capital raising, page-20

re: capital raising- post eni is there a need??
Back when HDR was $1 or less I too was worried re the necessity of a capital raising in HDR. But post ENI and with the current SP and thru it the implied valuation on Mauritania I am not.

As a back of the envelope calculation - say Mauritania is HDRs only real asset (so debt, cash and other permits negate each other). ENI increased HDRs share of Mauritania (its crude but ignore the Dana areas - only gas there so far) from 22% to 35% roughly. Again on the back of an envelope you can attribute 1/3 of HDRs market capitalisation to the ENI purchase - 480m * [fair value of an HDR share $1.25 to be conservative] = 600m - so the ENI deal was worth 200m AUD. A partial sell down (say 35% to 25%) of that at fair value ought to not only cover increased Ching capital costs but also provide lots of cash for the 04 exploration campaign.

All this of course depends on mgmts ability to sell the excess share at fair value. The real key to future value dilution of HDR shares is the value they realise on the permit equity sell down. The ENI permit equity used correctly should not allow HDR to increase its share in the acerage but also give a free carry for atleast 1 years further exploration and appraisal drilling - possibly even until sucyh time as Ching cashflow comes onstream.