Highlands Natural Resources Regulatory News (HNR)

1 Mar 2005 07:03

Hardman Resources Limited01 March 2005 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 1 March 2005 CONTACT: Simon Potter TELEPHONE: Within Australia: 08 9261 7600International: +61 8 9261 7600 RE: OPEN BRIEFING PAGES: 7 Enclosed is an Open Briefing with Managing Director Simon Potter, which has beenprepared by Corporate File for immediate release. SCOTT SPENCERDIRECTOR 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. Attention ASX Company Announcements Platform Lodgement of Open Briefing Hardman Resources LtdLevel 150 Kings Park RdWest Perth WA 6005 Date of lodgement: 01-Mar-2005Title: Open Briefing. Hardman. MD Potter Updates Mauritania Record of interview: corporatefile.com.auHardman Resources Ltd recently announced that the results of the appraisalprogram to date have upheld your initial assessment of the volume ofoil-in-place in Tiof of approximately 1,000 million barrels. Is it still tooearly to assess the value of the project? What has to be done before you can getan accurate assessment of the project parameters including a final estimate ofoil-in-place and, more importantly, recoverable reserves? Managing Director Simon Potter It's too early to be discussing the value of Tiof. Clearly the value will be afunction of oil price when production commences, the timing of the developmentand indeed the overall development costs. In turn the costs will depend on thedevelopment concept chosen by the joint venture partners, which remains to bedetermined. I suspect that it is most likely to be an FPSO, but the keyvariables in determining ultimate value will be the type and number ofdevelopment wells required. The next steps in determining the project parameters, including the amount ofrecoverable oil, will be to carry out further reservoir tests. I would like tosee more than a further single well test ahead of deciding the development plan.We anticipate that an additional well test will be incorporated into the 2005drilling programme. corporatefile.com.auWoodside recently released the "Woodside Reserves Statement - 2004". Thisdocument reported a Contingent Resource of 114.8 million barrels for Woodside's40% share of Tiof - implying a Contingent Resource of 287 million barrels forthe total project. How do you reconcile your estimate of oil-in-place in Tiof ofapproximately 1,000 million barrels with Woodside's estimate of ContingentResource? Managing Director Simon Potter Don Voelte, the CEO of Woodside, has recently stated that there's around abillion barrels of oil in place at Tiof. I agree with that assessment.Woodside's Contingent Resources, assessed as at 31 December 2004, of 287 millionbarrels represents their assessment of recoverable oil, i.e. the proportion ofoil in place that is ultimately produced. Since that assessment date we'veundertaken a lot more appraisal of the discovery including the most recent flowtest. The recovery factor implied for that level of Contingent Resources isaround 29%. Ultimately, again, how much we recover is a function of theefficiency of the development scheme chosen. Although it's fair to say that theTiof reservoir is a relatively complex reservoir, I think the joint venturepartners would be hopeful to lift that implied recovery number given the largevolume of oil in place. corporatefile.com.auWhat does it mean in layman's terms when you say that the Tiof-6 appraisal wellflowed at a maximum rate of 12,400 barrels of oil per day constrained by a 104/64 inch choke? Can you comment on the well pressure? What flow rates could bepossible if the field is developed? Managing Director Simon Potter The choke constrains oil flow which allows comparative pressure measurements oneither side of the restriction. That gives valuable information about thequality of the reservoir and the flowing characteristics of the well underdevelopment. If we allowed the well to flow unrestricted we'd probably get lotsof debris and fluctuations in flow rate which ultimately wouldn't allow us goodcomparative data. Further, when we well test we need to flow the oil into atemporary storage vessel as we don't yet have any production facilities in thefield. Therefore we need to maximise data collection in a very constrained timeperiod. The changes in well pressure during and in building back up after the test iscomplete are some of the key indicators of the size of the oil resource. If thepressure declined rapidly it would imply a small connected oil resource. Therecent Tiof well test results are currently being assessed. We would usually expect the flow rate to increase considerably under more normalproduction conditions when we will have much larger storage facilities and candraw the well down harder. In Chinguetti for example we're anticipating that wecould roughly double the production rates compared with the test rates. corporatefile.com.auWhat does the flow rate at Tiof tell you about reservoir deliverability and thesize of the field? Managing Director Simon Potter We actually expected a much lower flow rate because the reservoirs in this areaare more complex and less permeable than those at Chinguetti. The flow rateindicated that we've got a better reservoir at Tiof than we first thought andthat's what underpins the higher flow rates. For this type of reservoir we'd ideally like to do a longer test to fullyunderstand the connectivity of the reservoir but that's not currently practicalgiven the limited storage facilities and likely cost. corporatefile.com.auCan you explain why the assessment of potentially recoverable oil is moredifficult in these types of reservoirs compared with say Chinguetti? Managing Director Simon Potter Tiof sits halfway up a paleo-continental shelf, with reservoirs comprised offast moving sediments deposited in channels weaving backwards and forwards in abroader 2 kilometre wide channel. Chinguetti is actually set at the bottom ofsimilar channels where the sands are actually emerging out into the lessconstrained and wider base of the continental shelf. The Chinguetti reservoirsands are draped over a salt dome which gives the structure relief with steepishsides. The sands are of very good quality though unconsolidated, which meansthey will need cementing and fracturing to optimise facilities and production.Producer wells will be placed at the crest of the structure with water injectorsat the periphery to maintain reservoir pressure. The Tiof reservoir does not have the same vertical relief, thus is a muchflatter, linear structure two kilometres wide by about eight kilometres long.The sediments are a much more silty, mixed sand composition and more complex. Itis for these reasons we anticipated lower flow rates for Tiof. corporatefile.com.auWhat is the forward plan for Tiof? Managing Director Simon Potter This is still under discussion within the venture. The partners wish to maximisethe value of the Tiof reserves and therefore need to think carefully about thedevelopment scheme for this field. I would like to see further well tests tohelp guide the decision and anticipate the next one around mid year. Thereforeit is unlikely there will a development decision before late 2005. corporatefile.com.auIn recent months, Hardman has announced the new Tevet discovery, appraisalresults from Tiof, some unsuccessful exploration wells and confirmed the fundingfor its Chinguetti development. You joined Hardman recently as ManagingDirector. What is your initial view of Hardman's Mauritanian assets? Managing Director Simon Potter These assets have certainly been a company maker for Hardman. The assets arenothing short of spectacular really. We have two world class rigs contracted for2005. Development of Chinguetti is underway, we will continue appraising Tiofand we intend to appraise Tevet. We've yet to appraise Banda but it is a majorgas discovery. We have an ongoing exploration program and we're clearly hopefulof making some further significant discoveries. corporatefile.com.auCan you update progress on the Chinguetti Oil Field development? Managing Director Simon Potter We've committed over 50% of the project spend and we're within 5% of the budget.The floating storage and production vessel is in Singapore being refitted andthat is on schedule. Production and subsea facilities are under construction.Development drilling is underway and we are pleased with the initial wellresults. Further development includes drilling a gas disposal well at Bandawhich will minimise gas flaring. We're still on track to produce the first oilby the end of the March quarter 2006. corporatefile.com.auTevet is estimated by Woodside to contain Contingent Resources of 41 millionbarrels. Is it within tie-back distance to Chinguetti? What further work do youplan at Tevet to assess commerciality? Managing Director Simon Potter We need to do at least a further appraisal well and probably a flow test atTevet. But there is still a lot of geological and reservoir work we need to dobefore we site the appraisal well and determine whether it should be tied backto the FPSO. The whole channel system intrigues me. Banda sits on top of thechannel, within a buried canyon. Tevet sits further down the same channel systemwhich continues westward to become the reservoir at Chinguetti. Defining theseparate limits of each of the fields is not simple and there may be morepotential within the overall system than we recognize at present. corporatefile.com.auCan you briefly outline your view of Hardman's other exploration activities?Which do you think have most potential? Managing Director Simon Potter The two areas that really interest me and are receiving a lot of focus are theFalkland Islands and our acreage in French Guyane. Recently our partners, the Falklands Oil and Gas Company raised around £12million by listing on the AIM in London, so there is clearly an appetite in themarket for this Falkland acreage. Currently we are collecting seismic where goodimages are being received directly off the vessel indicating a number of reallyinteresting structures. This considerable potential in our Falklands acreagewill be assessed with a well within about two years. I'm particularly interested in our property in French Guyane. We hold over 97%equity in the license which covers some 65,000 sq km, the entire offshore to3000 metres water depth. In hydrocarbon terms it's sandwiched between theoffshore provinces of Trinidad and Venezuela and Brazil so it's a good piece ofreal estate. The offshore prospects are well defined and we can see goodstructures from the seismic similar to the channel features seen in Mauritania.There's also a compelling single, huge structure called Matamata. We're requiredto drill a well within the next 15 months as a part of the licence obligation.Our current strategy is to farm down from the 97% and bring in a partner tocontribute to the drilling of that well. With our Guyane property we've followed the traditional success route thatHardman has taken in the past, which is to have high equity, early access toprospective frontier exploration properties. We've traditionally dramaticallyfarmed down our share, but in future I would like to see us maintain a higherequity stake (up to 40%). We're now well over a billion dollar company, so canafford to retain higher equity and tolerate greater amounts of risk. As we bringin new partners we will look to swap assets rather than simply seekcontributions to funding or a carry. In March, we will operate the drilling of an exploration well in the Timor Sea -Marloo-1. This area is relatively mature and is in direct contrast to the rathermore spectacular frontier type exploration that we're doing elsewhere in theworld. With this operation we will continue to build our organisationalcapacity. corporatfile.com.au On the financial side how do you see Hardman's capacity to contribute to thecosts of the Mauritanian joint venture as well as continuing to develop itsportfolio outside of North West Africa.? Managing Director Simon Potter Over the last three years the company has raised $220m from the equity capitalmarkets and during the same period grown from a market cap of approx $330m to$1.2bn. We recently secured a US$100m project finance facility for Chinguetti.Hardman is fully funded through to first production from Chinguetti in 2006. Weare in a very strong financial position and are not constrained in the furtherdevelopment of our portfolio. Our financial and operational strength has createda strong platform for us to selectively participate in other leading hydrocabonprojects. corporatefile.com.auCan you talk a little about your history in the oil and gas industry and thestrategic direction you might take with Hardman? Managing Director Simon Potter I'm qualified as a geologist from the Royal School of Mines in London and Ispent nearly five years on the Copperbelt in Zambia. I did an MBA in the mid1980s which allowed me to join the commercial department of BP. I negotiatedexploration and development licenses, operating agreements, gas sales contractsetc. and I think this background of doing deals appealed to Hardman. I havelived in Australia before where I was responsible for the commercial aspects ofBP's interests in the North West Shelf as a partner to Woodside. Following thisI had a series of operations positions including overseeing North Sea andAlaskan operations before I completed my education through the executive programat Stanford. Most recently I have been CEO of joint venture oil and gascompanies for BP in Indonesia and Russia. Hardman has grown to its current size very quickly over the last couple of yearsand we now have a much greater risk capacity. We can manage our assets much morestrategically and hopefully we can attract very good partners and operators inorder to maximise the value of our future developments rather than be driven bycost exposure. I think one of the key aspects of Hardman's strategy previouslyhas been its early access to frontier exploration acreage which obviouslyillustrates its core skills. It's that exploration of frontier acreage thatactually gives the stock its buzz and my goal is to build on that not toconstrain it. corporatefile.com.auAs you point out, Hardman has indeed grown quickly in recent years and now has amarket capitalisation of around $1.4 billion and is in a strong financial andoperating position. Does Hardman have the appropriate organisational structureto operate in the sphere of plus $1 billion oil and gas companies? What broadchanges do you envisage to the organisational structure? Managing Director Simon Potter I'd like to improve our internal processes by improving the commercial rigorthat we have within the company but essentially, as I have already said, I won'tbe changing our core skills set of accessing frontier plays. Over time, we'dlike to boost our skills sets including improving the capacity of our newbusiness development teams such that we can turn over more opportunities morequickly. Whilst Mauritania has been a great success, it's taken 10 years tomature and I'd like to see that cycle time reduced. That requires additionaltechnical and commercial skills which we would like to bring into the company. corporatefile.com.auThank you Simon. For further information on Hardman Resources visit www.hdr.com.au or call SimonPotter or Scott Spencer on 08 9261 7600. For previous Open Briefings by Hardman Resources visit www.corporatefile.com.au DISCLAIMER: Corporate File Pty Ltd has taken reasonable care in publishing theinformation contained in this Open Briefing. It is information given in asummary form and does not purport to be complete. The information contained isnot intended to be used as the basis for making any investment decision and youare solely responsible for any use you choose to make of the information. Westrongly advise that you seek independent professional advice before making anyinvestment decisions. Corporate File Pty Ltd is not responsible for anyconsequences of the use you make of the information, including any loss ordamage you or a third party might suffer as a result of that use. This information is provided by RNS The company news service from the London Stock Exchange