Highlands Natural Resources Regulatory News (HNR)

24 Nov 2005 07:00

Hardman Resources Limited24 November 2005 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 24 November 2005 AUSTRALIAN CONTACT: Simon Potter Hardman Resources Ltd +61 8 9261 7600 LONDON CONTACT: Patrick Handley Brunswick Group +44 207 404 5959 RE: Chairman's 2005 AGM Presentation Hardman Resources Ltd provides a copy of the Chairman's presentation toshareholders at the Annual General Meeting held on 24 November 2005. A copy of the presentation is available at www.hdr.com.au. RICHARD O'SHANNASSYCOMPANY SECRETARY Chairman: Good morning ladies and gentlemen, I am Alan Burns, Chairman of HardmanResources Limited. In accordance with clause 12.4 of the Company's Constitution,I will chair this 19th Annual General Meeting. As the appointed time of meeting has arrived, I welcome members and invitedguests. From my right outwards I introduce to you our: • General Counsel & Company Secretary- Mr Richard O'Shannassy • Chief Executive Officer and Managing Director - Mr Simon Potter • Non Executive Director - Mr Scott Spencer • Non Executive Director - Mr Peter Raven • Non Executive Director - Mr Bob Carroll; and • Chief Financial Officer - Mr Peter Thomas We also have in attendance today Mr Nick Henry from our Auditors -PricewaterhouseCoopers. Ladies and gentlemen I will now confirm with the Company Secretary that we havea quorum and that this is a duly convened meeting. Company Secretary: Mr Chairman I can confirm that we have a quorum and that this general meetinghas been duly convened in accordance with the Company's Constitution. Chairman: With your permission, I suggest we take the notice convening the meeting asread. Is that agreed? Thank you. This meeting is convened to comply with statutory requirements but it should beviewed as an opportunity for all shareholders to learn more about your Company. The meeting will be conducted in a different format from previous years to takeinto account changes in the law and to address questions that have beenforwarded by shareholders. After answering the questions I will then give a general overview of the Companyafter which we will put the matters for voting to you and take further questionsas the opportunity arises. I will rotate the questioners to give a balanced opportunity to shareholders. Iwill then close the formal business of the meeting and Mr Simon Potter will givea presentation that has been today posted on the Company's website. I will now deal with the shareholder questions that have been forwarded prior tothe meeting. Dividends/Capital RaisingsQ1 When Chinguetti comes on stream in 2006, will there be dividends paid to shareholders?A1 We do not expect to pay dividends in the foreseeable future. Alan Burns We aim to provide our shareholders with capital growth rather than income, in line with most E & P companies. Q2 Will there be any further capital raisings or dilution of Hardman shares?A2 There are no current plans for raising additional equity; Alan Burns any future requirements will depend on the capital requirements of the business and the investment opportunities available to us in the future. Chinguetti/HedgingQ3 Is the Company intending to hedge any of its future oil from Chinguetti?A3 We do expect to arrange some hedging of oil price Peter Thomas realisations. Indeed, it is a requirement of our Chinguetti project finance facility that we have some hedging in place as utilisation of the facility increases. Generally we will not seek to remove oil price exposure from equity investors, subject to appropriate hedging to underpin our investment programme and the availability of the debt facility. We will report the hedging arrangements we enter into, in order to keep shareholders informed. Q4 The flow of information from the 2005 drilling campaign seems to be very minimal. Does the Company intend to keep this up in the future?A4 We constantly keep our disclosure practices under review. Simon Potter The recent quarterly report for the period ended 30 September 2005 gave very full information about the exploration programme. There are, of course, some constraints within our joint venture agreements over what we can disclose. We will continue to provide shareholders with information about the drilling programme including the prospects to be drilled as they are agreed. OperationsQ5 Why has the Company decided to drill Guyane alone?A5 We have not determined to drill this alone. Simon Potter We are actively looking at farmouts but we have to choose when it is the best time to do so. We are currently acquiring seismic data over the Guyane acreage to define the best prospect to drill. We are planning the operation as if we would drill the prospect alone. Remuneration ReportQ6 Short term incentive payments are a farce. Why should an officer be paid a bonus for doing what they are already remunerated for?A6 We believe that short term incentive payments Bob Carroll based on achieving measurable performance targets are an integral part of the total annual reward package and are recognised industry practice OtherQ7 Can the Company and Mr Potter keep the shareholders more informed than recently when only large institutional holders are advised of inner workings of the Company?A7 The premise of this question is incorrect. Alan Burns The presentations we provide to institutional shareholders are made available on the Company's website concurrently with those presentations. We treat all shareholders equally in terms to access to new information. Q8 Are we subservient to Woodside?A8 No. We make our own decisions. In the joint Simon Potter venture arrangements the operator and the company with the largest equity stake obviously has a considerable influence on outcomes but all joint venturers have a vote. Q9 How much money could be saved by placing the Annual Report on the Company's website rather than issuing the glossy hardcopy? This should be canvassed to shareholders for their opinion.A9 Very little, but we would certainly welcome Peter Thomas shareholders advising the Company that they would be content to access the Annual Report on the Company's website rather than being issued with a hard copy of the Annual Report. Forms are available at this meeting for shareholders to make that election and we encourage you to do so. Regrettably, the law does not allow us to stop issuing Annual Reports to shareholders unless they elect to access a copy on the Company's website. Q10 I have heard nothing on the court case with Woodside. Is the Company obliged to keep shareholders informed?A10 There have been no material developments in Richard O'Shannassy the dispute since the proceedings commenced. Pleadings have been filed by the parties. There is some prospect that the disputed issues will be mediated between all parties before the dispute goes to trial. If the dispute is not resolved by mediation then it is unlikely the matter would go to trial before late 2006. GeneralQ11 Why was Ted Ellyard paid $1,050,000?A11 Mr Ellyard was paid in accordance with his Richard O'Shannassy contract when he retired due to ill health as verified by his medical advisors Q12 What are the bonus payment criteria for the new CEO with regard to share market performance?A12 There are various elements of the CEO's Bob Carroll remuneration package, the value of which are linked to share market performance. These are set out on pages 45 and 46 of the Annual Report. Q13 Why is Mr Burns now shown as an independent director and last year he was not?A13 In March 2003 the ASX Corporate Governance Bob Carroll Council issued its ten Principles of Good Corporate Governance and Best Practice Recommendations. The ASX Listing Rules were amended at that time to require companies to provide a statement in their annual report disclosing the extent to which they followed these best practice recommendations in the reporting period. In the Hardman 2004 annual report Mr Burns was described as being non-independent. This arose out of a mistaken belief that a tenure of ten years or more as a director automatically made him non-independent. In the course of preparation of the 2005 annual report, Hardman's General Counsel queried the status of the Chairman as a non-independent director. The issue was raised at an Audit Committee meeting and it was agreed that the matter be referred to the company's auditors, PricewaterhouseCoopers for their opinion. PricewaterhouseCoopers considered the matter including the detailed definition of independence set out in the best practice guidelines. Consequently, they concluded that Mr Burns was independent and so advised the Audit Committee who in turn advised the Hardman Board. Q14 Are there any plans to increase the size of the Board?A14 Yes. Our objective is to recruit at least two Peter Raven new independent non executive directors within the next six months. We are looking to appoint individuals who have experience serving on a public company board and who have a background in or at least a working knowledge of the upstream sector of the oil industry. This search is being actively pursued. Q15 There is a large increase in employee related expenses, why?A15 Employee related expenses increased from $2 Simon Potter million in 2003/4 to $10 million in 2004/5, mainly due to a number of non-recurring charges. These include retirement benefits of $2million, termination payments of $1.5 million and a one off bonus of $2.5million amongst all staff in respect of the company's exceptional result in 2004. The remainder of the increase reflected somewhat higher staff numbers commensurate with the enlarged operating capacity of the company and its existing and planned growth. Q16 Has the Woodside litigation impacted on the joint venture relationship?A16 No Simon Potter Q17 Does Hardman have any M & A intentions?A17 We are always looking for value adding Alan Burns business opportunities within the international oil and gas sector. We should remember that Hardman was one of the founders of Dana and emerged profitably from that transaction. Also Hardman purchased a sizable stake in Arc Energy quite some years ago and sold that at a profit. With our enlarged capacity we constantly look at bigger deals Q18 Why are Mr Scott Spencer and Mr Alan Burns entitled to retirement benefits?A18 When service agreements were first entered Bob Carroll into between the Company and each of Messrs Burns, Ellyard and Spencer, provision was made for the payment of retirement benefits where retirement was effected after a relevant period of qualifying service. When those service agreements were extended with effect from 1 January 2004 the retirement benefit provisions were carried forward. Since then the Board has adopted a policy whereby retirement benefits will not be paid to future non-executive directors. Mr Raven and I do not have any retirement benefits available to us under the terms of our appointments. Q19 Why has the company suffered a A$16million exchange loss?A19 The company is domiciled in Australia and thus Peter Thomas our accounts are denominated in Aus$, but most of its expenditure obligations are in US$. We therefore maintained our cash balances in US$ to match our projected expenditure requirements as part ofour risk management programme. In our accounts the value of those US$ holdings has to be reflected in Aus$ at the then current exchange rate. As exchange rates fluctuate fixed holdings in US$ will have a varying Aus$ value. Thus at the end of an accounting period we will reflect either a gain, or a loss depending on how the currencies move relative to each other. However, this is only an opportunity loss or gain. To hold our cash in Australian dollars when our commitments are in US dollars would be speculative. Q20 Why have we changed our financial year end?A20 We have elected to change the financial reporting date of Peter Thomas the Company from 30 June to 31 December. We have received the necessary regulatory approvals to this change, so the next audited financial statements of your Company will be for the six month period ended 31 December 2005. Although this means two reporting periods within a relatively short space of time, it will bring our financial year into line with the budget cycles of the joint ventures in which we participate and also with the reporting timetables of the majority of our international peer group. It also means that we can look forward to our next AGM as soon as next May. Q21 Do we have any weather risks in Mauritania such as hurricanes or cyclones?A21 No, If you look at the slides, Mauritania is outside the Alan Burns hurricane or tropical cyclone belt. There are also few thunderstorms or waterspouts and no icebergs. From a general standpoint this slide shows our share price performance over thelast year. As you can see our share price is keyed strongly with drilling success. If one looks to the projections in the very near future we enter a new phase ofdrilling on our own areas and currently we are drilling in Mauritania in a blockwhere Woodside has no participation. You will also see the operator'sprojections of expected Chinguetti production start up around the end ofFebruary. As Simon will show in his presentation there are a number of high impact eventscoming to fruition in the next several months. Shareholders will be able to draw their own conclusions as to future share pricefrom Simon's presentation later. I now show you some general overviews of the projected position of the world oiland gas industry by the publishers of the Oil and Gas journal. From this we can see that Hardman is exceptionally well placed for the futuredue to its well funded emerging oil production and huge international acreageposition. As part of the Board's positioning of the Company for the future we arefortunate to have engaged Mr Simon Potter at this stage in our growth. Simoncomes to us from a senior management position in BP -one of the worlds bestmanaged companies. It is the Board's view that we have had a wonderful opportunity to set up yourCompany for future outstanding growth by putting proven management structures inplace, whilst we are still a relatively small company, much progress has beenmade. Mr Potter will elaborate on our strategy and progress in the course of hispresentation. This year we have an enlarged team. The oil industry is critically short ofexperienced people worldwide, largely due to a long period of low oil pricesresulting in under-recruitment generally. The Board and Simon Potter have builtthe current very capable team to lead the Company into a new phase as anemerging oil producer. I would appreciate your demonstration of support for thisteam when it comes to voting on the Remuneration Report which has alreadyreceived very substantial shareholder proxy votes in favour. As you know my long term colleague Scott Spencer has decided to retire fromHardman but has agreed to stay on as a non executive director for a periodthrough to first oil. I recall Scott's application for employment. I received a letter from aGovernment Department recommending that Scott Spencer join my company in asenior role. We had not advertised, being somewhat intrigued, I looked morecarefully at the letter and saw that it was signed by Scott Spencer. I thoughtthis was rather novel and showed great initiative. I phoned Scott and heexplained he spoke Russian fluently -as we were heavily involved in Russia Idecided to employ him. There were some intriguing and funny times. We were once in Romania, shortlyafter the dictator Ceaucescu and his wife had been shot, looking at one ofRomania's famous old oilfields. It was an interesting area in the middle of avineyard and perched atop of the hill, which was the crest of an oilfield, was alarge building converted into a modest restaurant, apparently it had been ahunting lodge. Our Romanian guides took us to lunch. Around the walls werephotos of the dictator perched afoot with gun on corpses of gigantic wild boars.Each photo around the wall was of increasing numbers of even larger shot boarswith the beaming dictator astride centre stage with gun. We thought it waspretty odd as there were no forests anywhere near this place. Scott asked theRomanian waiter where Ceaucescu had shot the boars. "Come this way" said he tous and he led us to the verandah overlooking a lot of pig pens out the back."Our leader", he laughs, "had the boars fattened up from piglets in the pens andhe came and shot them in the pens". There are some lessons here for the oil industry I think........fatten yourtargets up before you drill them and make sure you cant miss. I now show Scott, on Lake Albert in Uganda. Scott played a major role in ourUgandan venture and his work typifies the energy and dedication of ourdirectorate and staff. Later in the meeting Simon Potter will give you a detailed update on our Ugandaproject where we are now on the verge of drilling our first well on the project. Scott has served us royally in varied senior capacities including as a CEO andScott, on behalf of us all, thank you for your service to the Company and ourbest wishes for the future. This slide shows the results of the shareholder proxies lodged by the due time.You will note that voting on all resolutions is overwhelmingly in favour, savefor the election of Mr Andrew Mason as a director, which is overwhelminglyagainst. Mr Mason nominated himself under the Company's constitution and does not haveBoard support. This company is well directed and managed and poised on the verge of majorgrowth. A company is a team including shareholders, a directorate andmanagement. I am pleased that shareholders, as depicted on the proxy chart are showing suchsupport for the Board's recommendations and would appreciate continuing supportthrough the formalities of the meeting today. As I said earlier, Simon Potter, our CEO and MD, will give a presentation afterthe close of the formal business and I know you will find it illuminating andpositive. I will now turn to the formal business items outlined in the Notice of Meeting. This information is provided by RNS The company news service from the London Stock Exchange