchanged but we downgrade our FY06 and FY07 earnings forecasts 32% and 10% to 11.4cps and 21.4cps respectively. This follows heavy increases in expected depreciation rates and exploration write-offs for Chinguetti. Our A$1.95ps valuation is retained and assumes a long term US$60/bbl oil price, A$/US$ exchange rate of 0.76 and a 15% discount rate for Mauritania sovereign risk. Using the current US$75/bbl spot price increases our valuation 23% to A$2.40ps.

Forecast Impact: --

Recommendation Impact: Unchanged. (Last updated: 29/08/2006

Event Analysis

--
At the end of the period, HDR had 176,000bbls of oil on the floating production storage & offload (FPSO) vessel at Chinguetti. Up to half could be sold down by end 2H06 boosting revenue by around $15m. Net cash at the end of 1H06 was relatively steady at $143m after a US$113m (A$148m) equity raising in April.


Mauritanian remediation
HDR says while the original Chinguetti estimate of 380mmbls of oil in place is not materially changed, the ten production wells in the initial development plan are unlikely to recover significantly more than half the original 123mmbl reserve estimate. Infill drilling is expected to begin in 4Q06 to increase field deliverability from current 33-35kbopd rates, half the original guidance. Evaluation of the Tevet discovery as tie-back to Chinguetti is also being fast tracked. Good news at Tiof sees reserves now provisionally estimated at 50-60mmbls, a 10-20mmbl increase on the previous estimate due to the planned extended reach of wells from the central facility, with subsequent phases to access additional reserves.

HDR will spend $65m on exploration and appraisal this year and next. The remainder of the 2006 Mauritanian exploration program targets gas potential in Block 8 with HDR's 18% Flamant-1 now drilling a potential 5TCF (790mmboe) target. The WPL operated shallow water Cretaceous Kibaro-1 follows targeting 130mmbls of oil. In Uganda, testing of the Mputa and Waraga prospects confirms excellent reservoir quality and potentially commercial flow rates. Oil in place is estimated at 100-300mbls with an initial recoverable estimate of 30mmbls excluding near term upside. HDR says the greatest potential has yet to be tested beneath Lake Albert.


The 2007 campaign is to include 8-10 exploration wells covering Mauritania, Uganda, Tanzania, Guyane in addition to up to 15 wells in Suriname. HDR's frontier and deepwater Atlantic margin areas are of a nature to deliver substantial discoveries. We currently value HDR's overall exploration potential at around $300m or A$0.42ps. There is room for upside!"

Sounds moderatley encouraging, all in all.

I'm surprised that Hardman hasn't talked about possible methods of recovering a greater proportion of the oil in place. Could not water injection or similar be used?

soul, yes it could.

This is at a very early stage, and exploration is the driver here first.

Assessment comes next,, as they say they have exp[lored on 6% of their licence so far.

The fast tracking required by the Government will not allow them to do things in the natural order, I think and at their leisure.

Uganda has one heck of a bill for importing energy, and early produiction of oil for electricity will be of more benefit to them than discovery of oil in place. Obviously Hardman Tullow would sell at a discount to the Government, but if the electricity is more or less on site, there will be one to give them as there will not be any transport costs.

Also 1000 miles of cable will be tons cheaper than a pipeline to Mombasa

Things can change very quickly especially if Kingfisher comes in moderate to big, if at all?

Potters conservatism is well founded having been stufed by the Australian Press before over Tiof.

The sp is holding well at the moment bearing in mind the price of oil shifting downwards.

Good points, SWW. Am grateful for your clarification as I have misplaced my thinking-cap today! Elec production ought to be good news all round as it enables HNR to extend the supply-chain vertically and drive profits

By the same logic it would be good if HNR can find gas in Uganda, but I take it that the prospect is basically oily? No problem, as long as HNR have a handle on saleable product and clearly a ready market, it should be money in the bank.

Drilling update out today; Flamant-1 back on track.


RE: MAURITANIA DRILLING UPDATE
PAGES: 1
Hardman Resources Limited (Hardman) provides the following update on its exploration drilling
operations:
MAURITANIA: EXPLORATION DRILLING UPDATE - FLAMANT-1 (BLOCK 8)
Since the last report on the Flamant-1 exploration well, repairs have been made to the Blow Out
Preventer (BOP) and it has been re-run to the seabed. As at midnight on 4 September 2006, drilling of
Flamant-1 to the next planned casing point at 2,110 metres had recommenced with the well having
reached a depth of 1,880 metres.
Flamant-1 targets Cretaceous Carbonates and has a planned total depth 3,370m. The well is located in
1,414m of water, approximately 210km from the shore and 195 km North-West from Pelican-1, a
Cretaceous gas discovery drilled in Block 7.
Equities in Block 8 are:
Block 8
Dana Petroleum (Operator) 41.5%
Hardman Resources Ltd 18.0%
Roc Oil Company 2.0%
Wintershall 25%
Gaz de France 13.5%
Times and dates for Mauritania wells refer to GMT (Mauritania time), 8 hours behind Western Standard
Time, Perth.
Peter Thomas
Chief Financial Officer

You are doing a great job over here (as opposed to 'over there' at a8v8n where I reside most days), I have a largish holding in HNR, which has cost me a small fortune (if I sell!) so far. :(

Flamant? Who knows, but if they do find hydrocarbons there, then they talk of 1bln barrels equivilent I think. Fingers X'd as someone says above, but even then I shall stay put without that being a success.

That's how I feel. :)

We dont say much here Rayrac because we are the only 3(?) investors left in the whole world!

What we really need is georgetrio buying a few as he seems to have a Midas touch about him

I have 10,000 shares in the company I bought mine at 58.44p on22nd of august, they a dropped since my purchase. I am staying put for the time being. All it takes is some good new and finds.

janet - welcome and thank you for highlighting your presence.

That's a good price in the long term, and if they happen to hasve a bid approach as well, there is quite a bit of discount in it too.

FID on Tiuof will do it and news of Tevet tie back would help.

KIngfisher coming in foir Hertiage in Uganda too, plus I see Tullow have just bought adjoining licenses in the DRC(Congo), so they must think it's worth it.

So now we have 4 investors here.