third quarter activities & cashflow reports

STOCK EXCHANGE / MEDIA RELEASE
RELEASE DATE: 28 October 2005
AUSTRALIAN CONTACT: Simon Potter
Hardman Resources Ltd
+61 8 9261 7600
Peter Thomas
Hardman Resources Ltd
+61 8 9261 7600
LONDON CONTACT: Patrick Handley
Brunswick Group
+44 207 404 5959
RE: SEPTEMBER 2005 QUARTERLY REPORT
PAGES: 13
Please find attached September 2005 Quarterly Activities and Cash Flow Report for
Hardman Resources Ltd.
PETER THOMAS
CHIEF FINANCIAL OFFICER
Level 1, 50 Kings Park Road, West Perth
PO Box 869, West Perth
Western Australia 6872
Tel: +61 8 9261 7600 Fax: +61 8 9321 2375
HARDMAN RESOURCES LTD ABN 98 009 210 235
- 1 -
HARDMAN RESOURCES LTD
ABN 98 009 210 235
REPORT TO SHAREHOLDERS
FOR THE QUARTER ENDED 30 SEPTEMBER 2005
This report summarises the activities of Hardman Resources Ltd (the “Company”) and its
controlled entities (together, “Hardman” or “the group”) during the quarter ended 30
September 2005.
ACTIVITY HIGHLIGHTS
Field Development and Appraisal
Chinguetti: The project remains on schedule for first oil during February 2006. All the
production wells have been successfully completed and cleaned-up, indicating sufficient
initial well deliverability to meet the FPSO capacity. The FPSO conversion in Singapore
was completed at end September and the vessel sailed en route to the field on 5 October.
As with many other current industry projects, some upward cost pressure has been
encountered.
Tevet: The Tevet-2 appraisal well successfully confirmed the reservoir characteristics
encountered in the original discovery well, consisting of a 44m oil reservoir section below
a 68m gas cap. Study work is presently ongoing to determine development options.
Tiof: Work on Tiof evaluation and conceptual development studies continues, with a
decision on the next steps expected to be announced in the current quarter.
Exploration
Mauritania: Two unsuccessful exploration wells, at Sotto and Espadon, were completed
in the quarter, as previously reported. The subsequent Tevet-2 Miocene appraisal well was
deepened to a Cretaceous reservoir target with wireline evaluation indicating the presence
of an oil accumulation which, though it may prove too small to be commercial,
nevertheless upgrades the potential of other Cretaceous prospects in the area.
Uganda: Processing and interpretation of 2D seismic survey data continued into the
September quarter and a number of attractive prospects have been confirmed. The
Hardman-operated joint venture is preparing for a drilling program of most likely two
wells, targeted at these prospects. This program is expected to start late 2005.
Guyane: Preparation for the marine seismic survey was completed and data acquisition is
due to begin at the end of October 2005. The program includes recording of
approximately 1,600km of 2D seismic data and 300 km2 of 3D seismic data aimed at
maturing a number of leads to prospect status.
- 2 -
CORPORATE ACTIVITY
Evaluation studies on a number of potential new ventures continue, with a focus on the
Atlantic Margin areas.
During the quarter the group opened modest offices in Mauritania and Trinidad, manned
by senior staff experienced in those regions.
In early August 2005 a coup d’état led to a change in regime in Mauritania. Statements
released by the new Military Council have made clear its intention to guarantee the
integrity of existing contracts. Operations have been unaffected.
On 10 August 2005 the Company announced the appointment of Mr Peter Thomas as its
new Chief Financial Officer. Mr Thomas commenced duties on 1 September 2005.
FINANCE REPORT
The net cash outflow for the quarter ended 30 September 2005 was A$43.9 million, with
A$8.6 million spent on exploration and appraisal activities and A$33.3 million on
development of the Chinguetti field. The exploration cash spend was lower than
anticipated in the previous quarterly report primarily due to delays in cash calls, a slightly
later start to the current exploration drilling campaign in Mauritania and the slippage to the
current quarter of the commencement of seismic acquisition in Guyane and drilling in
Uganda. The net cash outflow was financed from existing cash balances.
Forecast cash expenditure for exploration and appraisal for the quarter ended 31 December
2005 is approximately A$46 million, with A$30 million expected to be spent on
development. On an accruals basis this equates to forecast expenditure for the six months
ended 31 December 2005 of some A$54.8 million on exploration and appraisal and A$64
million on development.
As at 30 September 2005, the group had available cash balances of A$103.8 million and
an undrawn facility for Chinguetti project costs (including re-financing of costs already
incurred) of US$100 million. Syndication of the Chinguetti project finance facility with a
group of international banks was successfully completed in July. The facility remains
undrawn as at the date of this Report.
The group currently has no oil price hedging arrangements in place.
The Company has elected and received the necessary approvals to change its financial
reporting date to 31 December, effective 31 December 2005. This will bring the annual
reporting cycle into line with most of its international peer group and also align with the
budget cycle of most of the joint ventures in which the group participates.
- 3 -
REVIEW OF OPERATIONS
MAURITANIA – WEST AFRICA
Chinguetti Field Development (Hardman 19.008% equity)
The project continued to make steady progress during the 3rd Quarter. Total progress at
end-September was 90%. Key project milestones included successful conclusion of all
drilling, well completion and clean-up activity after which the West Navigator drill-ship
was released. The well clean-up tests confirmed sufficient initial well deliverability to
meet the FPSO capacity whilst a production test of the Banda-2 well confirmed adequate
capacity to reinject excess Chinguetti associated gas. The end of the quarter also saw
completion of the conversion of the FPSO Berge Helene and its preparation for departure
from Singapore to Mauritania, and commencement of the in-field hook-up and installation
phase of the project. The FPSO sailed from Singapore on 5 October and is currently in
Cape Town, en route to the Chinguetti field.
As previously advised, the project continues to encounter cost pressures, and in September
the Operator (Woodside) formally advised the venture of an increase in known project
costs to US$705 million and advised maintenance of a contingency of US$45 million.
Some incremental costs are already being incurred against this contingent allowance.
Notwithstanding some identified manufacturing problems with the production flowlines,
the project remains on schedule to deliver first oil during February 2006.
Tiof Appraisal (Hardman 21.6% equity)
Technical assessment, involving integrated subsurface and surface work continues on this
substantial though complex resource. The joint venture is working towards definition of
development options, taking into account key uncertainties, economic viability and an
appropriate forward appraisal strategy, with a decision on the next steps expected to be
announced in the current quarter. Hardman’s view at this stage is that a phased
development may be the optimal solution to address the complexity of the field and to
manage risk.
Tevet Appraisal (Hardman 21.6% equity)
The Tevet Miocene discovery was penetrated during September by the Tevet-2 appraisal
well. This well successfully confirmed the reservoir characteristics encountered in the
discovery well, consisting of a 44m oil reservoir section below a 68m gas cap. Tevet is
located 22 km from, and is a likely tie-back to, Chinguetti, and the Berge Helene FPSO
has been designed to accommodate such an option (including the provision of water
injection support). Study work is presently ongoing to determine development options,
likely timing and integration with potential Chinguetti phase 2 in-fill wells.
Exploration (Hardman 16.2 – 28.0% equities)
The Stena Tay drilling rig returned from a scheduled refit in the Canary Islands in late July
and, following a short period of Chinguetti completion work, commenced a continuous
Mauritanian exploration campaign in early August.
- 4 -
The first well in PSC-A - Sotto-1/1ST - targeted canyon fill sands in a Lower Miocene
interval of similar age to the Chinguetti oil field and Tiof discovery. Following a
mechanical sidetrack, the well was drilled to a total depth of 3279m but failed to encounter
reservoir or hydrocarbons and was therefore plugged and abandoned. This was a higher
risk prospect in a previously undrilled channel. The well result confirmed the canyon
architecture but downgrades the prospectivity of the Sotto canyon. This result does not,
however, significantly reduce the remaining prospectivity of the permit and has provided
information on the variability of these channel systems useful to calibrate future targets.
Controlled source electromagnetic (“CSEM”) data were obtained but given the water
depths, were at the limit of interpretation and gave equivocal results.
Sotto was followed by a PSC-B well – Espadon-1/1ST – which also targeted Lower
Miocene sands some 13km to the west of the Tiof discovery and was drilled at this time to
assess potential resources in the greater Tiof area. This well also incurred a mechanical
sidetrack, prior to reaching a total depth of 3042m The well again failed to find any
significant hydrocarbon-bearing sands and was plugged and abandoned. No CSEM were
obtained in planning this well as CSEM use is constrained adjacent to highly resistive salt
features.
The ‘Stena Tay’ drilling rig then moved to the Tevet-2 location and successfully drilled
through the Cretaceous objective to a final total depth of 3914m. Wireline evaluation of
this target indicates the presence of an 8m gross oil column within good quality sands. The
result demonstrates the presence of a working petroleum system at this level and whilst the
discovery may prove too small to be commercial, it does upgrade the potential of other
Cretaceous prospects in the area.
In respect of seismic, the 1800 km2 3D survey across Block 8 was received, whilst
significant processing and interpretation efforts were undertaken in Block-6 (migration of
Atar survey) and across PSC-A and PSC-B (rescaling and merge of the Kiffa, Tanit and
Oudane surveys).
The forward exploration program comprises the PSC-B well Labeidna-1 which will target
Miocene sands in the vicinity of the Chinguetti field. Success at this well would
significantly upgrade the adjacent N’Dor prospect immediately to the South West. This
will be followed by the Block 1 well Faucon-1 (Dana-operated), which will target a large
Lower Campanian (Cretaceous) canyon fill reservoir with updip pinchout against a salt
diaper. In addition to seismic amplitudes, this prospect has support from CSEM data. Later
wells in the campaign include further PSC-B exploration activity and a Block 6
commitment well.
- 5 -
UGANDA – EAST AFRICA (Hardman 50% equity)
The licence covers the northern part of Lake Albert and the surrounding onshore area. In
the first half of 2005 the group successfully completed the acquisition of a 205 kilometres
2D seismic survey of the onshore area and an extension of some of those lines into the
lake. Processing and interpretation of that data continued into the September quarter and
as a result a number of attractive prospects were confirmed. Hardman and its joint venture
partner (Tullow Oil plc’s subsidiary Energy Africa) are preparing for a drilling program of
most likely two wells, Mputa-1 and Waraga-1. Both prospects are onshore and have
significant potential, in excess of 100 million barrels, with considerable upside. The
prospects are on structures associated with the rift bounding fault and in the case of Mputa
also associated with surface seeps. Site preparation is currently underway and drilling is
expected to start by December 2005.
GUYANE (FRENCH) – SOUTH AMERICA (Hardman 97.5% equity)
Preparation for a marine seismic survey was a key activity for the 3rd quarter, with data
acquisition due to commence at the end of October 2005. The program includes recording
of approximately 1,600km of 2D seismic data and 300 km2 of 3D seismic data in the
permit, which covers the area between the offshore borders between Suriname and Brazil,
from the 12 mile territorial limit to the 3000m isobath. This new seismic data acquisition
is aimed at maturing a number of leads to prospect status by the end of the first quarter
2006.
Preparation continued during the quarter for the drilling program in Guyane in 2006. This
program will consist of one firm well and one contingent well.
FALKLANDS – SOUTH ATLANTIC (Hardman 22.5% equity)
The interpretation of the data from the survey earlier in 2005 has proved encouraging; the
results showing a much larger and more diverse prospect inventory than originally
anticipated and identifying numerous new leads, with indications that some could
potentially be commercially significant in size. A full evaluation of these leads,
supplemented by further investigations, will be necessary before technically sound and
economically viable prospects can be defined.
Given the positive results of the survey, the joint venture has committed to an additional
6,000 kilometre seismic survey across the licences. This survey will be acquired in
conjunction with a seismic survey underway in the FOGL 100% licences. In the Hardman
JV licences approximately 800 kilometres of data has been acquired and the remainder
will be shot over the summer months, when we expect improved weather and recording
conditions. This data, along with the existing data, will be used to define prospects and
select the location for an additional planned 3D seismic survey of at least 2,000 square
kilometres. All of this work is expected to lead to definition of drillable prospects by mid
2007 in time for a decision to enter the drilling phase.
- 6 -
NEW ZEALAND
Hardman has withdrawn from the project and is waiting for confirmation that all related
documentation has been approved by Crown Minerals.
AUSTRALIA
Hardman has interests in the Timor Sea area, situated in Commonwealth waters offshore
northern Western Australia.
Timor Sea Permits:
Hardman is awaiting approval of its applications to relinquish AC/P25 (Hardman 95%)
and AC/P26 (Hardman 98.75%) in good standing with the Joint Authority.
AC/RL1: (Hardman 100%) Hardman continued discussions with the Joint Authority
(Northern Territory and Federal Government) regarding renewal of the Retention Lease.
HARDMAN RESOURCES LTD
PETER THOMAS
CHIEF FINANCIAL OFFICER
28 October 2005
Note: In accordance with Australian Stock Exchange Limited listing requirements, the geological information supplied
in this report has been based on information provided by geologists who have had in excess of five years experience in
their field of activity.
FOR FURTHER INFORMATION PLEASE CONTACT
HARDMAN RESOURCES LTD
Level 1, 50 Kings Park Road
West Perth Western Australia 6005
TELEPHONE
FACSIMILE
EMAIL
WEB SITE
+61 (0) 8 9261 7600
+61 (0) 8 9321 2375
[email protected]
www.hdr.com.au
Appendix 5B
Mining exploration entity quarterly report
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 1
Appendix 5B
Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.
Name of entity
HARDMAN RESOURCES LTD
ABN Quarter ended (“current quarter”)
98 009 210 235 30 SEPTEMBER 2005
Consolidated statement of cash flows
Cash flows related to operating activities
Current quarter
$A’000
Year to date
(3 months)
$A’000
1.1 Receipts from product sales and related debtors 2 2
1.2 Payments for (a) exploration and evaluation
(b) development
(c) production
(d) administration
(8,639)
(33,279)
-
(4,833)
(8,639)
(33,279)
-
(4,833)
1.3 Dividends received - -
1.4 Interest and other items of a similar nature received 1,092 1,092
1.5 Interest and other costs of finance paid - -
1.6 Income taxes paid - -
1.7 Other (provide details if material) - -
Net Operating Cash Flows
(45,627)
(45,627)
Cash flows related to investing activities
1.8 Payment for purchases of: (a) prospects
(b) equity investments
(c) other fixed assets
-
-
(371)
-
-
(371)
1.9 Proceeds from sale of: (a) prospects
(b) equity investments
(c) other fixed assets
-
-
-
-
-
-
1.10 Loans to other entities - -
1.11 Loans repaid by other entities - -
1.12 Other (provide details if material) (168) (168)
Net investing cash flows
(539)
(539)
1.13 Total operating and investing cash flows
(carried forward)
(46,196)
(46,196)
Appendix 5B
Mining exploration entity quarterly report
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 2
1.13 Total operating and investing cash flows
(brought forward)
(46,196)
(46,196)
Cash flows related to financing activities
1.14 Proceeds from issues of shares, options, etc. (Net) 2,340 2,340
1.15 Proceeds from sale of forfeited shares - -
1.16 Proceeds from borrowings - -
1.17 Repayment of borrowings - -
1.18 Dividends paid - -
1.19 Other (provide details if material) (130) (130)
Net financing cash flows
2,210
2,210
Net increase (decrease) in cash held
(43,986)
(43,986)
1.20 Cash at beginning of quarter/year to date 147,548 147,548
1.21 Exchange rate adjustments to item 1.20 231 231
1.22
Cash at end of quarter
103,793
103,793
The opening cash balances differs from the balance reported in the June Quarterly report due to the
reclassification of negative joint venture cash balances as payables in this report.
Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the
related entities
Current quarter
$A’000
1.23
Aggregate amount of payments to the parties included in item 1.2
389
1.24
Aggregate amount of loans to the parties included in item 1.10
-
1.25
Explanation necessary for an understanding of the transactions
Payments in item 1.23 are consulting and related costs (excluding GST) paid during the quarter to directors
of the entity and their associates.
Appendix 5B
Mining exploration entity quarterly report
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 3
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and
liabilities but did not involve cash flows
Nil
2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting
entity has an interest
Nil
Financing facilities available
Add notes as necessary for an understanding of the position.
Amount available
$A’000
Amount used
$A’000
3.1 Loan facilities 131,234 -
3.2 Credit standby arrangements - -
This is the US$100 million facility negotiated in the previous quarter to fund 80% of the Chinguetti
Oilfield development. This facility has not been drawn on as yet.
Estimated cash outflows for next quarter
$A’000
4.1 Exploration and evaluation 46,000
4.2 Development 30,000
Total
76,000
Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in
the consolidated statement of cash flows) to the related items
in the accounts is as follows.
Current quarter
$A’000
Previous quarter
$A’000
5.1 Cash on hand and at bank 6,252 13,690
5.2 Deposits at call - -
5.3 Bank overdraft - -
5.4 Other (provide details) 97,541 133,858
Total: cash at end of quarter (item 1.22) 103,793 147,548
Other cash balances comprise amounts held on 30 day deposit.
Appendix 5B
Mining exploration entity quarterly report
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 4
Changes in interests in mining tenements
Tenement reference Nature of interest
(note (2))
Interest at
beginning of
quarter
Interest at
end of
quarter
6.1 Interests in mining tenements
relinquished, reduced or
lapsed
- - - -
6.2 Interests in mining tenements
acquired or increased
- - - -
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number Number quoted Issue price per
security (see note 3)
(cents)
Amount paid up per
security (see note 3)
(cents)
7.1 +Preference
securities
(description)
- -
7.2 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns of
capital, buy-backs,
redemptions
-
-
-
-
7.3 +Ordinary
securities
658,610,645
658,610,645
-
-
7.4 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns of
capital, buy-backs
2,127,550
2,127,550
$1.10
$1.10
7.5 +Convertible debt
securities
(description)
- -
7.6 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through securities
matured, converted
Appendix 5B
Mining exploration entity quarterly report
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 5
7.7 Options
(description and
conversion factor)
2,972,450
-
Exercise price
$1.10
Expiry date
31/12/06
7.8 Issued during
quarter
- - - -
7.9 Exercised during
quarter
2,127,550 -
-
$1.10 31/12/06
7.10 Cancelled during
quarter
- - - -
7.11 Debentures
(totals only)
- -
7.12 Unsecured notes
(totals only)
- -
Appendix 5B
Mining exploration entity quarterly report
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 6
Compliance statement
1 This statement has been prepared under accounting policies which comply with
accounting standards as defined in the Corporations Act or other standards acceptable to
ASX.
2 This statement does give a true and fair view of the matters disclosed.
Sign here: ............................................................ Date: ............................
Chief Financial Officer
Print name: PETER THOMAS
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