5 Nov 2008 07:00
| For Immediate Release | 5 November 2008 |
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 in India and Nigeria, today issues its Interim Management Statement for the period from 1 July 2008 to date.
Key Highlights
Operations
Hardy's net average daily production for the three months ended 30 September was 516 stbd (Q3 2007: 676 stbd)
On Block GS-01 (on which a discovery was announced in 2007), two exploration wells were drilled, both of which were plugged and abandoned
On 28 October 2008 Hardy commenced re-entry operations on the PY-3-PD4 lateral well to enhance production in the PY-3 producing field by the end of 2008
Financial
Crude oil sales for the three months ended 30 September 2008 amounted to 53,181 stb (Q3 2007: 87,609 stb); the average price realised was $112.67 per stb (Q3 2007: $74.06 per stb)
Capital expenditures for the three months ended 30 September 2008, amounted to $8.3 million principally on the drilling of two exploration wells on the GS-01 block
During July and August 2008, the Company sold its remaining investment in Hindustan Oil Exploration Company Limited of 3.03 million ordinary shares for cash consideration of $9.9 million
At 30 September 2008 the Company had cash resources of $35.6 million and no long term debt
Corporate
On 27 October 2008 the Company announced the appointment of Mr Ian Bruce FCA as a Non-Executive Director. Mr Bruce is the Chief Executive Officer of Peters & Co. Limited, an independent, fully integrated investment dealer in the Canadian energy sector.
Sastry Karra Chief Executive of Hardy commented:
"We are delighted to welcome Ian to the Board of Hardy. His extensive experience in the capital markets and the energy sector will be invaluable. The recent commencement of the drilling of PY-3 lateral well and subsequent Phase III programme should have a positive impact on the Company's production and cash generation. Hardy continues to implement the Company's exploration and development programme on its five other blocks in India and two blocks in Nigeria."
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 | |
| Buchanan Communications | 020 7466 5000 |
| Mark Edwards Ben Willey |
FINANCIAL POSITION
Hardy remains in a strong financial position. As at 30 September 2008 the Company had cash resources of $35.6 million with no long term debt.
Hardy sold 53,181 stb of oil during the three months ended 30 September 2008 (Q3 2007: 87,609 stb). The average realised price in this period was $112.67 per stb (Q3 2007: $74.06 per stb).
Capital expenditures incurred during the three months ended 30 September 2008 amounted to $8.3 million of which $6.7 million was spent on drilling two exploration wells on the GS-01 block.
In July and August 2008, the Company liquidated its remaining balance of its HOEC shareholding of 3,025,552 shares, for cash consideration of approximately $9.9 million.
REVIEW OF OPERATIONS
India
PY-3 (18%)
Gross field production for the quarter ending 30 September 2008 was 0.26 MMstb of oil (Q3 2007: 0.35 MMstb). The daily average production on a participating interest basis was 516 stbd (Q3 2007: 676 stbd). The gross average daily production rate of the field for the month of October 2008 was 2,750 stbd. Hardy anticipates PY-3's gross daily production for 2008 to average 2,800 stbd.
The drilling of an additional lateral well, via the re-entry of the producing PY-3-PD4 well, commenced on 28 October 2008. This well is expected to contribute additional production by the end of the year.
The drilling of two further production wells is expected to commence in the second half of 2009.
CY-OS/2 (75%)
The Company submitted a proposal to revise the appraisal programme to reduce three firm and two contingent wells to one firm and one contingent well. The revised work programme was approved by the CY-OS/2 management committee in October 2008. The CY-OS/2 joint venture has requested the Government of India for an extension of the licence to January 2012 to accommodate the appraisal programme to establish commerciality of the block in accordance with the terms of the CY-OS/2 production sharing contract. Hardy will continue to work towards drilling of an appraisal well during the first half of 2009.
GS-01 (10%)
In May 2007, the Company had announced that it had encountered natural gas and condensate within the mid Miocene Limestone on a well on the GS-01 block.
On 26 August 2008 the Company announced that a further exploratory well GS01-S1 was drilled to a total depth of 3,985 m TVDRT on the western shelf edge of the block to explore the Miocene carbonate build-up, Miocene and Oligocene reefal carbonate. While there was porosity development in the reefal carbonates, no hydrocarbons were found. The well has been plugged and abandoned.
On 3 October 2008 the Company announced that the exploratory well GS01-M1 was drilled to a total depth of 4,326 m TVDRT to explore the Oligocene and Eocene carbonate targets. Porosity development was observed in the Oligocene target but no proper seal was present. Gas shows with heavier end hydrocarbons were recorded while drilling the mid-Eocene target zone over a 20 m interval. However, the middle Eocene carbonate could not be drilled in its entirety due to BOP pressure limitations of the rig. Well logs showed reservoir development but the MDT tests were inconclusive and a conventional DST was not conducted. The well has now been plugged and abandoned.
The GS-01 management committee reviewed and adopted an appraisal programme and budget for the GS01-B1 gas and condensate discovery (Dhirubhai - 33). With an effective term through to May 2010, the appraisal area comprises 5,890 km2.
The GS-01 joint venture is conducting further technical studies to enhance our understanding of the block.
D9 (10%)
The ultra-deep-water drilling rig "Deepwater Expedition", which is capable of drilling in waters in excess of 3,000 m, arrived in Indian waters and is currently located on the adjacent D6 block. The operator has advised that the first exploration well in the D9 block may commence drilling in the first half of 2009 as the rig is currently engaged in development operations on the adjacent block. It is possible that the D9 joint venture may get an opportunity to drill the first well on this block sooner should a deepwater rig become available.
D3 (10%)
The evaluation and incorporation of the data recovered from the Dhirubhai 39 and Dhirubhai 41 gas discoveries in the D3 block is ongoing. The tendering for acquisition of a further 1,200 km2 of 3D seismic data is in progress and the acquisition is expected to commence after the first quarter of 2009. The drilling of one further exploration well is anticipated in the latter part of 2009.
Further studies and analysis are planned for the fourth quarter of 2008, after which the Company expects to commission a formal review of the Company's resource and reserve potential in 2009.
Assam (10%)
The planned 2D seismic acquisition programme should commence in the first quarter of 2009. The programme is expected to acquire approximately 450 lkm of 2D seismic data.
Nigeria
Oza / Atala (20%)
The Oza joint venture has procured several long lead items and FEED study and ROW survey for pipelines are expected to commence prior to the end of 2008. Hardy's interest is carried on the approved initial work programme by a joint venture partner. Production is expected to commence during the second quarter of 2009
In Atala, community consultation process was initiated and several key environmental permits have been applied for. Tenders for route survey and dredging of the Atala well location are being finalised. The Atala joint venture continues to take steps to secure a swamp-barge drilling rig. The re-entry and testing programme for Atala #1 well is expected during the first quarter of 2009.
CORPORATE
Effective 24 October 2008 the Company appointed Mr Ian Bruce, FCA as an independent Non-Executive Director. Mr Bruce is the Chief Executive Officer of Peters & Co. Limited, an independent, fully integrated investment dealer in the Canadian energy sector. Mr Bruce holds an undergraduate degree from Queen's University; an MBA from the Richard Ivey School of Business at the University of Western Ontario; and the designations of Chartered Accountant, Chartered Business Valuator and CF (Corporate Finance Qualification). In 2004, he became a Fellow of the Chartered Accountants of Canada.
In addition to serving on the Board of Directors of Hardy, Mr Bruce will serve on the Company's Audit Committee.
GLOSSARY OF TERMS
| $ | United States Dollar |
| Assam block | licence AS-ONN-2000/1 |
| D3 | licence KG-DWN-2003/1 |
| D9 | licence KG-DWN-2001/1 |
| DST | drill stem test |
| FEED | front end engineering design |
| GS-01 | licence GS-OSN-2000/1 |
| HOEC | Hindustan Oil Exploration Company Limited |
| INR | Indian Rupee |
| km2 | square kilometre |
| Lkm | line kilometre |
| M | metre |
| MDT | modular formation dynamics tester |
| MDRT | measured depth from the rotary table |
| MMscfd | million standard cubic feet per day |
| MMstb | million stock tank barrels |
| Stb | stock tank barrel |
| Phase III | the PY-3 development plan comprising the drilling of two further production wells. |
| PY-3 | licence CY-OS-90/1 |
| ROW | right of way |
| stbd | stock tank barrel per day |
| TVDRT | total vertical depth measured from the rotary table |
NOTES TO THE EDITORS
Hardy Oil and Gas plc is an upstream international oil and gas company whose assets are principally in India and also in Nigeria. Its portfolio includes a blend of production, development, appraisal and exploration 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, 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.