Hardman closed yesterday at $1.61, down 18 cents or 10.1% from the previous day’s close of $1.79.

“Our valuation of Hardman is unchanged at A$2.48 a share,” the report stated.

“We believe the known reserves plus the potential for upgrades at Tiof and Chinguetti are worth around A$1.82 a share. The potential for further additions (Tevet) and the potential value of gas at Banda bring our value up to the A$2.48/share level. Our recommendation is maintained at Hold/Speculative Risk (2S).”

Smith Barney said there were also two other exploration wells – Sotto-1, a 150-250 million bbl prospect, and Bogue-1, a 300 million bbl prospect – that could still be drilled. It was also possible that the joint venture would now concentrate on generating cashflow from Chinguetti and Tiof rather than exploration.

But Hardman was still considered to be a speculative investment as its assets were located mainly in one country, Mauritania, and these were the first oil and gas fields to be located in that country.

Another reason to hold on to Hardman shares could be the company’s leases in offshore Guyane (formerly French Guiana).

Smith Barney did not discuss this region, but Hardman acting chief executive Scott Spencer told the company's annual general meeting that Hardman was excited about its deep-water leases off the Guyane coast. Hardman holds a 97.5 per cent interest in more than 65,000 square kilometres.

Spencer said Hardman had completed a large 2D seismic survey outlining a giant structure that could hold 2.5 billion barrels of recoverable oil.

The company was talking to potential farm-in partners but it intended to hold on to a bigger stake than it did when Woodside farmed into Chinguetti, Spencer said.