blue skies turning to grey for hardman

Thursday, October 06, 2005

Blue skies turn grey for Hardman - one shareholders perspective.

Open letter to Hardman Resourses directors and shareholders.


There has never been a better time in living history for oil stocks. Even the bluest of the blue chips are going gangbusters, with heavyweights like Woodside more than doubling their market cap in the last 12 months.

As I write Hardman’s share price looks more likely to see sub $2 prices pulling back from a high of $2.48. In the last 12 months Hardman has the dubious honour of being the worst performing resource stock on the ASX.

Questions need to be asked.

If Hardman cannot move forward in the current environment then clearly something has to be very wrong. Based on the principle that the market is never wrong (and I don’t really adhere to that) then the market clearly has lost confidence in Hardman Resources in recent times.

Why is this so? The departure of Ted Ellyard at a very critical time in Hardmans growth cycle was I believe the first negative catalyst on the landscape. Ted has been replaced by Simon Potter as CEO and now Peter Thomas has joined the company as CFO, following the rapid expulsion of Kathryn Davies as Company Secretary.

Mr Potter came to Hardman with reasonable credentials, however analysts and brokers did not appear to know very much about him and adopted a “wait and see” attitude. One of his credentials was that he had apparently had previous dealings with Woodside and this would prove advantageous. The opposite is the case.

Mr Potter’s task was, as he stated to oversee Hardman make the transition from junior explorer to mid cap or even major producer. He arrived to negotiate with the “big boys in oil”, raise Hardmans profile and take control of the company and its destiny.Certainly he expects to be remunerated as the leader of an emerging leader in the oil industry would expect to be rewarded.

The first task Mr Potter undertook was to take Hardman’s major partner to the Supreme Court over a piddling $18m. Surely he possesses sufficient knowledge and negotiating skills to come up with a better solution that would not put himself and Hardman at odds with Woodside directors and major shareholders and initiate an action that will ultimately be beneficial only to the lawyers involved. His second task was to unceremoniously dismiss Kathryn Davies who had contributed to the best of her abilities to her position as Company Secretary over many years. Aparantly she had outlived her usefullness. At the time some analysts took this as a show of power and control by Mr Potter in transiting Hardman to he next stage.

Many things have occurred within the last 12 months, not the least of which was the succession of five dry wells in Mauritainia. This has disappointed shareholders and analysts alike who were told that at least 140 highly prospective targets had ben identified offshore Mauritainia. With the very limited information released to the market regarding why these wells were chosen, drilled and their significance to the larger Mauritainian area, shareholders, brokers and analysts are left to speculate and draw their own conclusions. There has been much chatter as to whether these wells were “scientific” or “relinquishment” wells and therefore extremely high risk. Without any real news rumours will abound. Also the use use of innovative and highly aclaimed CSEM technology was promoted as having delivered up to 100% strike rate when used by other companies.

Mr Potter having put Woodside offside very early in his captaincy, meant that Woodside were quick to seize any opportunity to “smack” Mr Potter right between the eyes when the chance arose. When Mr Potter suggested to some analysts that Tiof commerciality was a “done deal” Woodside came out with guns blazing. In a scathing announcement to the ASX they put Mr Potter in a very unenviable position. Further to that Woodside appear to be preparing the market for the possibility that Tiof may either be not commercial or at best may be only partially developed. The “bowl of spaghetti” statement made recently by Mr Potter serves only to fuel further market uncertainty regarding Tiof. How are shareholders and analysts expected to understand what a “bowl of spaghetti” means let alone fully qualified geologists who are also bewildered by this term.

The public fueding between Hardman and it's major partner Woodside is becoming increasingly obvious.

For more than a year now shareholders have been hearing from Mr Potter that Hardman are in final negotiations with a major farmin partner for drilling in the highly prospective (or so we have been told) French Guyane offshore licence. From statements a year ago by Mr Potter shareholders were assured that an announcement was just around the corner. We now discover that Hardman have apparently been unsuccessful in attracting a major farmin partner for this venture. In the current climate of $60 + oil prices this beggars belief.

The AGM will be held on the 24th November in Perth. I will be there. If there is even the slightest suggestion that the directors issue themselves with the usual performance bonus I will oppose it most vehemently and I would urge other shareholders to do likewise. Certainly in the last 12 months the company appears to have gone into reverse. Never under estimate the power of the shareholders. This is “our” company. We have put our dollars on the line believing that the directors would do all they could to look after our interests. Directors come and go, usually with big golden handshakes whether they perform or not. Many shareholders have their retirement money invested in this company and have the right to expect a damn sight more leadership, initiative and disclosure than has been the case in recent times.

Personally I have been a long term investor in Hardman for a number of years and up until recently the results have backed up the promises. Sadly this is not the case now and I believe (from my discussions) that many have lost confidence in the board to move the company forward.

I have spoken to Scott Spencer many times over many years and Scott has always had time to speak to shareholders at length, regardless of their stake. Scott has always done his level best to explain and answer any questions that I have raised. My attempts to contact Dean Richardson have it seems fallen on deaf ears. I am still awaiting a reply to an email sent a month ago and understand that other shareholders have been ignored also. I will email the above comments to Mr Richardson and see if my observations warrant a response from him.

Once again I urge shareholders, large and small to attend the AGM if they can possibly do so. It is the only forum where the directors are answerable to us. We have a right to know what is happening with our company and if the current directors are not up to the tasks required of them then we need to find the right people for these jobs and soon.




Note: The above comments are my own perceptions and I am not a financial advisor nor ever wish to be one. I make no call what so ever as to whether readers should buy, sell or hold this stock. I do hold Hardman shares and my comments are intended only to express my disappointment (as is my right) in the recent lacklustre performance of Hardman Resources and a perceived lack of disclosure of vital information to shareholders and the market.