Highlands Natural Resources Regulatory News (HNR)

29 Apr 2005 08:06

Hardman Resources Limited29 April 2005 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 29 April 2005 CONTACT: Simon Potter TELEPHONE: Within Australia: 08 9261 7600International: +61 8 9261 7600 RE: MARCH 2005 QUARTERLY REPORT Please find attached March 2005 Quarterly Activities and Cash Flow Report forHardman Resources Ltd. SIMON POTTERMANAGING DIRECTOR HARDMAN RESOURCES LTD ABN 98 009 210 235 REPORT TO SHAREHOLDERS FOR THE QUARTER ENDED 31 MARCH 2005 This report summarises the activities of Hardman Resources Ltd and itscontrolled entities ("Hardman" or "the Company") during the quarter ended 31March 2005. ACTIVITY HIGHLIGHTS • Chinguetti Field Development: The development project remains well on track for first oil in Q1 2006. Total project progress is 66% and progress on the FPSO Berge Helene has reached 75% after the successful completion of dry dock activities and the installation of key process modules. During the quarter and in the subsequent period to the date of this report nine of the ten new development wells were drilled. Sand control completions have been installed on four wells and the completion program for the rest of the wells is continuing. Overall drilling results have been positive, meeting or exceeding expectations for both reservoir quality and hydrocarbon column with a likely increase in proved reserves. Five sidetracks were drilled for various reasons and all encountered significantly improved reservoir but the additional drilling effort has placed upward pressure on the project budget of US$625 million. Final project cost is expected to increase but remain within a 10% range of uncertainty for projects like this. Hardman's existing financial arrangements were planned on, and have the capacity to cover, this increased level of project cost. The additional drilling will not have an impact on the overall schedule to first oil. This is more dependent on the arrival of the FPSO and given the significant level of progress confidence is increasing that the production startup will occur earlier in Q1 2006. • Chinguetti Financing: Hardman announced on 27 January 2005 that it had entered into an agreement with the Australia and New Zealand Banking Group Limited ("ANZ") which established a US$100 million project loan facility. The funds will be applied to cover approximately 80% of Hardman's share of the development costs of the Chinguetti oilfield. The facility is fully underwritten by ANZ but will be syndicated to a number of banks. • Tiof Appraisal: The Tiof-6 well was drilled and tested during the quarter. The well encountered oil over a gross interval of 123 metres in several good quality sands of varying thickness and during a flow test in February 2005 achieved a maximum flow rate of 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 during the 72 hour main flow period. It is currently estimated Tiof has in excess of 1 billion barrels of oil in place and the current focus is the assessment of development options to realise recoverable reserves. • Mauritania Exploration: Seismic surveys were completed in Block 6 (3,096 square kilometres) and Block 7 (1,536 square kilometres) during the quarter. Electromagnetic surveys were undertaken in a number of PSCs to determine the effectiveness and potential application of this method. The results of these surveys and others acquired in 2004 will be used to determine the 2005 drilling program. • Australia, Timor Sea: - AC/P25: Interpretation of the Rufus 2D revealed only high risk prospects and the decision was made to relinquish the permit prior to entering the well commitment year. - AC/P26: The Marloo-1 well was drilled during April 2005 using the Ocean Bounty semi-submersible rig. The well was plugged and abandoned under budget for A$3.5 million after the target reservoirs proved to be devoid of hydrocarbons. - AC/RL1: Hardman took the opportunity of the low mobilisation cost of the Ocean Bounty to permanently plug and abandon the Talbot-1 and Talbot-2 wells in accordance with responsible environmental management. The operations were completed safely for a cost of A$1.75 million. • Falklands: The joint venture comprising Hardman (22.5%) and the newly listed UK company, Falklands Oil & Gas plc began shooting a 2D seismic survey comprising approximately 4,000 line kilometres over the defined leads and prospects during the last quarter. The data acquisition is expected to be completed early in the next quarter. • Guyane (French Guiana): Discussions with potential farmin partners to fund the drilling of the first exploration well in the permit continued. • Gabon: The Company completed the sale to Ascent Resources plc of its interests in offshore Gabon. • Uganda: A 205 kilometre 2D seismic survey of an onshore area in the PSC and an extension of some of those lines into Lake Albert was successfully acquired. This survey was acquired to evaluate a large nearshore prospect and the adjacent onshore area. CORPORATE ACTIVITY On 19 January 2005 Simon Potter joined the Company as CEO and Managing Director,in succession to Ted Ellyard who had previously stepped down from the role.Simon joins the company after a twenty year career with BP. On 27 January 2005 the Company announced that it had entered into an agreementwith the Australia and New Zealand Banking Group Limited ("ANZ") for a projectloan facility of US$100 million. The funds will be applied to coverapproximately 80% of Hardman's share of the development costs of the ChinguettiOil Field, located approximately 80 kilometres offshore Mauritania, West Africa.The terms and conditions of the loan facility are typical of large-scalefinancings of international resource projects. In addition, the facilityincludes political risk insurance cover for the benefit of the lenders, whichhas been obtained in the international market on favourable terms. The Companyis currently progressing with satisfaction of a number of conditions precedentrequired prior to first draw down under the loan. Representatives of the Companyand ANZ have commenced discussions with a number of leading banks in connectionwith syndication of the loan. Discussions are progressing satisfactorily. On 4 February 2005 Kathryn Davies, Chief Financial Officer and CompanySecretary, left the Company as a result of a restructuring. Richard O'Shannassywas appointed Company Secretary. The Company is undertaking an extensive searchfor a new Chief Financial Officer. On 23 March 2005 the Company completed the sale to Ascent Resources plc("Ascent") of two wholly owned subsidiaries, Gabon Investments (Themis Marin)Pty Ltd and Gabon Investments (Iris Marin) Pty Ltd, which respectively hold a12.86% interest in the Themis Marin and Iris Marin PSCs in offshore Gabon. Theconsideration for the sale initially comprised reimbursement of past explorationexpenditure totalling US$515,765 and 12 million shares in Ascent which is listedon the Alternative Investment Market of the London Stock Exchange. Furtherpayments will be due to the Company in the event of successful recovery ofhydrocarbons on testing from a well in either of the PSCs and on issue ofgovernmental approval for exploitation within either of the PSCs. During the quarter the Company completed documentation which provides for itswithdrawal from New Zealand Petroleum Exploration Permit 38215. The documentshave been submitted for Ministerial approval. On 8 April 2005 Hardman Chinguetti Production Pty Ltd commenced proceedings inthe Supreme Court of Western Australia against Woodside Mauritania Pty Ltd withthe aim of establishing its proper entitlement to cost recovery under the Area BPSC. The Supreme Court proceedings will not impact upon the development of theChinguetti Field which remains on schedule to produce first oil in the firstquarter of 2006. FINANCE REPORT Cash on hand at the end of the quarter totalled A$198.4 million. This hasreduced by A$49.1 million from the December 2004 balance. Cash outflows due toexploration and development continued to represent the most significantreduction with a total of A$48.4 million spent. During the quarter the Companyspent A$11.9 million on exploration expenditure and A$36.5 million on theChinguetti development project. Offsetting a portion of those costs was A$1.3 million received in the quarter asa result of the exercise of employee share options and A$1.8 million frominterest on short term investments the Company has with various financialinstitutions. REVIEW OF OPERATIONS MAURITANIA - WEST AFRICA 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 six oil production wells (including the Early DevelopmentWell drilled in 2003) and five water injection wells producing to a FloatingProduction, Storage and Offloading unit (FPSO), moored in 800 metres of water,some 80 kilometres from the Mauritanian coast. Phase II comprises the drillingof an additional four production wells, notionally two years after projectstart-up. Oil and produced water will be separated on the FPSO; excess gas willbe disposed of in the nearby Banda field via a dedicated well. Separated oilwill be stored on the FPSO and off-lifted via tanker directly to internationalmarkets. Project progress at the end of the quarter was 66% overall, slightly ahead ofschedule and the project remains well on track for first oil in Q1 2006.Conversion work on the FPSO "Berge Helene" was continuing at the end of thequarter. Good progress was made during the quarter with the successfulcompletion of drydock works and the arrival and installation of key processmodules taking progress on the FPSO to 75%. Chinguetti development drilling and completion continued with both rigs, the"West Navigator" and the "Stena Tay", at Chinguetti for most of the quarter. Atthe end of the quarter a total of six new development wells had been drilledthrough the reservoir objective and another three had been drilled at the dateof this report with only one producer now remaining to be drilled. Sand controlcompletions have been installed on four wells and the completion program willcontinue for the rest of the wells. A total of five sidetracks were drilled inthe course of the drilling program for a variety of geological and mechanicalreasons and as a result of the improved subsurface information all thesidetracks penetrated significantly better reservoir sections than the originalholes. Overall drilling results have been positive, meeting or exceedingexpectations with respect to both hydrocarbon column and reservoir quality witha likely increase in proved reserves. The additional drilling effort has placed upward pressure on the project budgetof US$625 million. While drilling is almost complete a number of criticalactivities, such as well completion and the tie-in of the wells to the FPSO areeither continuing or yet to commence. The final cost is expected to increase butremain within a 10% range of uncertainty, typical for a project like this.Hardman's existing financial arrangements were planned on, and have capacity tocover, this increased level of development cost. Drilling and completion is not expected to have an impact on the overall projectschedule, as these activities are not on the "critical path", which runs throughthe FPSO and the infield connection to the wells. FPSO conversions have oftenbeen the cause of delayed startup in other similar projects and this risk wasone of the key factors in determining the project schedule. Given thesignificant level of progress on the FPSO our confidence is increasing that theproduction startup will occur earlier in Q1 2006. Appraisal:Appraisal of the Tiof field continued during the first quarter with the drillingand testing of the Tiof-6 well. Tiof-6 commenced in late December 2004 and thewell encountered oil over a gross interval of 123 metres in several good qualitysands of varying thickness. It is interpreted that no gas or water wasintersected by the well. Tiof-6 achieved a maximum flow rate of approximately12,400 barrels of oil plus 11 million standard cubic feet of gas per day with astable rate of 9,150 barrels of oil per day over a main flow period of 72 hours.The well has now been suspended as a potential future oil production well. Theflow rates achieved at Tiof-6 exceeded expectations given that the reservoirsands were of poorer quality than at Chinguetti. 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. Exploration:The focus of exploration activities during the quarter was the acquisition ofseismic and electromagnetic surveys and the continuing processing andinterpretation of the seismic data acquired in 2004. This data will be used toselect the drilling targets for the 2005 exploration drilling program, which isexpected to include 7-9 wells across PSCs A, B, 6 & 1. The Block 6 3D seismicsurvey was completed on 7 February 2005 after acquiring 3,096 square kilometresof data. The recording vessel then moved to Block 7 where a 1,536 squarekilometres survey was completed on 15 March 2005. Electromagnetic surveys wereundertaken in a number of PSCs to determine the effectiveness and potentialapplication of this method. GABON - WEST AFRICA The Company completed the sale to Ascent Resources plc of its interests inoffshore Gabon. UGANDA - EAST AFRICA Hardman is operator and holds a 50% interest in Block 2 which is located in thenorthwest of the country. The licence covers the northern part of Lake Albertand the surrounding onshore area. The Company successfully completed the acquisition of a 205 kilometres 2Dseismic survey of the onshore area and an extension of some of those lines intothe lake. This survey was acquired to evaluate a large nearshore prospect andthe adjacent onshore area. The nearshore prospect can potentially be drilledfrom the shore with a deviated well. Processing and interpretation of the datawill be undertaken during the second quarter. GUYANE (FRENCH) - SOUTH AMERICA Hardman was awarded an Exclusive Exploration Licence ("EEL") offshore Guyane inJune 2001 and holds a 97.5% interest. The EEL covers a large area ofapproximately 65,000 square kilometres and includes the major part of theoffshore basin of Guyane. It extends from the twelve mile territorial waterslimit to the 3,000 metre water depth contour. The EEL provides for a five yearexploration programme with a well commitment due by June 2006. Acquisition of 7,500 kilometres of new 2D seismic was completed in mid February2003. The new seismic is of excellent quality and has confirmed the existence ofa thick sedimentary section in the basin and identified a number of hydrocarbonleads across the entire permit. Of particular interest is a large structure with multiple objectives referred toas the "Matamata Prospect". In addition to this, a number of leads similar tothe Mauritanian play types have been identified in the eastern shelf area. TheGuyane project is currently being presented to a selected group of potentialfarmin partners and several are reviewing the project. FALKLANDS - SOUTH ATLANTIC Hardman is a member of a consortium which in July 2002 was awarded severalcontiguous offshore exploration licences covering an area of over 30,000 squarekilometres to the south and south east of the Falklands. Hardman has a 22.5% interest but will be required to fund only 20% of theseismic survey, which commenced acquisition on 28 December 2004. The dataacquisition is expected to be completed in April 2005. NEW ZEALAND Hardman has withdrawn from the project. AUSTRALIA Hardman has interests in the Timor Sea area, situated in Commonwealth watersoffshore northern Western Australia. Timor Sea Permits:AC/P25: (Hardman 95%) The Rufus 2D seismic data failed to reduce the risk of theleads it was delineating to the point where a drillable target could bedetermined. Hence Hardman has applied to relinquish AC/P25 in good standing withthe Joint Authority prior to entering the well commitment year. AC/P26: (Hardman 98.75%) The Marloo-1 well was spudded on 1 April 2005 anddrilled to a total depth of 2,041 metres. Wireline logging confirmed the absenceof hydrocarbons in the objectives and the well was plugged and abandoned on 9April 2005 for a cost of A$3.5 million. The well had tested a Late Jurassicstructural/stratigraphic trap which probably failed due to lack of lateralsealing lithologies. AC/RL1: (Hardman 100%) Hardman elected to plug and abandon Talbot-1 and Talbot-2as a commitment to the Joint Authority (Northern Territory and FederalGovernment) in Retention Licence AC/RL1 (Hardman 100%). Hardman's studies ofdevelopment options for the Talbot field have shown that these old wells wouldnot be optimally located for production and any future development would requirecompletely new wells. It is therefore in line with responsible environmentalmanagement that the well-heads were removed and the sites left clean. Hardmanhas drafted a development plan for the 2 to 4 million barrels of reserves in theTalbot Field which given current oil prices is economic but intends to divest ofthis asset due to its poor fit with corporate strategy. HARDMAN RESOURCES LTD SIMON POTTERMANAGING DIRECTOR 29 April 2005 Note: In accordance with Australian Stock Exchange Limited listing requirements,the geological information supplied in this report has been based on informationprovided by geologists who have had in excess of five years experience in theirfield of activity. FOR FURTHER INFORMATION PLEASE CONTACT HARDMAN RESOURCES LTD Level 1, 50 Kings Park Road West Perth Western Australia 6005 TELEPHONE FACSIMILE +61 (0) 8 9261 7600 EMAIL +61 (0) 8 9321 2375 WEB SITE office@hdr.com.au www.hdr.com.au Rule 5.3 Appendix 5B Mining exploration entity quarterly report Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001. Name of entityHARDMAN RESOURCES LTD ABN Quarter ended ("current quarter")------------------- ------------------98 009 210 235 31 MARCH 2005------------------- ------------------ Consolidated statement of cash flows ------------ ------------Cash flows related to operating activities Current Year to quarter date $A'000 (9 months) $A'000 ------------ ------------ 1.1 Receipts from product sales and related - 154 debtors 1.2 Payments for (a) exploration and evaluation (11,942) (38,467) (b) development (36,511) (74,287) (c) production - 101 (d) administration (3,895) (13,215) 1.3 Dividends received - - 1.4 Interest and other items of a similar nature 1,773 7,217 received 1.5 Interest and other costs of finance paid - - 1.6 Income taxes paid - (13,459) 1.7 Other (provide details if material) - - ------------ ------------ Net Operating Cash Flows (50,575) (131,956) ----- ----------------------- ------------ ------------ Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects - - (b) equity investments - - (c) other fixed assets (403) (1,077) 1.9 Proceeds from sale of: (a) prospects 656 6,056 (b) equity investments - - (c) other fixed assets - 41.10 Loans to other entities - -1.11 Loans repaid by other entities - -1.12 Other (provide details if material) (62) (217) ------------ ------------ Net investing cash flows 191 4,766 ----- ----------------------- ------------ ------------1.13 Total operating and investing cash flows (50,384) (127,190) (carried forward) ----- ----------------------- ------------ ------------ ----- ----------------------- ------------ ------------1.13 Total operating and investing cash flows (50,384) (127,190) (brought forward) ----- ----------------------- ------------ ------------ Cash flows related to financing activities1.14 Proceeds from issues of shares, options, etc. 1,265 11,095 (Net)1.15 Proceeds from sale of forfeited shares - -1.16 Proceeds from borrowings - -1.17 Repayment of borrowings - -1.18 Dividends paid - -1.19 Other (provide details if material) - - ------------ ------------ Net financing cash flows 1,265 11,095 ----- ----------------------- ------------ ------------ Net increase (decrease) in cash held (49,119) (116,095)1.20 Cash at beginning of quarter/year to date 244,559 328,6951.21 Exchange rate adjustments to item 1.20 2,998 (14,162) ------------ ------------1.22 Cash at end of quarter 198,438 198,438 ----- ----------------------- ------------ ------------ Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the relatedentities ------------- Current quarter $A'000 ------------- -------------1.23 Aggregate amount of payments to the parties included in 341 item 1.2 -------------1.24 Aggregate amount of loans to the parties included in item ------- 1.10 ------------- --------------------------------1.25 Explanation necessary for an understanding of the transactions ------------------------------------------- Payments in item 1.23 are consulting and related costs (excluding GST) paid during the quarter to directors of the entity and their associates. ------------------------------------------- Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows -------------------------------------------- In March the Company entered into an agreement with Ascent Resources plc which is listed on the Alternative Investment Market (AIM), to sell two wholly-owned subsidiaries, Gabon Investments (Iris Marin) Pty Ltd and Gabon Investments (Themis Marin) Pty Ltd. These companies hold a 12.86% participating interest in the Iris Marin Production Sharing Contract ("PSC") and in the Themis Marin Production Sharing Contract respectively. Initial consideration for the acquisition was the issue of 12 million new ordinary shares of Ascent to Hardman which had a market value at the completion of the sale of 6.26 pence. -------------------------------------------- 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest -------------------------------------------- Nil -------------------------------------------- Financing facilities available Add notes as necessary for an understanding of the position. ------------- ------------- Amount available Amount used $A'000 $A'000 ------------- -------------3.1 Loan facilities - - ------------- -------------3.2 Credit standby arrangements - ------ ----------------------- ------------- ------------- Estimated cash outflows for next quarter ------------------ $A'000 ------------------4.1 Exploration and evaluation 17,652 ------------------4.2 Development 24,478----- ----------------------------- ------------------ Total 42,130----- ----------------------------- ------------------ Reconciliation of cash------------------------- ------------- -------------Reconciliation of cash at the end of the quarter (as Current Previousshown in the consolidated statement of cash flows) quarter quarterto the related items in the accounts is asfollows. $A'000 $A'000 ------------------------- ------------- -------------5.1 Cash on hand and at bank 20,735 10,385 ------------- -------------5.2 Deposits at call 177,703 233,418 ------------- -------------5.3 Bank overdraft - - ------------- -------------5.4 Other (provide details) - ------ ---------------------- ------------- ------------- Total: cash at end of quarter (item 1.22) 198,438 243,803----- ---------------------- ------------- ------------- Changes in interests in mining tenements ------------- ---------- -------- -------- Tenement Nature of Interest at Interest reference interest beginning of at end of quarter quarter (note (2)) ------------- ---------- -------- -------- 6.1 Interests in mining Gabon - Iris Working 12.80% Nil tenements relinquished, Marin / reduced or lapsed Themis Marin Timor Sea - Working 95% Nil AC/P25 ------------- ---------- -------- --------6.2 Interests in mining - - - - tenements acquired or ------------- ---------- -------- -------- increased Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rightstogether with prices and dates. ----------- ---------- --------------- ------------ Total Number Issue price per Amount paid number quoted security (see up per note 3)(cents) security (see note 3) (cents) ----------- ---------- --------------- ------------ 7.1 +Preference - - securities (description) ----------- ---------- --------------- ------------ 7.2 Changes during - - quarter (a) Increases - - through issues (b) Decreases through returns ---------- ---------- --------------- ------------ of capital, buy-backs, redemptions 7.3 +Ordinary 656,428,095 656,428,095 - - securities ----- ----------- ---------- ---------- --------------- ------------ 7.4 Changes during 1,150,000 1,150,000 $1.10 $1.10 quarter (a) Increases through issues (b) Decreases through returns ---------- ---------- --------------- ------------ of capital, buy-backs 7.5 +Convertible - - debt securities (description) ---------- ---------- ----------- ----------- 7.6 Changes during quarter (a) Increases through issues (b) Decreases through ---------- ---------- ----------- ----------- securities matured, converted ----------- 7.7 Options 5,155,000 - Exercise price Expiry date (description and conversion factor) $1.10 31/12/06 ---------- ---------- ----------- ----------- 7.8 Issued during - - - - quarter ---------- ---------- ----------- ----------- 7.9 Exercised during 1,150,000 - $1.10 31/12/06 quarter - ---------- ---------- ----------- -----------7.10 Cancelled during - - - - ----- quarter ---------- ---------- ----------- ----------- -----------7.11 Debentures - - (totals only) ----- ----------- ---------- ----------7.12 Unsecured - - notes (totals only) ---------- ---------- Compliance statement 1 This statement has been prepared under accounting policies which comply withaccounting standards as defined in the Corporations Act or other standardsacceptable to ASX (see note 4). 2 This statement does give a true and fair view of the matters disclosed. Sign here: ............................................................ Date:............................Company Secretary Print name: RICHARD O'SHANNASSY Notes 1 The quarterly report provides a basis for informing the market how theentity's activities have been financed for the past quarter and the effect onits cash position. An entity wanting to disclose additional information isencouraged to do so, in a note or notes attached to this report. 2 The "Nature of interest" (items 6.1 and 6.2) includes options in respect ofinterests in mining tenements acquired, exercised or lapsed during the reportingperiod. If the entity is involved in a joint venture agreement and there areconditions precedent which will change its percentage interest in a miningtenement, it should disclose the change of percentage interest and conditionsprecedent in the list required for items 6.1 and 6.2. 3 Issued and quoted securities The issue price and amount paid up is notrequired in items 7.1 and 7.3 for fully paid securities. 4 The definitions in, and provisions of, AASB 1022: Accounting for ExtractiveIndustries and AASB 1026: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of InternationalAccounting Standards for foreign entities. If the standards used do not addressa topic, the Australian standard on that topic (if any) must be complied with. == == == == == This information is provided by RNS The company news service from the London Stock Exchange