Mauritania continues to prove a most successful venue for HDR and partner Woodside Petroleum (WPL). The most recent drilling program is likely to add substantial oil reserves. As of November HDR’s estimated reserve position was 60 million barrels oil and several hundred Bcf of gas. Increased equity in several blocks prior to the Tiof discovery could see HDR book reserves close to 170 million barrels oil and around 1Tcf of gas by the end of 2004. At current marketcap that’s less than A$3/bbl compared current oil price of A$43/bbl.
Despite the 30c jump in share price we believe the market is yet to recognise the leap HDR has made over the last few months and see little coverage from other brokers who will await WPL’s complete analysis of the discoveries before recognising the impact to HDR.
The Pelican well, 125km north of Chinguetti, has just been completed and intersected a gross gas column of 370m. Net gas is considerable smaller. We await more details particular the seismic review noting the well was drilled at ‘top of structure’, thus oil may occur off structure. WPL has an option to acquire 10% due to it managing the well.
Earnings & Outlook: First production from Chinguetti is due late 2005. HDR’s production is likely to grow to 25,000bopd. Cost of development for HDR is US$133m, predominantly funded by project finance. 1st year profit could be as high as $100m, noting FY06 only captures/assumes 6 months of production. Tiof is likely to impact the FY08 year.
HDR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
