Highlands Natural Resources Regulatory News (HNR)

28 Oct 2005 07:01

Hardman Resources Limited28 October 2005 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 28 October 2005 AUSTRALIAN CONTACT: Simon Potter Hardman Resources Ltd +61 8 9261 7600 Peter Thomas Hardman Resources Ltd +61 8 9261 7600 LONDON CONTACT: Patrick Handley Brunswick Group +44 207 404 5959 RE: SEPTEMBER 2005 QUARTERLY REPORT PAGES: 13 Please find attached September 2005 Quarterly Activities and Cash Flow Reportfor Hardman Resources Ltd. PETER THOMASCHIEF FINANCIAL OFFICER HARDMAN RESOURCES LTD ABN 98 009 210 235 REPORT TO SHAREHOLDERS FOR THE QUARTER ENDED 30 SEPTEMBER 2005 This report summarises the activities of Hardman Resources Ltd (the "Company")and its controlled entities (together, "Hardman" or "the group") during thequarter ended 30 September 2005. ACTIVITY HIGHLIGHTS Field Development and Appraisal Chinguetti: The project remains on schedule for first oil during February 2006.All the production wells have been successfully completed and cleaned-up,indicating sufficient initial well deliverability to meet the FPSO capacity. TheFPSO conversion in Singapore was completed at end September and the vesselsailed en route to the field on 5 October. As with many other current industryprojects, some upward cost pressure has been encountered. Tevet: The Tevet-2 appraisal well successfully confirmed the reservoircharacteristics encountered in the original discovery well, consisting of a 44moil reservoir section below a 68m gas cap. Study work is presently ongoing todetermine development options. Tiof: Work on Tiof evaluation and conceptual development studies continues, witha decision on the next steps expected to be announced in the current quarter. Exploration Mauritania: Two unsuccessful exploration wells, at Sotto and Espadon, werecompleted in the quarter, as previously reported. The subsequent Tevet-2 Mioceneappraisal well was deepened to a Cretaceous reservoir target with wirelineevaluation indicating the presence of an oil accumulation which, though it mayprove too small to be commercial, nevertheless upgrades the potential of otherCretaceous prospects in the area. Uganda: Processing and interpretation of 2D seismic survey data continued intothe September quarter and a number of attractive prospects have been confirmed.The Hardman-operated joint venture is preparing for a drilling program of mostlikely two wells, targeted at these prospects. This program is expected to startlate 2005. Guyane: Preparation for the marine seismic survey was completed and dataacquisition is due to begin at the end of October 2005. The program includesrecording of approximately 1,600km of 2D seismic data and 300 km2 of 3D seismicdata aimed at maturing a number of leads to prospect status. CORPORATE ACTIVITY Evaluation studies on a number of potential new ventures continue, with a focuson the Atlantic Margin areas. During the quarter the group opened modest offices in Mauritania and Trinidad,manned by senior staff experienced in those regions. In early August 2005 a coup d'etat led to a change in regime in Mauritania.Statements released by the new Military Council have made clear its intention toguarantee the integrity of existing contracts. Operations have been unaffected. On 10 August 2005 the Company announced the appointment of Mr Peter Thomas asits new Chief Financial Officer. Mr Thomas commenced duties on 1 September 2005. FINANCE REPORT The net cash outflow for the quarter ended 30 September 2005 was A$43.9 million,with A$8.6 million spent on exploration and appraisal activities and A$33.3million on development of the Chinguetti field. The exploration cash spend waslower than anticipated in the previous quarterly report primarily due to delaysin cash calls, a slightly later start to the current exploration drillingcampaign in Mauritania and the slippage to the current quarter of thecommencement of seismic acquisition in Guyane and drilling in Uganda. The netcash outflow was financed from existing cash balances. Forecast cash expenditure for exploration and appraisal for the quarter ended 31December 2005 is approximately A$46 million, with A$30 million expected to bespent on development. On an accruals basis this equates to forecast expenditurefor the six months ended 31 December 2005 of some A$54.8 million on explorationand appraisal and A$64 million on development. As at 30 September 2005, the group had available cash balances of A$103.8million and an undrawn facility for Chinguetti project costs (includingre-financing of costs already incurred) of US$100 million. Syndication of theChinguetti project finance facility with a group of international banks wassuccessfully completed in July. The facility remains undrawn as at the date ofthis Report. The group currently has no oil price hedging arrangements in place. The Company has elected and received the necessary approvals to change itsfinancial reporting date to 31 December, effective 31 December 2005. This willbring the annual reporting cycle into line with most of its international peergroup and also align with the budget cycle of most of the joint ventures inwhich the group participates. REVIEW OF OPERATIONS MAURITANIA - WEST AFRICA Chinguetti Field Development (Hardman 19.008% equity) The project continued to make steady progress during the 3rd Quarter. Totalprogress at end-September was 90%. Key project milestones included successfulconclusion of all drilling, well completion and clean-up activity after whichthe West Navigator drill-ship was released. The well clean-up tests confirmedsufficient initial well deliverability to meet the FPSO capacity whilst aproduction test of the Banda-2 well confirmed adequate capacity to reinjectexcess Chinguetti associated gas. The end of the quarter also saw completion ofthe conversion of the FPSO Berge Helene and its preparation for departure fromSingapore to Mauritania, and commencement of the in-field hook-up andinstallation phase of the project. The FPSO sailed from Singapore on 5 Octoberand is currently in Cape Town, en route to the Chinguetti field. As previously advised, the project continues to encounter cost pressures, and inSeptember the Operator (Woodside) formally advised the venture of an increase inknown project costs to US$705 million and advised maintenance of a contingencyof US$45 million. Some incremental costs are already being incurred against thiscontingent allowance. Notwithstanding some identified manufacturing problemswith the production flowlines, the project remains on schedule to deliver firstoil during February 2006. Tiof Appraisal (Hardman 21.6% equity) Technical assessment, involving integrated subsurface and surface work continueson this substantial though complex resource. The joint venture is workingtowards definition of development options, taking into account keyuncertainties, economic viability and an appropriate forward appraisal strategy,with a decision on the next steps expected to be announced in the currentquarter. Hardman's view at this stage is that a phased development may be theoptimal solution to address the complexity of the field and to manage risk. Tevet Appraisal (Hardman 21.6% equity) The Tevet Miocene discovery was penetrated during September by the Tevet-2appraisal well. This well successfully confirmed the reservoir characteristicsencountered in the discovery well, consisting of a 44m oil reservoir sectionbelow a 68m gas cap. Tevet is located 22 km from, and is a likely tie-back to,Chinguetti, and the Berge Helene FPSO has been designed to accommodate such anoption (including the provision of water injection support). Study work ispresently ongoing to determine development options, likely timing andintegration with potential Chinguetti phase 2 in-fill wells. Exploration (Hardman 16.2 - 28.0% equities) The Stena Tay drilling rig returned from a scheduled refit in the Canary Islandsin late July and, following a short period of Chinguetti completion work,commenced a continuous Mauritanian exploration campaign in early August. The first well in PSC-A - Sotto-1/1ST - targeted canyon fill sands in a LowerMiocene interval of similar age to the Chinguetti oil field and Tiof discovery.Following a mechanical sidetrack, the well was drilled to a total depth of 3279mbut failed to encounter reservoir or hydrocarbons and was therefore plugged andabandoned. This was a higher risk prospect in a previously undrilled channel.The well result confirmed the canyon architecture but downgrades theprospectivity of the Sotto canyon. This result does not, however, significantlyreduce the remaining prospectivity of the permit and has provided information onthe variability of these channel systems useful to calibrate future targets.Controlled source electromagnetic ("CSEM") data were obtained but given thewater depths, were at the limit of interpretation and gave equivocal results. Sotto was followed by a PSC-B well - Espadon-1/1ST - which also targeted LowerMiocene sands some 13km to the west of the Tiof discovery and was drilled atthis time to assess potential resources in the greater Tiof area. This well alsoincurred a mechanical sidetrack, prior to reaching a total depth of 3042m Thewell again failed to find any significant hydrocarbon-bearing sands and wasplugged and abandoned. No CSEM were obtained in planning this well as CSEM useis constrained adjacent to highly resistive salt features.The 'Stena Tay' drilling rig then moved to the Tevet-2 location and successfullydrilled through the Cretaceous objective to a final total depth of 3914m.Wireline evaluation of this target indicates the presence of an 8m gross oilcolumn within good quality sands. The result demonstrates the presence of aworking petroleum system at this level and whilst the discovery may prove toosmall to be commercial, it does upgrade the potential of other Cretaceousprospects in the area.In respect of seismic, the 1800 km2 3D survey across Block 8 was received,whilst significant processing and interpretation efforts were undertaken inBlock-6 (migration of Atar survey) and across PSC-A and PSC-B (rescaling andmerge of the Kiffa, Tanit and Oudane surveys). The forward exploration program comprises the PSC-B well Labeidna-1 which willtarget Miocene sands in the vicinity of the Chinguetti field. Success at thiswell would significantly upgrade the adjacent N'Dor prospect immediately to theSouth West. This will be followed by the Block 1 well Faucon-1 (Dana-operated),which will target a large Lower Campanian (Cretaceous) canyon fill reservoirwith updip pinchout against a salt diaper. In addition to seismic amplitudes,this prospect has support from CSEM data. Later wells in the campaign includefurther PSC-B exploration activity and a Block 6 commitment well. UGANDA - EAST AFRICA (Hardman 50% equity) The licence covers the northern part of Lake Albert and the surrounding onshorearea. In the first half of 2005 the group successfully completed the acquisitionof a 205 kilometres 2D seismic survey of the onshore area and an extension ofsome of those lines into the lake. Processing and interpretation of that datacontinued into the September quarter and as a result a number of attractiveprospects were confirmed. Hardman and its joint venture partner (Tullow Oilplc's subsidiary Energy Africa) are preparing for a drilling program of mostlikely two wells, Mputa-1 and Waraga-1. Both prospects are onshore and havesignificant potential, in excess of 100 million barrels, with considerableupside. The prospects are on structures associated with the rift bounding faultand in the case of Mputa also associated with surface seeps. Site preparation iscurrently underway and drilling is expected to start by December 2005. GUYANE (FRENCH) - SOUTH AMERICA (Hardman 97.5% equity) Preparation for a marine seismic survey was a key activity for the 3rd quarter,with data acquisition due to commence at the end of October 2005. The programincludes recording of approximately 1,600km of 2D seismic data and 300 km2 of 3Dseismic data in the permit, which covers the area between the offshore bordersbetween Suriname and Brazil, from the 12 mile territorial limit to the 3000misobath. This new seismic data acquisition is aimed at maturing a number ofleads to prospect status by the end of the first quarter 2006. Preparation continued during the quarter for the drilling program in Guyane in2006. This program will consist of one firm well and one contingent well. FALKLANDS - SOUTH ATLANTIC (Hardman 22.5% equity) The interpretation of the data from the survey earlier in 2005 has provedencouraging; the results showing a much larger and more diverse prospectinventory than originally anticipated and identifying numerous new leads, withindications that some could potentially be commercially significant in size. Afull evaluation of these leads, supplemented by further investigations, will benecessary before technically sound and economically viable prospects can bedefined. Given the positive results of the survey, the joint venture has committed to anadditional 6,000 kilometre seismic survey across the licences. This survey willbe acquired in conjunction with a seismic survey underway in the FOGL 100%licences. In the Hardman JV licences approximately 800 kilometres of data hasbeen acquired and the remainder will be shot over the summer months, when weexpect improved weather and recording conditions. This data, along with theexisting data, will be used to define prospects and select the location for anadditional planned 3D seismic survey of at least 2,000 square kilometres. All ofthis work is expected to lead to definition of drillable prospects by mid 2007in time for a decision to enter the drilling phase. NEW ZEALAND Hardman has withdrawn from the project and is waiting for confirmation that allrelated documentation has been approved by Crown Minerals. AUSTRALIA Hardman has interests in the Timor Sea area, situated in Commonwealth watersoffshore northern Western Australia. Timor Sea Permits: Hardman is awaiting approval of its applications to relinquish AC/P25 (Hardman95%) and AC/P26 (Hardman 98.75%) in good standing with the Joint Authority. AC/RL1: (Hardman 100%) Hardman continued discussions with the Joint Authority (Northern Territory and Federal Government) regarding renewal of the RetentionLease. HARDMAN RESOURCES LTD PETER THOMASCHIEF FINANCIAL OFFICER 28 October 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 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 entity HARDMAN RESOURCES LTD ABN Quarter ended ("current quarter")------------------- ------------------98 009 210 235 30 SEPTEMBER 2005------------------- ------------------ Consolidated statement of cash flows ------------ ------------Cash flows related to operating activities Current Year to quarter date $A'000 (3 months) $A'000 ------------ ------------ ------------ 1.1 Receipts from product sales and related 2 2 debtors 1.2 Payments for (a) exploration and evaluation (8,639) (8,639) (b) development (33,279) (33,279) (c) production - - (d) administration (4,833) (4,833) 1.3 Dividends received - - 1.4 Interest and other items of a similar nature 1,092 1,092 received 1.5 Interest and other costs of finance paid - - 1.6 Income taxes paid - - 1.7 Other (provide details if material) - - ------------ ------------ Net Operating Cash Flows (45,627) (45,627) ----- ----------------------- ------------ ------------ Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects - - (b) equity investments - - (c) other fixed assets (371) (371) 1.9 Proceeds from sale of: (a) prospects - - (b) equity investments - - (c) other fixed assets - -1.10 Loans to other entities - -1.11 Loans repaid by other entities - -1.12 Other (provide details if material) (168) (168) ------------ ------------ Net investing cash flows (539) (539) ----- ----------------------- ------------ ------------1.13 Total operating and investing cash flows (46,196) (46,196) (carried forward) ----- ----------------------- ------------ ------------ ----- ----------------------- ------------ ------------1.13 Total operating and investing cash flows (46,196) (46,196) (brought forward) ----- ----------------------- ------------ ------------ Cash flows related to financing activities1.14 Proceeds from issues of shares, options, etc. 2,340 2,340 (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) (130) (130) ------------ ------------ Net financing cash flows 2,210 2,210 ----- ----------------------- ------------ ------------ Net increase (decrease) in cash held (43,986) (43,986)1.20 Cash at beginning of quarter/year to date 147,548 147,5481.21 Exchange rate adjustments to item 1.20 231 231 ------------ ------------1.22 Cash at end of quarter 103,793 103,793 ----- ----------------------- ------------ ------------ The opening cash balances differs from the balance reported in the JuneQuarterly report due to the reclassification of negative joint venture cashbalances as payables in this report. 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 389 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 -------------------------------------------- Nil -------------------------------------------- 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 131,234 - ------------- -------------3.2 Credit standby arrangements - ------ ----------------------- ------------- ------------- This is the US$100 million facility negotiated in the previous quarter to fund80% of the Chinguetti Oilfield development. This facility has not been drawn onas yet. Estimated cash outflows for next quarter $A'000 ------------------4.1 Exploration and evaluation 46,000 ------------------4.2 Development 30,000----- ----------------------------- ------------------ Total 76,000----- ----------------------------- ------------------ 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 6,252 13,690 ------------- -------------5.2 Deposits at call - - ------------- -------------5.3 Bank overdraft - - ------------- -------------5.4 Other (provide details) 97,541 133,858----- ---------------------- ------------- ------------- Total: cash at end of quarter (item 1.22) 103,793 147,548----- ---------------------- ------------- ------------- Other cash balances comprise amounts held on 30 day deposit. 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 - - - - tenements relinquished, reduced or lapsed ------------- ---------- -------- --------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 658,610,645 658,610,645 - - securities ----- ----------- ---------- ---------- ----------- ----------- 7.4 Changes during 2,127,550 2,127,550 $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 2,972,450 - Exercise price Expiry date (description and conversion factor) $1.10 31/12/06 ---------- ---------- ----------- ----------- 7.8 Issued during - - - - quarter ---------- ---------- ----------- ----------- 7.9 Exercised during 2,127,550 - $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. 2 This statement does give a true and fair view of the matters disclosed. Sign here: ................................. Date:............................ Chief Financial Officer Print name: PETER THOMAS == == == == == This information is provided by RNS The company news service from the London Stock Exchange