wpl reporting wednesday

Macquarie: WPL - Reporting Wednesday
15/08/2006

Mauritania Concerns Continue to Weigh

Shares in Woodside (WPL), Hardman Resources (HDR) and ROC Oil (ROC) have all been hit lately by concerns that their Joint Venture Mauritanian oil field in Northwest Africa isn’t as significant as originally thought. Further, last month’s WPL’s June quarter production report printed below the market’s expectations and stoked concerns that an imminent reserve downgrade is in the wings. But are these concerns overdone and have investors been too aggressive in the selling of these stocks? In the following story, Macquarie Research Equities (MRE) outlines their remodeled Mauritanian asset base – whilst downgrades are in place to their forecasts, MRE reiterate that their investment thesis remains unchanged.

Mauritanian assets reworked with emphasis on the Tiof and Tevet. The Mauritania asset base includes three key oil fields: 1) Chinguetti 2) Tiof and, 3) Tevet. MRE have downgraded their Tiof reserves forecast from 220mmbbl to 100mmbbl. Although the Tiof development is progressing with a concept in place, MRE remain cautious that recoverable resources will be limited due to the field’s geological complexity.

Tevet forecasts also reduced. MRE have cut recoverable reserves from 75mmbbl to 25mmbbl due once again to the geological complexity and uncertainity surrounding the field.

However…… MRE remain positive that that a Tiof and Tevet development will proceed and look
forward to further guidance following the Chinguetti reserves review that is currently in progress. MRE’s remoodelling of the Mauritanian asset base is a more of a function to capture and limit the potential downside risk. MRE have not changed recommendation on any stock but maintain the view that the current uncertainty will weight most heavily on HDR until progress is made on the future Mauritanian development schedule.

MRE maintain outperform recommendations for WPL, HDR and ROC. MRE’s target price have been revised for three stocks are as follows: WPL 12-month target of $47.91; HDR 12-month target of $1.80 and ROC 12-month target of $4.42.