HDY.L Regulatory News (HDY)

12 December 2019

Hardy Oil and Gas plc

("Hardy", the "Company")

Half Year Results for the six months ended 30 September 2019

Hardy Oil and Gas plc (LSE: HDY), the oil and gas exploration and production company, reports its results for the six months ended 30 September 2019 (H1FY20).

All financial amounts are stated in US dollars unless otherwise indicated.

SUMMARY

Activity during the six months ended 30 September 2019

·; CY-OS/2 - The Supreme Court of India allowed the Government of India's ("GOI") appeal of an arbitration award to be appealed in the Delhi High Court. The appeal is projected to take several more years to conclude. Actions to enforce the award in foreign jurisdictions were unsuccessful.

·; PY-3 - the GOI did not agree to convene a Management Committee meeting to discuss and ratify an application to a development plan and extension to the production sharing contract. An arbitration with the PY-3 non-operating partners had concluded but the ruling of the tribunal had been continuously delayed.

Financial

·; The Group's total comprehensive loss was $0.3 million for the H1FY20 compared to a loss of $54.1 million for first half of FY19 (H1FY19) wherein CY-OS/2 was written down by $51.1 million.

·; Cash and short-term investments at 30 September 2019 excluding discontinued operations was $3.1 million; Hardy has no debt.

·; Discontinued operations - current assets and current liabilities of the discontinued operations were $12.9 million and $14.7 million respectively.

Post half year end highlights

·; 2 October 2019, the Company disposed of its oil and gas assets via the sale of wholly owned subsidiary Hardy Exploration & Production (India) Inc. (HEPI) to Invenire Energy Private Limited for gross consideration of $8.75 million.

·; 18 October 2019, Richard Galvin was appointed Executive Director of the Company and Ian MacKenzie resigned as Chief Executive Officer.

·; 25 November 2019, Blake Holdings Limited announced a Mandatory Offer of 5 pence per share for the shares of the Company valuing the Company at approximately $4.8 million. The Board recommended shareholders take no action pending the publication of the offer document.

·; As at 30 November 2019 the Company had $10.5 million in cash and short-term investments.

OUTLOOK

·; Focus on acquiring or establishing a company, business or asset that operates in the resources sector or other industries.

·; The Board intends to seek shareholder approval regarding investment opportunities prior to action being taken

Alasdair Locke, Chairman of Hardy, commented: "Hardy's board of directors (the "Board") will be writing to shareholders as soon as practicable with its formal response to the Mandatory Offer once Blake has posted the offer document. Further announcements will be made as and when appropriate. In the meantime, the Board recommends that shareholders should take no action."

For further information please visit www.hardyoil.com or contact:

OVERVIEW

The Group's strategy has been to be an active participant in the upstream oil and gas industry, realise value from an India focused portfolio and pursue new opportunities as they arise. The events surrounding Hardy Exploration & Production (India) Inc's (HEPI) attempts to enforce the CY-OS/2 Award has led the Board to conclude that contracts entered into with the GOI do not provide basic protection from unilateral amendment to, deviation from, and termination of agreements. These circumstances prompted the Board to initiate a strategic review which culminated with the sale of all Indian assets and a shift in focus to identify a suitable investment for the Company's resources which remains ongoing.

Activity Review - Recommended sale of HEPI

As reported in the 2019 Preliminary Final Results Announcement, as part of the conclusion of the initial phase of its strategic review, the Board had explored numerous options to find a solution to the issues surrounding the Company's Portfolio in India and the Directors concluded that the sale of HEPI was the best option for the Company and its Shareholders for the following reasons:

·; the development work on each asset had been suspended for an extended period of time and so the Group had earned no revenue from any of the Assets since 2011 due to ongoing litigation and disputes and consequently, in recent years, the Group had been unable to commercialise or realise any value from the assets;

·; given the status of the ongoing litigation and disputes, the Group could not predict when, or if, such matters would be resolved or monetised in favour of the Group. Therefore, the Board was unable to determine when development work in respect of each asset would recommence (if at all);

·; the transaction would eliminate the need to fund the ongoing litigation and disputes going forward; and ongoing operational losses, indebtedness and associated cash outflows which would have arisen if HEPI had remand within the Group.

·; As a result of discussions with the FCA and in accordance with the requirements of the Listing Rules, the Company was required to transfer its listing on the London Stock Exchange from the current Premium Listing segment to the Standard Listing segment of the Official List. Accordingly, the Board sought authority from Shareholders at the EGM for the Transfer of Listing, which was inter-conditional on the disposal of HEPI.

As a result, for the reasons set out above, the Board recommended that the sale of HEPI was in the best interests of the Company and Shareholders voted in favour of the Transaction and Transfer of Listing at the Extraordinary General Meeting.

On 2 October 2019, the Company completed the sale of HEPI to Invenire Energy Private Limited (Invenire) for gross proceeds of $8.75 million. As part of the sale process the FCA required that shareholders simultaneously agree to the Company transferring its listing from a Premium listing to a Standard listing on the Main Market of the London Stock Exchange which took effect on 30 October 2019. A summary of the differences of the two listings was summarised in section IV (pages 26 and 27) of the Circular to shareholders dated 22 August 2019.

Mandatory Offer

On 24 November 2019, Blake Holdings Limited (Blake) announced that it will make a Mandatory offer of 5 pence in cash per share, valuing the Company at approximately $4.8 million. The Offer Document and relevant Forms of Acceptance are required to be posted to Hardy shareholders (or made available electronically in accordance with the Takeover Code) as soon as practicable and not later than 28 days after the date of the Mandatory offer announcement. The Offer Document will contain the formal terms of the Offer. The Board recommended that shareholders take no action until it had issued its response which is expected to be issued within 14 days of the publication of Blake's offer document.

Financial

The sale of HEPI took place on 2 October 2019 and as a result this segment of the Group has been classified as a discontinued operation.

The Group realised a pre-tax loss from continuing operations of $0.6 million and a pre-tax profit from discontinued operations of $0.4 million resulting in a total comprehensive loss of $0.3 million.

On 30 September 2019, assets for disposal were $12.9 million and liabilities directly associated with assets for disposal amounted to $14.7 million. Excluding assets for disposal the Group's assets and liabilities amounted to $3.2 million and $0.2 million respectively.

As at 30 September 2019, excluding assets for disposal the Group had over $3.1 million of cash and short-term investments with no debt. The Company maintains robust internal control and risk management systems appropriate for a Company of our size and resources. As at 30 November 2019 the Company had $10.5 million of cash and short-term investments.

Board Changes

Further to shareholders' vote in favour of the two resolutions at the Company's Extraordinary General Meeting on 1 October 2019, which resulted in the sale of substantially all of Hardy's assets and which constituted a change of control under the terms of his employment contract, the Company's Chief Executive Officer, Mr Ian MacKenzie, agreed with the Company that his employment would terminate effective 18 October 2019.

On 18 October 2019, Richard Galvin was appointed to the board of directors as the Executive Director. Mr Galvin has over 20 years of commercial and financial industry experience and has served Hardy for 14 years holding various management and executive roles latterly as Treasurer and Corporate Affairs Executive. Most recently, Mr Galvin was instrumental in the Company's successful sale of HEPI.

On 2 October 2019, Mr MacKenzie and Richard Galvin resigned from their directorships of Hardy Exploration & Production (India) Inc..

Objectives and outlook

Hardy's board of directors will be writing to shareholders as soon as practicable with its formal response to the Mandatory Offer once Blake has posted the offer document. Further announcements will be made as and when appropriate. In the meantime, the Board recommends that shareholders should take no action.

The Directors intend to use the Company's existing cash resources and short-term investments with the net proceeds of the cash consideration received from the HEPI sale for the purposes of acquiring or establishing a company, business or asset that operates in the resources sector or other industries should an appropriate investment opportunity present itself. The Board of Directors will continue to carry out its assessment of various identified and yet to be identified investments opportunities. The Board will not take any further steps in relation to any investments it plans to make without first consulting with shareholders.

FINANCIAL REVIEW

The Group's accounts ended 31 March 2019 contained a material uncertainty relating to the going concern of the Group. The details and circumstances carefully considered, by the Board, in coming to this conclusion were fully disclosed in notes 1b and 2 of the Consolidated Financial Statements. The subsequent sale of HEPI has resulted in those circumstances no longer being present, namely significant current liabilities to Samson Maritime Limited and other professional service providers. Furthermore the proceeds of the sale of HEPI significantly increased the resources of the Company and reduced the projected expenditures.

In the six months ended 30 September 2019, the Group recorded a total comprehensive loss of $0.3 million. As at 30 September 2019 the Company held total cash and short-term investments of $3.1 million with no debt.

The proceeds from the sale of HEPI and payment of various fees associated with sale have left the Company with a cash and short-term investment balance of $10.5 million as at 30 November 2019

Discontinued operations - The Group held interests in the following three assets, all of which are in India:

·; CY-OS/2: HEPI has a 75 per cent. participating interest ("PI") in CY-OS/2 with the remaining 25 per cent. PI being held by GAIL (together, the "CY-OS/2 uJV partners") under the terms of the CY-OS/2 Production Sharing Contract;

·; CY-OS-90/1 (PY-3): HEPI has an 18 per cent. PI in PY-3 with the remainder being held by TATA (21 per cent. PI), HOEC (21 per cent. PI) and ONGC (40 per cent. PI) (together, the "PY-3 uJV partners") under the terms of the PY-3 Production Sharing Contract; and

·; GS-OSN-2000/1 (GS-01): HEPI has a 10 per cent. PI in GS-01 with the remaining 90 per cent. PI held by Reliance (together, the "GS-01 uJV partners") which also acts as operator under the terms of the GS-01 Production Sharing Contract.

The Company has in place processes to the identification and management of risk by combining the Board's assessment of risk with risk factors originating from, and identified by, the Group's senior management team. Risks are identified, assessed for materiality, documented, and monitored through a risk register with senior management involved in the process. Risks that are identified as high and/or trending upwards are noted and assigned to the Executive Director to monitor and, if possible, proactively mitigate.

FY20 & FY21 Principal Risks and Uncertainties

The material risks and uncertainties previously identified were directly attributable to the operating activities of Hardy Exploration & Production (India) Inc. (HEPI). Following the sale of HEPI the Group's principal risks and uncertainties previously identified were eliminated or significantly mitigated. The underlying risks and uncertainties inherent in Hardy's current business are strategic and financial. The Board has identified principal risks and uncertainties through to FY21 and established policies and assigned responsibilities to mitigate their possible negative impact on the business, a summary of which is provided below:

RESPONSIBILITY STATEMENT

Each of the directors of the company confirms that to the best of his or her knowledge:

a. the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

b. the half year report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);

c. the half year report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein);

On behalf of the Board

Richard Galvin,

Executive Director

11 December 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 6 months ended 30 September 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 6 months ended 30 September 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the 6 months ended 30 September 2019

Approved and authorised for issue by the Board of Directors on 11 December 2019

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 6 months ended 30 September 2019

1. Accounting Policies

These financial statements are for the six months ending 30 September 2019.

i) Basis of measurement

Hardy prepares its financial statements on a historical cost basis except as otherwise stated.

ii) Going Concern

The Group's accounts ended 31 March 2019 contained a material uncertainty relating to the going concern of the Group. The details and circumstances carefully considered, by the Board, in coming to this conclusion were fully disclosed in notes 1b and 2 of the Consolidated Financial Statements.

On 15 July 2019, Hardy Oil and Gas Plc ("Company") entered into a Share Purchase Agreement with Invenire Energy Private Limited ("Invenire") for selling its entire stake in its wholly owned subsidiary, Hardy Exploration & Production (India) Inc. ("HEPI") on an as-is basis, for a consideration of USD 8,750,000 ("Transaction"). The Transaction was approved by shareholders on 1 October 2019 and completed on 2 October 2019.

Following the completion of the Transaction the circumstances identified in note 1b and 2 of the Consolidated Financial Statement are no longer present, namely significant current liabilities to Samson Maritime Limited and other professional service providers. Further the proceeds of the sale of HEPI have significantly increased the resources of the Company and reduced the projected expenditures.

The Directors intend to use the Company's existing cash resources and short-term investments with the net proceeds of the cash consideration received from the HEPI sale for the purposes of acquiring or establishing a company, business or asset that operates in the resources sector or other industries should an appropriate investment opportunity present itself. The Directors have reviewed the Company's ongoing activities and having regard to the Company's existing working capital position, the Directors are of the opinion that the Company has adequate resources to enable it to undertake its planned activities over the next 12 months from the date of these financial statements.

iii) Basis of preparation

These interim consolidated financial statements are for the six months ended 30 September 2019 and have been prepared in accordance with International Accounting Standard 34 "Interim Financial Statements". The accounting policies applied are consistent with International Financial Reporting Standards (IFRS) adopted for use by the European Union.

The accounting policies and methods of computation used in the interim consolidated financial statements are consistent with those used in the Company's Annual Report for 2019 and are expected to be applied for the year ending 31 March 2020.

The Financial information has not been audited or reviewed by the auditors.

iv) Cyclicality

The interim results for the six months ended 30 September 2019 are not necessarily indicative of the results to be expected for the financial year 2020. The operations of Hardy Oil and Gas plc (HOGL) are not affected by seasonal variations.

v) Full year comparative information in interim results

The financial information for the year ended 31 March 2019 does not constitute the Company's statutory accounts for that year but is derived from those accounts. Statutory accounts for 2019 are available at the Company's website. The auditors reported on those accounts and whilst their report was unqualified it highlighted a material uncertainty in relation to going concern.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 March 2019.

2. Critical Accounting Estimates and Judgments

The preparation of the Group's financial statements requires the use of estimates and judgements that affect the carrying value of assets and liabilities at the balance sheet date and the reported amounts of revenue and expenditure for the year. These estimates and judgements are made based on management's knowledge of the facts, taking into account historical experiences and expectations of future events that are believed to be reasonable under the particular circumstances. By definition the actual results will most likely differ from the estimates made.

3. Segment analysis

Post-acquisition of HEPI by Invenire Energy Private Limited, the Company operates in a single geographical segment. There are no reportable segments for the Company.

4. Taxation

Considering the current uncertainty over the future of the operations and the ongoing review of the strategic objectives of the Group, a deferred tax asset on the losses carried forward has not been recognised.

5. Loss per share

Loss per share is calculated on a loss of US$ 283,708 for the six months ended 30 September 2019 (September 2018: US$54,059,086) on a weighted average of 36,882,018 Ordinary Shares for the six months ended 30 September 2019 (September 2018: 36,882,018). No diluted loss per share is calculated.

6. Discontinued Operations

On 2 October 2019 the Group sold the wholly owned subsidiary Hardy Exploration & Production (India) Inc and as a result has been classified as discontinued operation and is no longer presented in the segment note. The results of Hardy Exploration & Production (India) Inc incorporating consolidation adjustments, are presented below:

The major classes of assets and liabilities of discontinued operations classified as held for distribution to equity holders of the parent as at 30 September 2019 are as follows:

The net cash flows incurred by discontinued operations are as follows:

Loss per share ($)

7. Share capital

The Company has authorised share capital of 200 million US$ 0.01 ordinary shares. Changes in issued and fully paid ordinary shares during the six months ended 30 September 2019 are as follows:

8. Share Options

Changes in outstanding share options during the six months ended 30 September 2019 are summarised below:

9. Contingent liabilities

Litigation

In the normal course of business, the Group may be involved in legal disputes which may give rise to claims. Provision is made in the financial statements for all claims where a cash outflow is considered probable. No separate disclosure is made of the detail of claims as to do so could seriously prejudice the position of the Group.

Others

Disputed claims amounting to approximately $0.4 million by the suppliers to discontinued operations has not been acknowledged as debt.

10. Dividends

The Board of Directors do not recommend the payment of an interim dividend for the period ended 30 September 2019.

11. Approval of interim Consolidated Financial Statements

These interim consolidated financial statements have been approved by the Board of Directors on 11 December 2019.

GLOSSARY OF TERMS

Hardy Oil and Gas plc

16 North Silver Street

Aberdeen, UK AB10 1RL

Tel: +44 (0) 1224 61 2900

Fax: +44 (0) 1224 63 3995

Investors Relations Contact Richard Galvin

IR@hardyoil.com