Highlands Natural Resources Regulatory News (HNR)

11 Mar 2005 08:53

Hardman Resources Limited11 March 2005 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 11 March 2005 CONTACT: SIMON POTTER TELEPHONE: Within Australia: 08 9261 7600International: +61 8 9261 7600 RE: HALF-YEARLY REPORT 31 DECEMBER 2004 Please find following a copy of the Company's Half-Yearly Report for the periodto 31 December 2004. SIMON POTTERMANAGING DIRECTOR HARDMAN RESOURCES LTD ABN 98 009 210 235 AND CONTROLLED ENTITIES DIRECTORS' REPORT 31 December 2004 The Directors present their report on the consolidated entity, being HardmanResources Ltd and its controlled entities ("Hardman" or "the Company"), for thehalf-year ended 31 December 2004. DIRECTORS The Directors of the Company during and since the end of the half-year are: Alan Robert BurnsSimon Craig PotterScott Sherwood SpencerPeter Leo RavenRobert Anthony Carroll Edward John Ellyard was Managing Director from the beginning of the half-yearuntil he resigned from that position on 29 October 2004. He remained on theBoard as a Non-executive Director until his resignation on 16 December 2004. Simon Craig Potter was appointed as the Chief Executive Officer and ManagingDirector on 19 January 2005. OPERATING RESULTS The net consolidated loss of the consolidated entity for the half-year ended 31December 2004 was $16,098,361 (2003: $10,827,487). The net loss for the December 2004 period is primarily attributable to thewriting off of $10 million relating to unsuccessful exploration wells inMauritania and $20.4 million in foreign exchange losses. An income tax benefitof $13.6 million partly offset these losses. The cash on hand of the Company fell by $84.1m to $244.6 million during the sixmonths to December 2004. This was largely due to $62.8 million being spent onexploration, appraisal and development expenditure over all the Company'spermits, with $59.6 million spent on the intensive drilling campaign inMauritania. An additional outlay was made for income tax of $13.5 million andthere was a foreign exchange loss of $17.9 million relating to revaluation ofcash balances. Cash generated during the period came from the sale of the Company's remaining12% interest in EP 413 from ARC Energy Limited for $4.3 million, conversion ofemployee share options of $9.8 million and interest received of $5.6 millionfrom short term investments with various financial institutions. REVIEW OF OPERATIONS The consolidated entity continued oil and gas exploration and developmentactivities and related investment both in Australia and internationally.Existing projects were significantly advanced, particularly Mauritania, and newprojects were assessed for their potential. A significant event was the finalising of the Chinguetti Project financing whenon 27 January 2005, Hardman announced that it had entered into an agreement withthe Australia and New Zealand Banking Group Limited ("ANZ") which establishes aUS$100 million project loan facility. The funds will be applied to coverapproximately 80% of Hardman's share of the development costs of the ChinguettiOilfield. The facility is fully underwritten by ANZ. On 9 November 2004, the Government of the Islamic Republic of Mauritaniaexercised its right to participate in the Chinguetti Oilfield development,offshore Mauritania. The government participation will comprise a 12% equityposition in the Exploitation Perimeter which was granted in May 2004 by way ofan Exclusive Exploitation Authorisation (EEA), which includes the ChinguettiOilfield. The participation will be provided pro rata by the Joint Ventureparticipants, such that Hardman's interest in the EEA reduces from 21.6% to19.008% with the balance of PSC Area B (in particular Tiof) remaining at 21.6%.The election by the Government to participate will result in the reimbursementof past costs in consideration for their interest as specified in the PSC. The operational focus continued on Mauritania during the period with anintensive exploration, appraisal and development drilling campaign commencing inSeptember 2004. In the North Perth Basin, Australia, the Company sold its remaining 12% interestin EP413 (which contains the Jingemia Oil Field) by exercising its option inSeptember 2004. A detailed review of each project area follows: Mauritania Exploration:The 2004 drilling program commenced in September with four exploration wellsbeing drilled. The first well, Tevet-1 (PSC B), intersected a gross hydrocarboncolumn of 114 metres comprising a 70 metre gas column and a 44 metre oil column.The Dorade-1 (PSC Block 2), Capitaine-1 and Merou-1 (PSC B) wells wereunsuccessful and subsequently plugged and abandoned. A 3,059 kilometre 3D seismic survey in PSC Area A was completed on 14 November2004. The survey vessel then moved to PSC 6 in the north where it commencedrecording a 3,100 square kilometre 3D survey. Appraisal:The Tiof appraisal programme has seen four wells drilled to date. • Tiof-3 encountered a gross oil column of 134 metres containing several individual sands of variable thickness. The well was then sidetracked (as planned) and successfully cored the reservoir intervals, but because of mechanical problems the well could not be flow tested to its potential and was suspended for possible future use. • Tiof-4 encountered oil over a gross interval of 113 metres in several individual sands of variable thickness while Tiof-5 encountered an oil column of at least 23 metres. These wells were not planned for flow testing. • Tiof-6 commenced in late December 2004 and encountered oil over a gross interval of 123 metres. It is interpreted that no gas or water has been intersected by the well and the interval comprises several good quality sands of varying thickness. The well underwent an extended flow test in February 2005. The maximum rate the well flowed at was approximately 12,400 barrels of oil plus 11 million standard cubic feet of gas per day with a stable rate of 9,150 barrels of oil per day. The well has now been suspended as a potential future oil production well. It is currently estimated Tiof has in excess of 1 billion barrels of oil inplace. The focus going forward will be to assess development options to realiserecoverable reserves. Development:The Chinguetti Field Development was formally committed in May 2004 with projectexecution commencing in June. Field development is taking place in two stages - Phase I comprises 6 oil production wells and 5 water injection wells producingto a Floating Production, Storage and Offloading unit (FPSO), moored in 800mwater, some 80km from the Mauritanian coast. Phase II comprises the drilling ofan additional 4 production wells, notionally 2 years after project start-up.Oil and produced water will be separated on the FPSO; excess gas will bedisposed of in the nearby Banda field via a dedicated well. Separated oil willbe stored on the FPSO and off-lifted via tanker directly to internationalmarkets. Project progress at year end (45% overall) was broadly in-line with expectation.In particular, two significant milestones occurred in December. Firstly, theBerge Helene crude carrier arrived into Singapore to undergo conversion to anFPSO for use on the field. Secondly, two deep-water rigs - the Stena Tay andWest Navigator arrived in Mauritanian waters to commence development drillingand completion activities. The target date for first oil remains March 2006. Uganda The Company commenced activities in preparation for the acquisition of a 2Dseismic survey of the onshore area and an extension of some of those lines intothe lake. Falklands The Joint Venture began shooting a 2D seismic survey comprising 4,900 linekilometres over the defined leads and prospects. The acquisition is 85% completewith the remainder expected to be completed by late March 2005. Australia - Timor Sea In February Hardman applied for consent to surrender the AC/P25 permit and isawaiting a response from the Government. Preparations continued in AC/P26 todrill the Marloo-1 exploration well in late March 2005. Guyane Discussions continued with potential farmin partners to fund the drilling of thefirst exploration well in the permit. Gabon On the 2 March 2005 Hardman entered into an agreement with Ascent Resources plc(Ascent) to sell its 12.86% participating interests in the Iris Marin ProductionSharing Contract and the Themis Marin Production Sharing Contract. Initialconsideration for the acquisition will be the issue of 12 million new ordinaryshares of Ascent to Hardman. Following completion, Ascent shall reimburseHardman for US$515,765 of past costs. Further bonus payments totallingA$1,200,000 will be made to Hardman provided certain success criteria isachieved. Other Projects Hardman has notified the operator, Bounty Oil & Gas NL, and the Government ofits intention to withdraw from permit PEP38215 in New Zealand. In Eritrea, theEritrean Government decided not to proceed with the award of the Massawa Blockin the Red Sea. The Company is seeking clarification of this situation. ROUNDING OF AMOUNTS The amounts contained in this report and in the financial report have beenrounded to the nearest thousand dollars (where rounding is applicable) under theoption available to the Company under Australian Securities and InvestmentsCommission (ASIC) Class Order 98/0100. The Company is an entity to which theClass Order applies. AUDITORS INDEPENDENCE DECLARATION A copy of the auditors' independence declaration as required under section 307Cof the Corporations Act 2001 is set out on page 13. Signed on 11 March 2005 in accordance with a resolution of the Board. S C PotterMANAGING DIRECTOR HARDMAN RESOURCES LTD ABN 98 009 210 235 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2004 CONSOLIDATED 31 Dec 2004 30 June 2004 $'000 $'000CURRENT ASSETS Cash assets 244,559 328,695Receivables 22,730 23,713Inventories 3,086 2,411Other financial assets 1,052 1,014Other assets 567 155 ----- ----- TOTAL CURRENT ASSETS 271,994 355,988 --------- --------- NON CURRENT ASSETS Property, plant and equipment 914 428Capitalised oil and gas expenditure 178,985 117,406Deferred tax assets - 1,712 --- ------- TOTAL NON CURRENT ASSETS 179,899 119,546 --------- --------- TOTAL ASSETS 451,893 475,534 --------- --------- CURRENT LIABILITIES Payables 39,233 27,883Provisions 218 195Current tax liabilities - 17,885 --- -------- TOTAL CURRENT LIABILITIES 39,451 45,963 -------- -------- NON CURRENT LIABILITIES Provisions 85 62Deferred tax liabilities 18,913 29,797 -------- -------- TOTAL NON CURRENT LIABILITIES 18,998 29,859 -------- -------- TOTAL LIABILITIES 58,449 75,822 -------- -------- NET ASSETS 393,444 399,712 ========= ========= EQUITY Contributed equity 338,459 328,629Reserves 3,223 3,223Retained Profits 51,762 67,860 -------- -------- TOTAL EQUITY 393,444 399,712 ========= ========= The above consolidated statement of financial position should be read in conjunction with the accompanying notes. HARDMAN RESOURCES LTD ABN 98 009 210 235 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 CONSOLIDATED Notes 31 Dec 2004 31 Dec 2003 $'000 $'000 Revenues from ordinary activities 2 11,120 4,175 Foreign exchange loss (20,378) (2,433)Depreciation and amortisation (247) (747) ---Writedown of well assets - (4,611) ---Carrying amount of assets sold (2,601) - ---Exploration, evaluation and appraisal costswritten off ---and provided for (10,521) (2,432) ---Operating and production expenses (156) (3,144) --- ---------Other expenses from ordinary activities (6,914) (1,635) --- --------- --------- --- --- ---Loss from ordinary activities beforeincome tax 3 (29,697) (10,827) Income tax benefit relating to ordinaryactivities 13,599 - --- -------- --- Net loss from ordinary activities (16,098) (10,827) --- ---------- ---------- Net loss attributable to members of --- --- ---Hardman Resources Ltd (16,098) (10,827) --- ---------- ---------- Total changes in equity other than thoseresulting from === === ===transactions with owners as owners (16,098) (10,827) === ========== ========== === === === === === === === === === === === === Cents Cents === ===Basic loss per share (2.47) (2.34) ======== ======== Diluted loss per share N/A N/A ===== ===== The above consolidated statement of financial performance should be read in conjunction with the accompanying notes. HARDMAN RESOURCES LTD ABN 98 009 210 235 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 CONSOLIDATED 31 Dec 2004 31 Dec 2003 $'000 $'000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from operations 166 4,112Payments to suppliers and employees (9,076) (5,116)Interest received 5,606 537Income tax paid (13,458) - ---------- --- ---NET CASH FLOWS USED IN OPERATING ACTIVITIES (16,762) (467) ---------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on disposal of property, plant andequipment 4 -Payments for property, plant and equipment (667) (65)Net proceeds on disposal of oil and gas interests 4,266 -Payments for oil and gas exploration, appraisaland development (62,754) (29,094)Payments for secured deposits (174) - ------- --- --- ---NET CASH FLOW USED IN INVESTING ACTIVITIES (59,325) (29,159) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares and options 9,830 31,428Payment of share issue costs - (1,199)Loans (repaid)/owed by other entities (22) (386) ------ ------- NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 9,808 29,843 ------- -------- NET (DECREASE)/INCREASE IN CASH HELD (66,279) 217 CASH AT THE BEGINNING OF THE HALF-YEAR 328,695 30,804 Effects of exchange rate changes on cash (17,857) (107) ---------- ------- CASH AT THE END OF THE HALF-YEAR 244,559 30,914 ========= ======== The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. HARDMAN RESOURCES LTD ABN 98 009 210 235 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 NOTE 1: BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT This general purpose half-year consolidated financial report has been preparedin accordance with the requirements of the Australian Corporations Act 2001,applicable Accounting Standards including AASB 1029: "Interim FinancialReporting", Urgent Issues Group Consensus Views and other mandatory professionalreporting requirements. This financial report should be read in conjunction withthe financial report for the year ended 30 June 2004 and any publicannouncements made by Hardman Resources Ltd and its controlled entities duringthe half-year ended 31 December 2004 in accordance with any continuousdisclosure obligations arising under the Corporations Act 2001 of Australia. The accounting policies have been consistently applied with those of theprevious financial year. Where necessary, comparative figures have been adjustedto conform with the current year presentation. For the purpose of preparing thehalf-year consolidated financial report, the half-year has been treated as adiscrete reporting period. The half-year consolidated financial report has beenprepared in accordance with the historical cost convention. The half-year report does not include full disclosures of the type normallyincluded in an annual financial report and therefore cannot be expected toprovide as full an understanding of the financial performance, financialposition and financing and investing activities of Hardman as the full financialreport. International Accounting Standard Convergence The Company's management of the transition to the Australian equivalents to IFRSis on schedule to meet the reporting requirements. The adoption of Australianequivalents to IFRS will be first reflected in the consolidated entity'sfinancial statements for the half-year ending 31 December 2005 and the yearending 30 June 2006. To date the project team has not identified any further accounting policychanges that will be required other than those disclosed in the 30 June 2004Annual Report. In some cases choices of accounting policies are available,including elective exemptions under Accounting Standards AASB 1 First-timeAdoption of Australian Equivalents to International Financial ReportingStandards. Some of these choices are still being analysed to determine the mostappropriate accounting policy for the consolidated entity. AASB 6: Exploration Evaluation of Mineral Resources was released in December2004 and is not expected to have any significant impact on the Company'sexisting accounting policy. NOTE 2: REVENUE CONSOLIDATED 31 Dec 2004 31 Dec 2003 $'000 $'000 Revenue from operating activities:- sales revenue 703 3,415- service revenue - 113 --- ----- --- --- 703 3,528 ----- ------- Revenue from outside the operating activities:- interest received from other persons 5,606 537- sundry revenue - management and other fees 23 110- proceeds on disposal of property, plant andequipment 4 -- proceeds on sale of oil and gas interests 4,784 - ------- --- --- --- 10,417 647 -------- ----- --- ---Total Revenue 11,120 4,175 ======== ======= NOTE 3: PROFIT/(LOSS) FROM ORDINARY ACTIVITIES Profit/(Loss) from ordinary activities before income taxhas been determined after: (a) Expenses === ===Cost of sales 156 1,658 ===== ======= Writeback of diminution in the value ofinvestments (shares) (38) (214)Net loss on disposal of plant and equipment 25 -Provision for site restoration - 196Amortisation of oil and gas assets 94 584Depreciation - plant and equipment 153 163Foreign exchange loss 20,378 2,433 =======Writedown of capitalised exploration 495 128 =====Exploration expenditure written off 10,026 2,304Writedown of well assets - 4,611 === ======= (b) Net gains === ===Net gain on disposal of non-current assets === ===- oil and gas interests 2,211 - ======= === === === NOTE 4: CONTINGENT LIABILITIES AND CONTINGENT ASSETS As at 31 December 2004 the only material change in contingent assets since the30 June 2004 financial statements was the exercise of the Option Agreement byHardman to sell its remaining 12% interest in EP413 for a sum of $4,783,829. NOTE 5: STATEMENT OF OPERATIONS BY SEGMENT The consolidated entity operates in two primary geographical segments based onlocation of operations and assets. The geographical segments used are: Other - Any areas not material to segment disclosure (including New Zealand,Falkland Islands and Guyane (French Guiana)).Africa - Any countries in Africa which currently includes Mauritania, Gabon andUganda.Australia The operations by geographical segments are: Other Africa Australia Consolidated31 December $'000 $'000 $'000 $'0002004: ===Revenue ===External - - 5,487 5,487segment ---------------- ---------------- ----------------revenueOther 5,633unallocated === === === ---------------revenue === === === ===Total 11,120Revenue === === === ============== Result Segment (20) (9,806) 2,018 (7,808)result ---------------- ---------------- ---------------- Unallocated (21,889)revenue less ---------------expenses ---Profit/(loss) fromordinaryactivities before (29,697)income tax Income Tax 13,599 ---------------- ---Net profit/ (16,098)(loss) ================ NOTE 5: STATEMENT OF OPERATIONS BY SEGMENT (Continued) Other Africa Australia Consolidated31 December $'000 $'000 $'000 $'0002003: ===Revenue ===External - - 3,528 3,528segment ---------------- ---------------- ----------------revenueOther 647unallocated === === === ---------------revenue === === === ===Total 4,175Revenue === === === ============== Result Segment (5) (1,576) (5,483) (7,064)result ---------------- ---------------- ---------------- Unallocated (3,763)revenue less --------------expenses ===Profit/(loss) fromordinaryactivities before (10,827)income tax Income Tax - ---------------- ---Net profit/ (10,827)(loss) ============== NOTE 6: SIGNIFICANT EVENTS SUBSEQUENT TO BALANCE DATE Subsequent to balance date and as at the date of signing this report thefollowing significant events have occurred: On 27 January 2005 Hardman Resources Limited entered into an agreement with theAustralia and New Zealand Banking Group Limited ("ANZ"), which establishes aproject loan facility of US$100 million. The funds will be applied to coverapproximately 80% of Hardman's share of the development costs of the Chinguettioilfield. The facility is fully underwritten by ANZ. On the 2 March 2005 Hardman entered into an agreement with Ascent Resources plc(Ascent) to sell its 12.86% participating interests in the Iris Marin ProductionSharing Contract and the Themis Marin Production Sharing Contract. Initialconsideration for the acquisition will be the issue of 12 million new ordinaryshares of Ascent to Hardman. Following completion, Ascent shall reimburseHardman for US$515,765 of past costs. The estimated pre tax profit from thistransaction will be $152,000. Further bonus payments totalling A$1,200,000 willbe made to Hardman provided certain success criteria is achieved. NOTE 7: CONTRIBUTED EQUITY CONSOLIDATED 31 Dec 2004 31 Dec 2003 $'000 $'000Issue of ordinary shares during the half-year: Capital raising - 23,328Options exercised 9,830 8,100Capital raising costs - (1,199) --- --------- 9,830 30,229 ======= ======== No of shares No of sharesIssue of ordinary shares during the half-year: Capital raising - 42,727,270Options exercised 8,936,588 13,500,000 -------------- ------------- 8,936,588 56,227,270 ============== ============ Auditors' Independence Declaration As lead auditor for the review of Hardman Resources Limited for the half yearended 31 December 2004, I declare that to the best of my knowledge and belief,there have been: a) no contraventions of the auditor independence requirements of theCorporations Act 2001 in relation to the review; andb) no contraventions of any applicable code of professional conduct inrelation to the review. This declaration is in respect of Hardman Resources Limited and the entities itcontrolled during the period. Nick Henry PerthPartner 11 March 2005PricewaterhouseCooper HARDMAN RESOURCES LTD ABN 98 009 210 235 AND CONTROLLED ENTITIES DIRECTORS DECLARATION The Directors of the Company declare that: 1. The financial statements and notes set out on pages 5 to 12 are in accordancewith the Corporations Act 2001, and: (a) comply with Accounting Standards, the CorporationsRegulations 2001 and other mandatory professional reporting requirements; and (b) give a true and fair view of the consolidated entity'sfinancial position as at 31 December 2004 and its performance for the half-yearended on that date. 2. In the Directors' opinion there are reasonable grounds tobelieve that the Company will be able to pay its debts as and when they becomedue and payable. This declaration is made in accordance with a resolution of the Board ofDirectors. S C PotterMANAGING DIRECTOR Dated this 11 day of March 2005. Independent review report to the members of Hardman Resources Limited Statement Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the financial report of Hardman ResourcesLimited: • does not give a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of the Hardman Resources Group (defined below) as at 31 December 2004 and of its performance for the half-year ended on that date, and • is not presented in accordance with the Corporations Act 2001, Accounting Standard AASB 1029: Interim Financial Reporting and other mandatory financial reporting requirements in Australia, and the Corporations Regulations 2001. This statement must be read in conjunction with the rest of our review report. Scope The financial report and directors' responsibility The financial report comprises the statement of financial position, statement offinancial performance, statement of cash flows, accompanying notes to thefinancial statements, and the directors' declaration for the Hardman ResourcesGroup (the consolidated entity), for the half-year ended 31 December 2004. Theconsolidated entity comprises both Hardman Resources Limited (the company) andthe entities it controlled during that half-year.The directors of the company are responsible for the preparation and true andfair presentation of the financial report in accordance with the CorporationsAct 2001. This includes responsibility for the maintenance of adequateaccounting records and internal controls that are designed to prevent and detectfraud and error, and for the accounting policies and accounting estimatesinherent in the financial report. Review approach We conducted an independent review in order for the company to lodge thefinancial report with the Australian Securities and Investments Commission. Ourreview was conducted in accordance with Australian Auditing Standards applicableto review engagements. For further explanation of a review, visit our websitehttp://www.pwc.com/au/financialstatementaudit. We performed procedures in order to state whether, on the basis of theprocedures described, anything has come to our attention that would indicatethat the financial report does not present fairly, in accordance with theCorporations Act 2001, Accounting Standard AASB 1029: Interim FinancialReporting and other mandatory financial reporting requirements in Australia, aview which is consistent with our understanding of the consolidated entity'sfinancial position, and its performance as represented by the results of itsoperations and cash flows.We formed our statement on the basis of the review procedures performed, whichincluded: • inquiries of company personnel, and • analytical procedures applied to financial data. Our procedures include reading the other information included within thefinancial report to determine whether it contains any material inconsistencieswith the financial report.These procedures do not provide all the evidence that would be required in anaudit, thus the level of assurance provided is less than that given in an audit.We have not performed an audit, and accordingly, we do not express an auditopinion.While we considered the effectiveness of management's internal controls overfinancial reporting when determining the nature and extent of our procedures,our review was not designed to provide assurance on internal controls.Our review did not involve an analysis of the prudence of business decisionsmade by directors or management. Independence In conducting our review, we followed applicable independence requirements ofAustralian professional ethical pronouncements and the Corporations Act 2001. PricewaterhouseCoopers Nick Henry PerthPartner 11 March 2005 This information is provided by RNS The company news service from the London Stock Exchange