Chinguetti Production Update

31 May 2006 07:00

Hardman Resources Limited31 May 2006 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 31 May 2006 AUSTRALIAN CONTACT: Simon Potter Hardman Resources Ltd +61 8 9261 7600 Peter Thomas Hardman Resources Ltd +61 8 9261 7600 Jim Kelly Third Person Communications Pty Ltd +61 2 8298 6100 LONDON CONTACT: Patrick Handley Brunswick Group +44 207 404 5959 RE: CHINGUETTI PRODUCTION - UPDATE AND REMEDIATION PLAN Hardman Resources Limited (Hardman) provides the following update in respect ofthe production performance and plans for the Chinguetti oil field, offshoreMauritania, West Africa. As previously announced, production for the period 1 to 10 May 2006 averaged45mbopd. The average production for the period 1 to 29 May 2006 was 41mbopd,essentially from the four wells in the southern sector of the field. Recentshort term production constraints have not impacted reserves and there is now aplan in place to remediate restrictions to field performance. Production Drilling The Operator has proposed drilling three new producer wells in the southernsector as being the most effective way to restore oil deliverability. Subject tomaterials and equipment availability, the drilling of new production wells willtake priority over the exploration programme. It is anticipated that the drilling of these new Chinguetti wells will startaround October 2006 and options to accelerate this timing are being explored,including batch drilling of the new wells in advance of availability ofcompletion equipment. The Operator advises that the well plans will be finalisedby early July. Facilities Progress has been made in resolving outstanding facilities issues. Following thefailure of one of the three gas compressors in early May 2006, it is anticipatedthat the two undamaged machines, both upgraded, will be recommissioned thisweek. Operation of two out of the three compressors will allow gas lift of theproduction wells to begin and partial gas reinjection into the Banda reservoirto recommence. The damaged compressor is unlikely to be available before August.Until that time gas handling capacity remains constrained and gas flaring willcontinue. Additional options for de-bottlenecking the gas system to increasethroughput are being examined. Production Outlook Production is below the Operator's forecast, although the rate of decline hasslowed significantly. Some further decline, mitigated by the provision of gaslift and by potential gas facilities debottlenecking, can be expected beforeproduction stabilises in the next quarter. With the drilling of each new well,the production rate is expected to increase by an average of at least 10 mbopd,until natural decline commences. Further in-fill drilling, including resumingthe remainder of the Chinguetti phase 2 drilling (part of the originaldevelopment plan), will be undertaken in 2007. Reserves The field Operator, Woodside, has confirmed that it has not amended itsestimates of oil reserves as a result of these recent short term productionconstraints. Hardman is undertaking a reserves review with an independent thirdparty, Netherland, Sewell & Associates Inc., to be completed by September 2006.This review will take into account the latest data, including thedeeper-than-prognosed oil water contact, which directionally would increase theestimate of oil in place, as well as latest mapping of reservoir sanddistribution. In light of recent well performance, additional wells are neededto recover the reserve volumes and this will involve additional costs. All production figures reported above are gross. SIMON POTTERMANAGING DIRECTOR This information is provided by RNS The company news service from the London Stock Exchange