I wouldn't post this if I thought it was relevant to HDR, but it...

I wouldn't post this if I thought it was relevant to HDR, but it does show you what some of the press are feeling about all these new opportunistic small oilers here in the UK.

Hardman are not a 'small, newby oiler' so it doesn't apply!

From S Telegraph UK.....

Breaking views
By John Paul Rathbone and Simon Nixon (Filed: 03/04/2005)

Let's stop gushing about overvalued oil shares

Imagine you run an oil company. Not a major like Shell, but a small oil company listed on London's Aim market. Let's call it Cash Shell. This firm has no hard assets - that's to say, no proven or probable reserves, which are those most likely to be commercially developed. But it has produced a sheaf of geologists' reports that point to humungous "possible" reserves of oil.

The distinction between proven, probable and possible reserves might have been enough to get Sir Phil Watts sacked as chief executive of Shell last year. But this doesn't seem to bother your investors, and there is a gusher under your share price. Indeed, the whole Aim-listed oil and exploration sector has been gushing lately.

This has been as true of tiddlers as of large firms. Last week, shares in India Star Energy rose 137 per cent in their first day of trading. The company's only asset is £900,000 in cash - hardly enough to buy more than a few thousand barrels of oil at its current price of $55. First Calgary Petroleum, which doesn't produce any oil, has a market capitalisation of £1.5bn.

It has, however, made some promising gas finds in Algeria, and independent auditors reckon these might be worth £2bn. But strip out "possible" reserves - the lowest quality kind - and the firm's bankable reserves are worth only £700m. On that basis, First Calgary is trading at a 114 per cent premium.

Socking premiums have become the norm among smaller oil exploration stocks. There are currently some 50 small or mid-capitalisation companies listed in London, with a combined market cap of £15bn, equivalent in size to, say, a BG Group.

The 20 biggest trade at an average 67 per cent premium to their core net asset values, according to estimates by Canaccord, assuming a long-term oil price of $35 a barrel. By contrast, BG Group trades at around a 10 per cent premium.

Part of the valuation gap reflects hopes that a big fish will snap up one of these minnows - even though deals in recent years have typically closed at just a 20 per cent premium. The rest embodies hopes of an exploration success - as at Falklands Oil and Desire Petroleum.

Those firms' stock prices have doubled over the past six months, yet neither has even started to drill. And while a high oil price does mean a greater number of finds are likely to be economically viable, the historical success rate remains only one well for every 10 sunk.

Soaring oil prices combined with one or two lucky finds, such as Cairn's Indian jackpot last year, have helped fuel this dotcom-style enthusiasm for small oil firms. Investors that bought into Cairn or one of the other lucky companies a while back have indeed made a packet. But buying stock in Cash Shell at current levels looks like a mug's game.