buy 2

Hardman Resources Ltd (ASX Code : HDR) - Rating : Buy 2/Current Price : $1.95/Price Target : $2.43
The Chinguetti oil field (HDR 19%) averaged only 45,000bpd for the first ten days of May, after averaging 53,000bpd in April and 66,000bpd in March. Production has also not yet stabilised from the field and so it may possibly trough below 45,000bpd before volumes can be rectified. We had previously estimated gross production of 50,000bpd from early May to the end of 3Q06E, and 60,000bpd in 4Q06E. We have now reduced our estimate of average gross oil production for the remainder of 2006E to 43,000bpd. The impact has been to reduce our forecast of HDR's share of 2006E oil production by about 0.4mmbbls to 2.4mmbbls. As a result, this has led to our EPS forecast reducing for 2006E, 2007E and 2008E by 21.1%, 1.7% and 1.9% respectively. In our view, the lower than expected Chinguetti oil production rate is likely to be rectified towards the end of the year. We have raised our rating from Neutral 2 to Buy 2 as the recent share price fall appears to have been overdone relative to the

small impact on valuation. Our HDR share price target is now A$2.43 (prior A$2.50). This reflects our DCF valuation (mainly Chinguetti and Tiof), plus a risk weighted value for exploration upside.