LONDON (Alliance News) - Hardy Oil & Gas PLC Thursday said it failed to deliver most of its primary goals in the last financial year as movement in oil prices and several issues caused by the government of India "side-tracked" its development as the firm posted an USD11.6 million pretax loss.
The company does not currently generate any revenue as it is developing projects, with difficulty, in India, but that pretax loss for the year to the end of March is significantly narrower than the USD26.2 million loss booked in the previous year.
In the previous financial year, Hardy Oil booked a USD22.6 million write-off against its exploration efforts, but write-off shrank in the most recent year to USD4.9 million. However, Hardy Oil also recorded a USD2.8 million impairment against the PY-3 block in the recent year, compared to zero in impairments the year before.
Administrative costs rose to USD4.0 million from USD3.8 million.
"The 2016 financial year did not deliver several of our primary objectives for the year. Early in the year we had built a consensus with stakeholders of the PY-3 field. However, this was subsequently side-tracked by parties to this consensus linking unrelated issues and reneging on commitments," said Chairman Alasdair Locke.
"The company's strategy for its India portfolio remains largely unchanged. Having considered the low price environment, we believe that the PY-3 field offers the earliest opportunity for the group to create value within our current portfolio," he added.
The Indian government has updated its policies within the energy market and has recently announced new policies covering marketing, pricing and the freedom that companies have for deep water or high temperature operations.
Although Hardy Oil welcomed the regulatory changes, it said it does not believe the policies will facilitate new investment.
Hardy Oil said the new policies have not facilitated the joint venture's final field development plan, which is still under consideration by Indian authorities. The company holds an 18% stake in the PY-3 project but is also the operator.
The company believes initial production would be around 3,000 barrels of oil per day before potentially rising to 8,000 barrels per day, but if the plan is not approved soon, then the project could get the chop.
"Well monitoring activity has been proposed and failing the timely adoption of a full field development plan and past budgets, planning for abandonment will be initiated," said Hardy.
However, the number-one priority for the company during 2016 is to resolve the ongoing arbitration concerning the CY-OS/2 block. The government is currently attempting to take the block away from the joint venture, in which Hardy Oil has a 75% stake, after three chief justices of India, which no longer hold their posts, ruled to restore the block to Hardy and partners.
The government is questioning the merit and also the jurisdiction regarding the decision to restore the block to the joint venture, but Hardy Oil believes the appeal made by the government against the decision contravenes the production-sharing contract over the block, which states all arbitration awards are final and binding - meaning appeals should not be necessary.
The next hearing concerning the arbitration is on July 29.
"We will continue to seek the restoration of the block to the CY-OS/2 joint venture in a timely manner. The appeal and enforcement process in India is likely to continue throughout 2016. The company believes that it has a strong position as the unanimous international award is well reasoned. Hardy will recommence work on the appraisal of the Ganesha-1 natural gas discovery once the block has been restored to the CY-OS/2 joint venture," Hardy Oil said.
Locke added: "The enforcement of the CY-OS/2 Award would present new resources to expand our portfolio. Through the down cycle in commodity prices we can achieve tangible value creation provided we have the constructive collaboration of all stakeholders of our India based assets. The actions of our joint arrangement partners and sovereign authorities will shape our future in India."
Hardy Oil shares were up 0.2% to 21.30 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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