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tiof comment abn amro Stock specifics

Hardman Resources

4Q05: Waiting for a Tiof time

Hardman was the worst-performing stock in our universe in 2005 on the back of a very unsuccessful drilling program in Mauritania . Tiof will dominate 1H06, in our view. We expect an announcement in the second quarter. 2006 exploration looks more promising.
Tiof - will it or won't it?

HDR had expected an announcement on the commerciality of the Tiof project before year-end. The operator (WPL) has postponed this decision until at least 2Q06. This is due to the very complex nature of the reservoir and the difficulty in formulating a development plan to maximise the recoverable reserves. We still forecast and value a multi-staged commercial development eventually culminating in recoverable reserves of 235mmbbl.
2006 exploration - small ones are more juicy

Through 2005, we remained sceptical about the prospectivity of the Cretaceous plays in Mauritania , but Labeidna confirms our view that the Miocene still offers considerable exploration upside from smaller pockets of oil. The shallower water 'Atwood Hunter' has been contracted to conduct the 2006 and 2007 drilling programs in the PSC A and B joint ventures areas. The initial wells in the 2006 program are set to be drilled in PSC A and should include the Kilbaro, Awatt and Colin/Colin Deep prospects. Unlike the 2005 'Stena Tay' program, the prospects in 2006 and 2007 should include more smaller, shallower, Miocene plays which have a much greater probability of success than the wells drilled in 2005. However, this rig is also not available until the second quarter.
Catalysts and valuation - Tiof the key catalyst over next nine months



In the meantime, we expect first production from Chinguetti in February 2006, which would provide the company with its first significant cash flow, and would remove some of the risk associated with the costs over-runs experienced in developing this cornerstone asset. We retain our A$2.10 target price with Tiof remaining central to the share price staying above this level. We also believe that HDR would be an interesting takeover target for a NOC interested more in long-term resource potential than short-term returns. Mauritania is likely to have sufficient gas to contemplate an export project, while the recoverable oil potential of Tiof would be boosted by applying a lower hurdle rate than that commonly used by an IOC such as WPL. PetroChina and ONGC would seem to be the two most likely candidates.
Security ExDate ExPrc Type ConvFac Delta

HDRIZK 27-Jul-06 175 Call 1 0.73

HDRIZZ 4-Dec-06 120 Call 1 0.94

HDRIZQ 14-Jun-07 125 Call 1 0.9