Hardman Resources in New Mauritania Plan

PERTH, Apr 07, 2005 (Dow Jones Commodities News Select via Comtex) By Stephen Bell Of DOW JONES NEWSWIRES

Australia's Hardman Resources Ltd. (HDR.AU) said Thursday that up to eight new exploration wells will be drilled at its Mauritania oil project in the second half of 2005.

Mauritania operator Woodside Petroleum Ltd. (WPL.AU) will be "putting to the joint venture 10 drill-ready prospects by June," said Hardman Chief Executive Simon Potter.

At least half of those prospects, and probably "six to eight," will be drilled in the second half, Potter told Dow Jones Newswires in an interview.

The new drilling will test "large" targets, Potter said, as the joint venture partners try to rebuild confidence in the exploration upside at Mauritania, after a moderate program last year that returned three dry holes along with the Tevet discovery.

Buoyed by news of the latest drilling plan, Hardman shares closed up 2.1% at A$1.93, their high for the day, valuing the Perth-based group at A$1.27 billion.

Shares in Woodside fell 14 cents to A$25.46.

Broker UBS believes the coming offshore drill program has a "risk weighted value" of around A$1.60 per Woodside share based on an assumed 32% overall success rate.

"We believe our assumed risked success rate is reasonable since Woodside-operated Mauritania exploration drilling has delivered a 45% success rate to date," UBS said in a research note.

Previous successes include the US$625 million Chinguetti development that is due to begin production by next March at a rate of 75,000 barrels of oil per day, and the Tiof discovery that Hardman believes has 1 billion barrels of oil "in place."

Woodside owns 47% of Chinguetti. The other participants are Hardman with 19%, the Mauritanian government with 12%, BG Group PLC (BRG) with 10%, the Premier group of companies with 8.1% and Roc Oil Co. (ROC.AU) with 3.3%.

UBS said the Sotto prospect will test a new Miocene channel system with a target size of 150-250 million barrels of oil.

But Hardman's Potter said that Sotto is one of many prospects in the program.

"We have a range of play types that we need to fully understand," he said, adding that he is confident Mauritania is a "company maker" for Hardman, despite the disappointing exploration results last year.

"The fact that we've had three dry holes in the context of the whole basin is neither here nor there," he said.

"There could easily be another five Chinguettis and another three or four Tiofs," he said.

"So I hope that the exploration program we embark upon will be a strategic evaluation of the basin rather than just drilling the biggest bump that we see," Potter said.

Turning to corporate issues, Potter said he is aware of market speculation that U.K.-based BG Group, a minority owner of Chinguetti and Tiof, may be interested in Hardman.

"With the oil price the way it is, there are a lot of companies cashed up and looking for opportunities," he said.

Hardman is a potential takeover target, along with many other companies, but there have been no discussions with BG, Potter said.

"I'm sure that there is going to be a lot of consolidation in the industry over the coming year," he added.

Woodside owns 10% of Hardman but has "indicated" to Potter that "they are very happy with their holding", he said.

Hardman's 19% share of Chinguetti will entitle it to around 14,000 barrels of oil a day, which will make it Australia's fourth-biggest oil producer behind Woodside, Santos Ltd. (STO.AU) and Oil Search Ltd. (OSH.AU).

"It is clearly core for Hardman to get Chinguetti on stream and producing," Potter said.

"As we get closer to first oil, we'll see that reflected in the stock price, where we get more of a balance. Rather than just being an exploration play, we become a production and oil price play," he said.

Potter also believes that a share market "discount" attached to Hardman because of perceived political risk in Mauritania will "start to evaporate" as oil production gets closer.

Turning to Tiof, Potter said that the joint venture partners are "agreed" that it contains 1 billion barrels of oil, but the "key issue is how much oil we can recover."

Woodside has said a development option could be finalized in the third quarter, but Potter said two more appraisal wells are needed to fully evaluate the field.

Despite high oil prices, there is "no point in rushing at this like a bull at a gate," Potter said.

"This has to be a pretty measured and considered development to maximize the recovery factor," he said.

Analysts believe around 30%-40% of Tiof's oil may be recovered, depending on how well the field's individual reservoirs are connected.

Last year Woodside said Tiof could become the company's second production hub off the west African coast by 2008, based on a stand-alone development costing up to A$2 billion.

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