While Hardman remains one of the leading lights of Australia's emerging mid-tier oil and gas sector, some of the luster has been lost with the Chinguetti downgrade. Trading at A$2.36 at the end of April, the stock ended Monday trade at A$1.44, valuing the company at A$1 billion.
Potter said the growth story hasn't changed and points to the company's half year profit of A$22.9 million and the A$136 million it has in the bank to fund exploration and development.
During the latest six months, Hardman has launched oil production, expanded its global portfolio, begun operating its own projects and had success with oil discoveries.
The setback at Chinguetti has not shaken the company's faith in Mauritania, Potter said, and the Tiof oil project is going ahead with a final investment decision expected in the second quarter of 2007. Tiof has also been a frustration for the Woodside Petroleum Ltd. (WPL.AU)-led consortium, with its complex geological structure slowing the development timetable.
Hardman also has a stake in the Flamant prospect in Mauritania, where drilling is underway and an estimated resource of five trillion cubic feet of gas could underpin a liquefied natural gas plant.
And at Chinguetti, Potter believes operator Woodside remains committed to work on a redevelopment plan that could again boost recoverable reserves.
Potter said the high returns on Chinguetti oil, around US$56 a barrel net of operating costs, made it a resource worth persevering with.
"There won't be a lot of barrels in (Woodside boss) Don Voelte's portfolio that are as valuable as those barrels," he said.
"The prize for turning oil in place into barrels sold is huge."
Hardman has a 19% stake in Chinguetti with Woodside owning 47.38%. At Tiof it holds 21.6% to Woodside's 53.45%.
Uganda Is New African Frontier For Hardman
While work goes on in Mauritania, Hardman is turning much of its attention to the project it operates itself in Uganda.
The first three wells drilled next to Lake Albert in the central African nation have all hit oil and estimated recoverable reserves currently stand at 30 million barrels, an estimate the company believes is conservative.
Potter said more wells are due to be drilled and the eventual size of the recoverable reserves will dictate what type of development goes ahead.
At the current size a mini-refinery could be built and the oil used to run a 50 megawatt power plant to feed into Uganda's electricity grid.
If it rises above 150 million barrels then a larger refinery could be established along with a bigger power plant.
And if the resource ends up above 300 million barrels it may be economical to export the oil, which involves transporting it 1500 kilometers overland to the coast.
Potter met with Uganda's long-serving president Yoweri Museveni earlier this month and was left in no doubt of the country's commitment to the project.
"In terms of security classifications there used to be just one class A site, which was the presidential palace," he said.
"There are now two, the second of which is our oil field."
Hardman believes the real prize in Uganda lies beneath Lake Albert, and Potter said a lot of technical work now needs to be done to establish how this target can be drilled.
"We want to get under the lake and that requires a drilling solution that we reckon we will have in place by the end of 2007," he said.
Potter said when he came on board at Hardman all of its assets were offshore wells which could cost more than US$30 million to drill and take more than three years.
"My contract is only for five years so I could have found I had arrived and drilled one well in these places and it would have taken one third of the free cash of the company," he said.
He said Hardman now has a number of onshore projects, with Uganda the most advanced and Suriname and Tanzania in the pipeline.
-By Alex Wilson, Dow Jones Newswires; 61-3-9671-4323; [email protected] -Edited by Ian Pemberton
HDR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
