Oil junior Hardman joins the big league Author: Ian Howarth Date: 21/05/2004 Words: 1035 Source: AFRBreaking Publication: Financial Review Section: Companies Page: 64
It has been a while since Australia's dwindling band of oil analysts have had a new stock to study.
The increasing demands of fund managers, who will only invest in "index weighted" companies, mean that stockbrokers pore over an ever-decreasing number of oil stocks.
But Perth-based Hardman Resources has finally attracted the attention of analysts after its share price ran to $1.84, lifting its market capitalisation to more than $1billion and propelling the company into the ASX/S&P150 index.
Citigroup Smith Barney, UBS and Deutsche Bank in Australia have all been alerted by the rise in market capitalisation and have initiated analyst coverage of the stock.
London-based broker Oriel Securities, a long-time supporter of the stock, has issued a substantial research report to add to the new excitement over the company.
Until recently, only two Australian stockbrokers analysed the stock. Now the Hardman bandwagon has as many passengers as the unbeaten 2004 St Kilda Australian rules football club has new members.
Hardman has come from nowhere as an unloved junior explorer with a share price of between 4c and 6c in the mid-1990s.
Now it is about $1.60 a share, the company holds potential oil reserves of about 1 billion barrels and it has become the darling of the London Stock Exchange.
At $1.84 a share, touched in April, Hardman had a market capitalisation of just over $1 billion, propelling it to 136th place in the country's top 150 listed companies.
But to chief executive officer Ted Ellyard, the newfound popularity of the company is a distraction.
Ellyard just wants to get on with the job of finding more oil and gas reserves. He is busy at present trying to hire more staff to spread the frantic workload that comes with being on the cusp of developing two and possibly three offshore oil discoveries and operating exploration programs in eight countries from South America and Africa to New Zealand and the Falkland Islands.
That is a tough task in Perth, now the unchallenged headquarters of Australia's oil and gas sector, where good staff are increasingly hard to find and ever more expensive.
Hardman also needs new offices to relieve the cramped conditions at its premises.
Hardman's company-making discovery was the Chinguetti oil field in the deep offshore region of Mauritania in west Africa.
The Chinguetti discovery was followed by the much larger Tiof and Banda fields. These discoveries and a string of exciting, major structures in the area that still need to be drilled have the potential to contain recoverable reserves of more than 1 billion barrels of oil, by Hardman's own account.
Hardman's 21 per cent share of the Chinguetti field alone is estimated to contain recoverable reserves of 142 million barrels. At the current oil price of more than $US40 a barrel, the oil in the ground has a value of billions of dollars, making Hardman, with its open share register and strong exploration upside, a stock of interest to brokers.
Hardman's biggest shareholder is its Mauritanian joint-venture partner, Woodside Petroleum, with 10 per cent.
Where did Hardman come from?
Perth-based resources sector investor Alan Burns floated Hardman in 1987 as a small minerals explorer, but the market crash in October that year put paid to the minerals efforts and Hardman switched to oil and gas exploration.
In the early 1990s, Hardman acquired a couple of projects in Russia, one in Siberia and the other at Sakhalin in the country's far east.
Hardman was essentially going nowhere and Ted Ellyard joined the company in 1996 after a long and bitter takeover battle in his earlier company, Stirling Petroleum.
Ellyard sold the Russian projects and started to concentrate on Mauritania's offshore potential after being introduced to the country by General Gold, one of Perth's multitude of gold explorers, which was working in the country.
In mid-1996, after studying some old seismic data and even earlier drilling records, Ellyard flew to London to meet Mauritanian government officials and sign an offshore Production Sharing Agreement over the first of the nation's offshore lease areas.
Hardman now holds about 21 per cent equity in seven of the eight offshore blocks in Mauritania and is the country's biggest oil and gas explorer.
The first well drilled in the country by Hardman was in May 2001 when it discovered the Chinguetti field. Hardman, drilling in water depths of more than 800metres, quickly followed with the Tiof and Banda discoveries. Several even bigger prospects lie in deeper water further offshore.
"There was exploration in Mauritania in the '70s and early '60s by several of the major oil companies but that was all in the shallow water," Ellyard says.
"It's not until you get out into the deep water where you have got the large salt structures" that you find the big reservoirs.
The Mauritania venture has also changed structure dramatically since Hardman first went to the country. After initially offering the region to Shell, which was not interested, Hardman approached Woodside in Perth and won an enthusiastic response.
Woodside is now operator and set to develop the offshore discoveries.
Italian oil group ENI Agip joined the early work but recently sold out to Hardman for just $US33 million ($47million). Ellyard on-sold the Agip stake to British Gas less than two months later for $US132million.
Hardman is now gearing up for a major new drilling program.
HDR Price at posting:
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