uganda is the attraction in takeover

Uganda's the attraction in Irish tilt at Hardman
Jamie Freed
November 16, 2006


TULLOW Oil's $1.47 billion offer for Australia's Hardman Resources has been deemed generous by an independent expert. Accounting firm KPMG said the $2.02 a share bid via a scheme of arrangement from the Irish oil company was well above its $1.02 to $1.48 a share valuation of Hardman.

But KPMG added it had not placed a value on the strategic or operational benefits Tullow will gain by buying out Hardman, its joint venture exploration partner in Uganda.

Tullow is believed to be interested in Hardman more for the potential of its assets in Uganda - where the first five wells in a drilling program have all encountered hydrocarbons - rather than for its minority stake in the troubled Chinguetti joint venture in Mauritania. "They know the basin in Uganda," Hardman managing director Simon Potter said.

The operator of the Chinguetti joint venture, Woodside Petroleum, will hold its annual investor briefing in Sydney today, where it could provide an update on the field's reserves. The $US709 million ($929 million) project was supposed to produce up to 75,000 barrels a day but it only flowed at that rate for three weeks before output declined by more than half.

There is speculation the recoverable reserves at Chinguetti could be halved due to the greater than expected complexity of the field.

The independent expert's report on Hardman released yesterday said there was no real evidence a water injection program was helping to provide pressure support for oil to flow more easily. The joint venture plans to start drilling an in-fill well in December at a cost of up to $US82 million, before spending another $US600 million or so on more production wells and water injectors by the end of 2009.

The disappointing output at Chinguetti has meant delays in approving other oil and gas developments in Mauritania. The Tiof field could be developed at a cost of up to $US915 million, with a decision expected in the middle of next year. But development studies on the Tevet and Banda gas and Labeidna oil discoveries have been placed on hold.

The scheme of arrangement merger with Tullow is subject to shareholder approval at a meeting in Perth on December 18. Mr Potter indicated he was unlikely to take up a position with Tullow if the scheme was approved because the Irish company would probably close Hardman's Australian offices.

Hardman shares closed 0.5c lower at $2.06.