update: woodside sells hardman stake for a$118.3m

UPDATE: Woodside Sells Hardman Stake For A$118.3M

By Matt Chambers
Of DOW JONES NEWSWIRES

MELBOURNE (Dow Jones)--In the second sale of its type in Australia in two days, Woodside Petroleum Ltd. (WPL.AU) offloaded its stake in Hardman Resources Ltd. (HDR.AU) to Deutsche Bank AG (DB), which then sold the stock to institutional investors.

Woodside said Thursday it sold its interest in Hardman to the investment bank for A$118.3 million, or A$1.755 a share, which is about a 7% discount to the stock's last trade.

Deutsche Bank then sold the shares to Australian institutional investors at A$1.76 each over a period of about three hours, a source familiar with the transaction said.

Despite the discount, the price represents a hefty return for Woodside, which bought its 10.24% stake in Hardman at an average of 98.5 cents a share, or about A$66 million, between 2001 and 2004. Hardman shares last traded at A$1.91 and were halted pending the sale announcement.

Woodside's decision to sell a cornerstone stake to a bank which then passed them on to investors echoes a deal done Wednesday by Rio Tinto PLC (RTP), which sold its stake in Lihir Gold Ltd. (LHG.AU) to Citigroup Inc. (C).

Hardman and Woodside, both based in Perth, are partners in production and exploration joint ventures offshore Mauritania.

Analysts said the sale is likely to be damaging to Hardman, whose share price has already fallen 23% in the past two months as Woodside talked down the pair's Mauritanian Tiof development.

"It's likely to cause a short-term fall in Hardman's share price, maybe 5 to 8 cents, but it doesn't change the company's prospects, which are based on exploration success and oil prices," said John Colnan, an analyst at Shaw Stockbroking in Sydney.

Colnan, who recommends clients buy Hardman shares, said the sale doesn't dim Hardman's appeal, noting Oil Search Ltd. (OSH.AU) shares have risen fourfold since Woodside sold a minority stake in 2003.

Another analyst, who declined to be named, didn't have such a positive view on Hardman. He said Hardman is a risky investment and that Woodside is probably getting out to reduce its exposure to the Tiof project. A development decision on Tiof has been delayed until the second quarter of 2006 after poor drilling results.

Woodside's sale comes the same day as the company agreed to sell its majority stake in Australia's undeveloped Blacktip gas field, along with other ground, for US$30 million to Italy's ENI Spa (E).

"I think Woodside are of a mind that if it's noncore, non-strategic and they've decided to sell it, without too much focus on the share price," Colnan said.

A Woodside spokesman said it was the right time to sell its stake in Hardman, with the market well-informed and both companies recently having briefed investors.

Hardman said the sale will make the stock more liquid, and that recent growth in the company has meant Woodside no longer needs to provide support to ensure Hardman can fund activities in Mauritania.

"It is now an appropriate time for Woodside to sell its holding given the transformation that Hardman has undergone in the last few years," Hardman Chief Executive Simon Potter said.

The company has never been in better shape, he added.

Hardman shares have trebled in the past year, as oil prices surged and the Chinguetti joint venture with Woodside in Mauritania nears production.

The stock hit a record A$2.56 Aug. 3, but has since fallen back, largely on news the Tiof project is looking uncertain.

Deutsche Bank declined to comment on the sale, but a source close to the transaction said there was a lot of demand for Hardman shares, denying claims earlier in the day the bank was having trouble selling the shares.

A slump in Port Moresby-based Lihir Gold's stock after Rio Tinto sold its 14.5% stake would have damped investors appetites.

Lihir Gold closed down 11% at A$2.08 on the Australian bourse Thursday after Rio Tinto sold its stake to Citigroup.

Rio Tinto offloaded its stake Wednesday at A$2.15 a share, capitalizing on a doubling of Lihir gold's share price over the past year and timing the sale just one day after gold prices hit US$500 an ounce for the first time in 18 years.

Another casualty of the sale may be Australia's Roc Oil Ltd. (ROC.AU), a joint venture partner in Mauritania with Woodside and Hardman. Roc Oil shares fell 3.9%.

Woodside operates Chinguetti and exploration projects offshore Mauritania, including Tiof, for the joint venture partners. Other participants are U.K.-based BG Group PLC (BRG) and the Premier Oil PLC (PMO.LN) group of companies.