FRENCH GUIANA SHAPING UP AS HARDMAN’S NEXT BIG PLAY While all the attention is presently being focused on the current drilling operations offshore Mauritania, Hardman Resources (HDR) couldn’t possibly have a better back-up than French Guiana if Mauritania doesn’t turn out to be quite as good as it appears to be which, in the bulletin’s opinion, is most unlikely. All the same, along the way in proving up Mauritania as a major oil province there will undoubtedly be, as is actually happening now, misinterpretations of well testing results leading to periods of either unwarranted gloom or euphoria. Accordingly, this seems the ideal time to check out what other potentially big projects HDR could be involved in short term, and really standing out in that regard is the 95% equity the company holds in an Exclusive Exploration Licence (EEL), offshore Guyane (French Guiana), South America, which was awarded not much over a year ago, on June 1, 2001. This licence covers the major part of the offshore basin of Guyane, and extends from the twelve-mile coastal limit to the 3000 metre water depth contour with a total area of approximately 65,000 sq km. The EEL provides for a five-year exploration work programme, with a well commitment due at the end of the first three years. Guyane, which is also known as French Guiana, is a French overseas dependency located on the north-eastern coast of South America between Surinam to the west and Brazil to the east. This geographical region has been the focus of increased petroleum exploration in recent years. Guyane, however, is underexplored, with only some seismic coverage having been shot and two shallow water wells drilled in the 1970s. Previously, HDR completed a data trade with Exxon to acquire copies of all the existing seismic data in the licence, totalling approximately 4,000 line km. That data was computer scanned to enable a detailed technical evaluation on HDR’s seismic workstations. Well data from the two offshore wells drilled in the licence area has also been evaluated and tied to the seismic data. The initial phase of work has confirmed that all the requirements for an active petroleum system are present in offshore Guyane. Play fairways have been delineated and numerous leads identified. This work has provided HDR with a solid basis for the design and acquisition of new seismic data, to upgrade the leads identified to prospect status. All the above has more or less been lifted straight out of HDR’s September quarterly report last year because it provides such a good description of what the company is about in offshore Guyane. It did sound then if it could turn into another Mauritania, and now this has become far more likely with the news in HDR’s last June quarterly report that the company had arranged for a 7,500 km 2D seismic survey to be shot over the area, starting in this September quarter, which it felt confidentwould upgrade the area sufficiently to induce other companies to fund its exploration, just like what has happened in Mauritania, leaving HDR with a substantial free carried interest in the early stages, at least. Even though the company said it had secured most favourable financial terms for the survey, it is still a major investment in the area’s future, as well as being a most impressive vote of confidence in its perceived prospectivity. What also must be remembered is that as a substantial shareholder with 10 – 11 percent of issued share numbers, and having the right to increase this further, Woodside Petroleum (WPL) would certainly have been consulted before such a relatively large financial commitment was made, and it doesn’t require much imagination to take this one step further and suppose that not only did the survey have WPL’s blessing, but also that it was probably accompanied by a promise to come in too, if the survey’s findings were sufficiently encouraging. What should also be remembered, as has already been touched on, is that this particular region has become increasingly popular with oil explorers, with the bulletin almost certain it read somewhere recently about a major oil discovery off Brazil, and so it’s very easy to imagine if the survey outlines some undoubtedly attractive prospects in what is virtually an unexplored area, there’ll be no shortage of companies wanting a piece of the action apart from WPL.
Conclusions Maybe the bulletin is expecting too much in hoping for HDR to repeat in Guyane what it has done in Mauritania, but it certainly seems to be shaping up that way in the very early stages, at least, and that is something which can’t be denied. Certainly, it is more than a useful back-up for HDR to have in the tortuous process of proving up just how much oil there is offshore Mauritania, and the way things seem to be shaping up, a much better idea of that should be known about the same time as some meaningful seismic data on the Guyane survey starts to filter through. It could be that the news is positive on both fronts, that, say, around 300 million barrels of recoverable oil are confirmed offshore Mauritania, and some compulsory drilling targets are indicated offshore Guyane. In that event, the $2.50 share price talked about for HDR in the last issue could become a reality, and perhaps that’s being a bit conservative. But, if considerably less than 300 million barrels are proved up in Mauritania, making it hard to justify HDR’s market capitalisation as it stands now, encouraging seismic data from Guyane, which surely can almost be counted on, would make the market think twice before crucifying HDR shares. And, it shouldn’t be forgotten also that HDR has another useful short term back-up in the significant 30%, partly freecarried interest HDR will hold in the Twin Lions wildcat on trend with the Cliff Head oil discovery, which is scheduled for drilling early in 2003.
AN UNLISTED PARTICIPANT’S VIEWS ON OFFSHORE MAURITANIA The bulletin has often wondered how those companies drilling offshore Mauritania really rate their chances of achieving commercial oil production from this area. From everything the bulletin has observed itself, there can be little doubt that this will happen, but none of the Australian listed companies involved are prepared to publicly state such a view, although Hardman Resources (HDR) goes close at times. While, without question, a good deal of HDR’s present market valuation is based on the premise that this will happen, although it must always be kept in mind there is very considerable potential value in other parts of the company’s most impressive exploration portfolio, in the case of Woodside Petroleum (WPL), the largest Australian interest holder, and the operator of the entire venture, if there is any value written into its share price because of Mauritania, it is precious little. Furthermore, when this company’s future, reasonably short term, sources of revenue come up for discussion, little, if any, reliance is placed on Mauritania. Of course, WPL has always gone out of its way to avoid saying anything that could possibly raise the market’s hopes unduly, which the bulletin reckons has probably caused an unrealistic, degree of caution to creep in, even in HDR’s case, although that company has done its best, as already touched on, to at least give its shareholders real hope that commercial development is likely. But, perhaps putting the whole situation in much better perspective, UK-listed participant, Fusion Oil & Gas, has stated in words to the effect that following the second successful Chinguetti well, it seemed no longer a matter of whether development would take place, but rather what the region’s ultimate potential would be, and that’s the way the bulletin finds itself viewing the situation too, as do in all likelihood, the Australian listed members of the consortium. But, in HDR’s case, where there is quite a bit of value already written into its share price because of Mauritania, the area’s ultimate potential, i.e. just how much oil will be ultimately found, is naturally still an important factor.
HDR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
