(HDR.AX, HMNRF) BUSINESS AND INVESTING > THE SPECULATOR
SPECULATOR: OIL ABOARD
May 15, 2002
Hardman Resources boosted estimates of recoverable oil reserves by 50% to more than 100 million barrels last week from its discovery with Woodside Petroleum in the Atlantic Ocean, offshore the west African republic of Mauritania, last year. Yet the company's shares closed static over the week at 67¢. Moreover, the Woodside-Hardman joint venture also announced the signing of a contract with the drill ship Deep Water Discovery for two to four wells to be sunk in the third quarter of calendar 2002. This gives added certainty to progress on this emerging world-class project in which Hardman and associates hold exploration rights over an area as large as the North West Shelf of Western Australia.
Woodside Petroleum as operator brought in the Chinguetti 1 discovery well a year ago with a reported minimum gross oil column of 90 metres. In January, Woodside announced an estimate of 65 million barrels of recoverable reserves.
Last week, in an open briefing with analysts, Hardman managing director Ted Ellyard said his company's estimate of recoverable reserves was more than 100 million barrels as a "most likely" estimate based on 3D seismic data available plus the first well's result (with an updated gross oil column of 120m). He explained that the Woodside figure was a "risked reserves" estimate based on the fact that parts of the field had not yet been evaluated by drilling.
Under the forthcoming drilling program, two appraisal wells will be put down to test the northern and eastern flanks of the field and to prove the total thickness of the oil column. The drill ship is contracted to arrive off Mauritania within a two-month window of August-September this year following completion of the rig's program off west Africa.
Ellyard indicated that following the drilling of the two appraisal wells, the consortium should be able to immediately start development, most likely with a floating production storage platform or ship. That could take a year to build, with the hope of first production within two years of drilling the appraisal wells.
It might be recalled that, following the Chinguetti discovery last year, Woodside took a placement of 11% of Hardman shares at $1.10 last July, thus adding $36.3m to the junior's cash funds, which then totalled $65m.
A modest few millions have since been invested on Hardman buying into the Woodada gas field and other prospective acreage north of Perth.
Ellyard estimates that Hardman's net cost for the current year's Mauritania program (including 8300km of 3D seismic mapping) to be $40m. Hardman retains a 21.6% interest in the discovery block, where Woodside is committed to drill one appraisal well with a contingent commitment to another.
Woodside is also committed to drill an exploration well on another block (Hardman's equity, 35.5%) to test a Cretaceous sand channel system. Shell, without the benefit of modern 3D seismic, found sub-economic oil on an outer flank of this system in the 1970s. A second exploration well may be drilled on one of two structures within 25km of the discovery well, where a new strike could be linked to the planned production platform.
Ellyard confirmed Hardman "is in discussions with some large oil companies" to farm out its cost in one exploration well (reducing its equity from 35.5% to 23%). Such a successful move would slash Hardman's net cost in the Mauritania program from $40m to $30m.
Hardman, with 388 million shares on issue, is capitalised by the market at $403m and has identified as many as 50 prospects off Mauritania yet to be tested.
In the meantime, Advantage Telecommunications – our punt on the wholesale trader in voicecall time between Asia and Europe – has been assessed by broker Terrain Securities as trading on a lowly price-earnings multiple of 3.3 times EBITDA to be achieved in the first quarter of the forthcoming 2002-03 year.
AdvanTel revealed two weeks ago that its March-quarter revenues totalled $770,000 (with only 16 of its so far signed-up 51 telco clients contributing). Last week, it projected revenues for the current quarter to June 30 would be "in the vicinity of" $2m with another five to 10 telcos participating. By November, it projects that most, if not all, of its interconnect clients will be operating, by which time it expects voice traffic across its network of 16 million to 20 million minutes a month. The company, with a staff of just 24, claims an average 40% gross margin on its revenue. Nice call, if you can get it.
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