24 Dec 2014 07:00
24 December 2014
Hardy Oil and Gas plc
("Hardy" or "the Company")
Relinquishment of D3
Hardy Oil and Gas plc (LSE: HDY), the oil and gas exploration and production company focused in India announces that on 23 December 2014 the Company consented to the relinquishment of the KG-DWN-2003/1 (D3) exploration licence.
On 23 December 2014, the D3 Management Committee considered a proposal from Reliance Industries Limited, the operator of the D3 block, in which the Company holds a 10 per cent interest, for the relinquishment of the block. The proposal set out that as per the Government of India (GOI) Notification O-22013/27/2012-ONG-D-V dated 10 November 2014, access restrictions have been imposed by the GOI and the Operator recommended the relinquishment of the block with immediate effect under clause 3.1 (a), and (e) and 3.2, of the referenced Government Policy.
The Operator conveyed that the previously announced access restrictions imposed by the Ministry of Defence (MOD) rule out any further exploration/development activities in the impact zone area and inhibited the Contractor from undertaking any further work and investment in the unrestricted area of the Block due to the anticipated increase in cost and risk. This untenable position was further compounded by the uncertainty of long-term natural gas pricing in India following the GOI policy announced earlier in the year which imposed pricing at a significant discount to our expectation of regional market pricing.
The relinquishment of the block will release Hardy from any further work programme liability including any further financial liability related to unfinished Minimum Work Programme penalties. However, $22,033,290 of the Company's Intangible Assets, which are attributable to the D3 block, will be subject to write down in the current financial year.
The Company's primary objectives remain to secure key stakeholder approvals for the PY-3 field and continue activity that will take Hardy closer to realising production from its portfolio of assets. The release of liabilities associated with the D3 Block means that the Company is now in a stronger working capital position from which to fund its planned work activity on other assets and we look forward to updating the market further in due course.
For further information please visit www.hardyoil.com or contact:
Hardy Oil and Gas plc | 012 2461 2900 |
Ian MacKenzie, Chief Executive Officer Richard Galvin, Treasurer & Corporate Affairs Executive | |
Arden Partners plc | 020 7614 5917 |
Steve Douglas | |
James Felix | |
Tavistock Communications | 020 7920 3150 |
Simon Hudson
|
Background leading to relinquishment:
The production sharing contract (PSC) for the D3 block was signed on 23 September 2005. The Contractor subsequently carried out substantial work in the block in the exploration phase, spending more than $220 million. In doing so, the D3 joint venture (JV) completed nearly twice the amount of Seismic activities in comparison to the minimum work programme (MWP), and drilled four of six committed exploration wells.
In 2012 the Directorate General of Hydrocarbons (DGH) informed the Operator of restrictions imposed by MoPNG, in the D3 block. These restrictions affect 38 per cent of the block (1,242 km2 affected out of 3,288 km2 of block area) with a number of prospects lying in this affected area. The MOD restrictions introduced since October 2012, which were beyond the control of the Contractor, the effect of which was to prevent the Contractor from making any further progress, as these restrictions impact operations through the entire lifecycle of Exploration, Development and Production.
The Operator has advised that the MOD access restrictions rule out any further exploration and development activities in the impact zone area and inhibited the Contractor from undertaking any further work and investments in the remaining area of the Block due to increases in the anticipated cost and risk.
The Operator advised, that as a result of the above noted restrictions, it was not possible for the Contractor to proceed with a proportionate reduction in the PSC area as allowed under the Policy clause 3.1(a).
NOTES TO THE EDITORS
Hardy Oil and Gas plc is an upstream oil and gas company focused in India. Its portfolio includes a blend of exploration, appraisal, 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 is the operator of the PY-3 oil field (shut-in July 2011) located offshore India's east coast in the Cauvery basin. Hardy also has interests in two other offshore exploration blocks in India's Saurashtra, and Cauvery basins.
Hardy is incorporated under the laws of the Isle of Man and headquartered in Aberdeen, 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.
For further information please refer to our website at www.hardyoil.com