from citigroup...EMERGING GROWTH/SMALL CAPSHardman Resources Ltd...

from citigroup...

EMERGING GROWTH/SMALL CAPS
Hardman Resources Ltd (HDR.AX - A$1.94) Rating: Buy (1), High Risk (H) ?
A new discovery? This time in Uganda

Hardman has intercepted a 45- metre oil column in the Waraga-1 well (net 50%) located onshore Uganda. The pre-drill estimate
was for a recoverable resource of 150MMbbls of oil.
The oil quality is considerably better than expected. Although the oil is located in a shallow reservoir it is an API 40 degree crude
(i.e. it's light which is good) and could receive an attractive price on global markets if commercial. Mauritanian crude, by
comparison is around 27 degrees API and is expected to fetch around US$6/bbl less than the WTI price.
The sandstone reservoir at Waraga-1 is of an unknown quality - but looks "encouraging". There is no indication of associated gas,
which if present could be expected to aid the flow of oil to surface.
Testing will not occur for some months. The current rig does not have the capability to test the well. Some modification maybe
necessary.
However, if the oil can flow at commercial rates, which would be less than required for an offshore project, the Uganda discovery
could be worth around up to $1.20/share. The probability of this outcome is probably low at around 25%, suggesting that the
discovery on a risked basis at this stage could be worth around 25cps to Hardman.
This would increase our target price from $2.04 to $2.35/share. Consequently, we have increased our recommendation from a
Hold / Speculative Risk (2S) to a Buy / High Risk (1H)