7 May 2009 07:00
| For Immediate Release | 07 May 2009 |
Hardy Oil and Gas plc
("Hardy" or "the Company")
Interim Management Statement
Hardy Oil and Gas plc (LSE: HDY), the oil and gas exploration and production company with assets predominantly in India, today issues its Interim Management Statement for the period from 1 January 2009 to date.
* All financial figures in US dollars unless otherwise stated
Operational Highlights
D3: Pre-drilled KGV-D3-G1 to 20" casing point (1,625 m TVD) for future re-entry
D3: Completed the acquisition of 1,150 km2 of 3D seismic data (3D seismic data has now been gathered across the entire block)
PY-3: Net average daily production for the three months ended 31 March 2009 was 528 stbd (Q1 2008: 512 stbd)
PY-3: Completed the PY3-PD4RL well with a gas lift valve for future oil production
Assam: Commenced acquisition of 450 line km of 2D seismic data on the Assam block (approximately 300 line km acquired to date)
Financial Highlights
Salesoil of 77,274 stb was realised for the three months ended 31 March 2009 (Q1 2008: 92,633 stb); the average price realised was $44.31 per stb (Q1 2008: $94.18 per stb)
Total capital expenditures amounted to $5.1 million principally on the drilling of one development well on the PY-3 field and acquisition of seismic data on the company's D3 and Assam exploration blocks
Cash and short term investments at 31 March 2009 was $16.2 million; the Company has no long term debt
On 27 April 2009 the Company completed a placing of 6,208,997 Ordinary Shares at 174 pence per share for net proceeds of $15.2 million
Sastry Karra, Chief Executive of Hardy, commented:
"We are delighted with the tremendous support received from new and existing shareholders in the recent share placing. Hardy is now well positioned to progress the highly prospective exploration programme on our D3 and D9 exploration assets in the prolific Krishna Godavari basin in India."
For further information please contact:
| Hardy Oil and Gas plc | 020 7471 9850 |
| Sastry Karra, Chief Executive | |
| Yogeshwar Sharma, Chief Operating Officer | |
| Dinesh Dattani, Finance Director | |
| Arden Partners plc | 020 7398 1632 |
| Richard Day | |
| Matthew Armitt | |
| Buchanan Communications | 020 7466 5000 |
| Mark Edwards Ben Willey |
FINANCIAL POSITION
Hardy sold 77,274 stb of oil during the three months ended 31 March 2009 (Q1 2008: 92,633 stb). The average realised price in this period was $44.31 per stb (Q1 2008: $94.18 per stb).
Total capital expenditures incurred during the three months ended 31 March 2009 amounted to $5.1 million, of which $2.6 million was spent on drilling a development well on PY-3 field and $2.2 million on seismic data acquisition.
The Company successfully completed a placing on 27 April 2009 of 6,208,997 Ordinary Shares at a price of 174 pence per share for net proceeds of £10.4 million. The Company subsequently converted the proceeds into US dollars resulting in net proceeds of $15.2 million.
Hardy remains in a strong financial position. As at 31 March 2009, the Company had cash and short term investments of $16.2 million with no debt. In April 2009, the financial position of the Company was strengthened, through an equity issuance, resulting in the cash position being supplemented by $15.2 million.
REVIEW OF OPERATIONS
India (Non-operated)
D3
The joint venture acquired 1,150 km2 of 3D seismic data during the first quarter of 2009. With the completion of this programme, the joint venture has acquired 3D seismic data covering the entire block. Additional interpretation and processing was completed on previously acquired data, including PSTM and AVO studies.
On 16 April 2009, the company announced the commencement of the drilling of the third exploration well KDV-D3-G1. Drilling was subsequently suspended after the setting of 20" casing at 1,625 m TVD. The joint venture intends to re-enter the well in the second half of 2009 to test prospective geological horizons.
An appraisal programme for the gas discoveries Dhirubhai 39 and 41 was approved by the joint venture operating committee and has been submitted to the Director General of Hydrocarbons of the Government of India for consideration.
D9
The Company expects that the D9 joint venture will commence drilling on the block once the Government of India ratifies a proposed drilling moratorium. The drilling moratorium provides for the licencees of various deepwater exploration licences to be granted a three year extension to the term of the PSC to address a global shortage of deepwater drilling ships. The ratification of the drilling moratorium may occur after the completion of India's elections in June 2009. The Board anticipates that the first exploration well on the D9 block will commence drilling in the second half of 2009.
Technical Review
Hardy has commissioned Gaffney, Cline & Associates Ltd to provide a third party technical review of the resource potential on the Company's D9 and D3 exploration assets. This report is expected to be published by the end of the second quarter of 2009.
Assam (AS-ONN-2000/1)
The joint venture has made progress with the 450 line km 2D seismic data acquisition programme. The programme is expected to be completed, as planned, in the second quarter of 2009.
GS-01
The GS-01 joint venture continued various geological and geophysical studies in relation to the appraisal of the Dhirubhai 33 gas discovery. A decision on the drilling of an appraisal well will be made during the second quarter of 2009.
India (Operated)
PY-3
Gross field production for the quarter ending 31 March 2009 was 0.26 MMstb of oil (Q1 2008: 0.26 MMstb). The daily average production on a participating interest basis was 528 stbd (Q1 2008: 512 stbd). The gross average daily production rate of the field for the month of April 2009 was 3,105 stbd. Hardy anticipates gross daily production for the year to average 3,000 stbd.
As announced on 17 February 2009, the Company completed the re-entry and drilling of the PY3-PD4RL well. The PD4 vertical well was re-entered and side-tracked from 2,916 m MD (2,890 m TVDSS) and drilled down to 4,375 m MD (3,525 m TVDSS). With the assistance of nitrogen lift, the well flowed at 700 stbd of oil with 30% water-cut, however, the well was unable to be reactivated as a self flowing well. The well has been completed as a producer with a gas lift valve to allow for future production when gas lift compression facilities are installed on the FPU. Hardy is currently updating its geological model to incorporate new data gathered from the well.
CY-OS/2
The joint venture has applied for an extension of the appraisal period to January 2012, as per the PSC, to the Ministry of Petroleum and Natural Gas of the Government of India to establish commerciality of the Ganesha gas discovery. The Company is working with the Ministry and DGH to finalise the duration of the appraisal period.
The Company intends to farmout a significant portion of its participating interest in this licence following the resolution of the extension period.
Nigeria
Oza
In February 2009 34 km of line pipe, for the initial field development plan, arrived in Port Harcourt, Nigeria. A front end engineering study and pipeline route survey commenced and is currently ongoing. It is anticipated that pipeline construction and installation will commence in the second half of 2009.
GLOSSARY OF TERMS
| $ | United States Dollar |
| £ | Pound sterling |
| 2D | two dimensional |
| 3D | three dimensional |
| Assam block | exploration licence AS-ONN-2000/1 |
| AVO | amplitude variations with offset (supports the interpretation of various seismic anomalies being direct hydrocarbon indicators |
| D3 | exploration licence KG-DWN-2003/1 |
| D9 | exploration licence KG-DWN-2001/1 |
| DGH | Director General of hydrocarbon of the Government of India |
| Dhirubhai 33 | gas discovery on GS-01-B1 announced on 15 May 2007 |
| Dhirubhai 39 | gas discovery on KGV-D3-A1 announced on 13 February 2008 |
| Dhirubhai 41 | gas discovery on KGV-D3-B1 announced on 1 April 2008 |
| Ganesha | non-associated gas discovery announced on 8 January 2007 |
| GS-01 | exploration licence GS-OSN-2000/1 |
| km | kilometre |
| km2 | square kilometre |
| lkm | line kilometre |
| m | metre |
| MD | measured depth |
| MMstb | million stock tank barrels |
| Ordinary Shares | ordinary shares of $0.01 each in the capital of the Company |
| PSC | production sharing contract |
| PSTM | pre-stack time migration (facilitates the interpretation of the topography of subsurface structures) |
| PY-3 | licence CY-OS-90/1 |
| Q1 | the first quarter of the year |
| TVD | total vertical depth |
| TVDSS | total vertical depth sub-sea |
| stb | stock tank barrel |
| stbd | stock tank barrel per day |
NOTES TO THE EDITORS
Hardy Oil and Gas plc is an upstream international oil and gas company whose assets are principally in India. Its portfolio includes a blend of exploration, appraisal, development, and production assets. Hardy's goal is to evaluate and exploit its asset base with a view to creating significant value for its shareholders.
Hardy Oil and Gas plc has existing production from an offshore field in India's Cauvery basin. Hardy also has interests in four offshore exploration blocks in India's Saurashtra, Cauvery, and Krishna Godavari basins, one onshore exploration block in the Assam basin and two development licences in Nigeria.
Hardy is incorporated under the laws of the Isle of Man and headquartered in London, UK. Ordinary shares of Hardy were admitted to the Official List and the London Stock Exchange's market for listed securities effective 20 February 2008 under the symbol HDY.
The Company's Indian assets are held through the wholly owned subsidiary Hardy Exploration & Production (India) Inc, located in Chennai, India. The Company's Nigerian assets are held through wholly owned subsidiary Hardy Oil Nigeria Limited, located in Lagos, Nigeria.
For further information please refer to our website at www.hardyoil.com
DISCLAIMER
This "Interim Management Statement" contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Company believes the expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy.