Hardy Oil & Gas (HDY) - Interim Management Statement
RNS Number : 6001Q
Hardy Oil & Gas plc
08 November 2012
8 November 2012
Hardy Oil and Gas plc
Interim Management Statement
Hardy Oil and Gas plc ('Hardy' or 'the Company'), the oil and gas exploration
and production company with assets in India, today issues its Interim
Management Statement for the period from 1 July 2012 to the date of this
· Completed strategic review reaffirming our commitment to the Company's
India focused portfolio
· Relocation of the corporate office to Aberdeen, the UK's centre of
excellence for upstream oil and gas expertise
· Cost rationalisation exercise undertaken resulting in a reduction in
annual overhead costs of approximately $1.0 million
· Cash and short term investments at 30 September 2012 amounted to $30.3
million which is sufficient for the Company's committed exploration drilling
programme; the Company has no debt
· D3 - PSDM processing of 3D seismic data of 1,292 km^2 covering the
eastern area of the block is in progress and expected to be completed by the
· D3 - Declaration of commerciality for the Dhirubhai 39 and 41 natural
gas discoveries under review by the Government of India ('GOI')
· PY-3 - Secured partner consensus on a timeline for the submission of a
revised full field development plan by the end of 2012
· GS-01 - Ongoing discussions with the operator regarding the submission
of a development plan for Dhirubhai 33 natural gas discovery
· CY-OS/2 -The dispute resolution is in progress to extend the production
· D3 - Carry out the geotechnical studies to rank prospects and finalise
the next locations for drilling. It is expected that the drilling of the fifth
exploration well is likely to commence in the first half of 2013
· CY-OS/2 - Award of the tribunal on the dispute with the GOI is expected
by the end of 2012
· PY-3 - Submit a full field development plan to the GOI for their review
and seek to secure their approval by the first quarter of 2013. Subject to
approval, complete the tendering process for facilities and initiate planning
for a drilling programme to recommence production in 2014
· GS-01 - Development plan schedule to be submitted to the GOI by the end
Ian MacKenzie, Chief Executive Officer of Hardy, commented:
"Following our review, we have concluded that Hardy's India focused portfolio
has the potential to add significant shareholder value and our medium-term
focus will therefore remain on India. The outcome of planned activity through
2013 is expected to crystallise our view on the longer-term prospects of our
portfolio. In the interim we will continue to consider all opportunities to
accelerate value creation for our shareholders."
For further information please visit www.hardyoil.com or contact:
Hardy Oil and Gas plc 0122 461 2900
Ian MacKenzie, Chief Executive Officer
Richard Galvin, Treasurer & Corporate Affairs Executive
Arden Partners plc 020 7614 5917
Tavistock Communications 020 7920 3150
The Board has completed its strategic review. Our review focused on assessing
Hardy's existing assets, organisational competencies and potential
opportunities to create value for shareholders. Whilst the Company continues
to evaluate long-term upstream growth opportunities, the Board believes that
Hardy's India focused portfolio, in the medium-term, provides a good platform
from which to create shareholder value.
India focused portfolio - Our review concluded that the Company's asset
portfolio, being spread across the spectrum of early exploration, appraisal
and development, has substantial underlying value which should be realised
through the implementation of the planned programmes. Consequently, we
reaffirm our medium term commitment to our India focused strategy.
India's improving investment climate - In 2013 we look forward to the GOI
reaffirming its commitment to encouraging investment in India's upstream oil
and gas sector and the resolution of a number of industry concerns. We very
much hope that this will result in an acceleration of the approvals process.
India's gas market fundamentals remain strong and the gap between demand and
supply is expected to remain high with consequent upward pressure on future
Reorganisation - An objective of our review was to more closely align our
underlying overhead requirements to our overall activities without
compromising the competencies required to remain an offshore operator. Based
on our review, the Company's corporate office has been relocated to Aberdeen.
The relocation has resulted in a reduction in annualised overhead of
approximately $1.0 million. Locating to Aberdeen also brings the Company
closer to the expertise and resource base in designing, planning and executing
complex offshore hydrocarbon projects which will be of benefit to the Company
in the implementation of development programmes.
Ongoing assessment - As plans for PY-3 and CY-OS/2 become clearer, further
direct recruitment or engagement of support resources will be put in place. We
will continue to assess and evaluate further opportunities that complement our
existing portfolio in India and identify longer term upstream opportunities to
diversify the Company's portfolio.
REVIEW OF OPERATIONS
As at 30 September 2012, the Company had cash and short term investments of
$30.3 million and no debt.
Block KG-DWN-2003/1 (D3): Exploration (Hardy 10 per cent interest)
Update - The joint venture continued to undertake a number of geotechnical
studies including the PSDM reprocessing of over 1,292 km^2 of 3D data.
Geotechnical studies have been focused on assessing the potential of the
eastern area of the block and high grading prospects, including testing deeper
A revised proposal for the declaration of commerciality (DOC) for the
Dhirubhai 39 and 41 natural gas discoveries, submitted earlier this year,
remained under review by the GOI. The proposed development plan provides for a
dry gas, sub-sea cluster development with the flexibility to add in additional
wells and to include possible adjoining area of discoveries.
Outlook - The joint venture will continue the geotechnical work into 2013.
The deep-water drillship Dhirubhai Deepwater KG2, contracted to Reliance
Industries Limited (Reliance), is expected to arrive in Indian waters by the
end of the year. Drilling of a fifth exploration well is expected to commence
in the first half of 2013.
The GOI's review of the D3 DOC proposal will likely continue into 2013.
Background - Situated in the Krishna Godavari Basin, a prolific petroleum
province on the East coast of India, the D3 exploration licence encompasses an
area of 3,288 km^2, in water depths of 400 m to 2,200 m, and is located
approximately 45 km offshore. The D3 block is operated by Reliance which holds
a 60 per cent participating interest, BP and Hardy hold participating
interests of 30 per cent and 10 per cent respectively. To date, four
consecutive gas discoveries have been made via the Dhirubhai 39, 41, 44 and 52
(KGV-D3-A1, B1, R1 and W1) exploration wells. The joint venture has acquired
approximately 3,250 km^2 of 3D seismic data over the block.
Block CY-OS 90/1 (PY-3): Oil Field(Hardy 18 per cent interest - Operator)
Update - As previously announced, the PY-3 field remained shut-in. We
continued working with partners and government authorities to plan for the
timely recommencement of production. We have held a number of constructive
meetings with partners and the India upstream oil and gas regulator ('DGH').
As a result we have agreed to a timeline to submit a full field development
Outlook - Assuming timely approvals from partners, a full field development
plan is to be submitted for the GOI's review and approval by the end of the
first quarter of 2013. Once the revised plan is approved, we intend to
initiate a tendering process for the required production facility and drilling
services. Based on current assumptions, production could recommence in the
first half of 2014. The field's existing well is capable of producing at a
gross daily rate of over 3,000 bbld and with future planned wells, the field
has the potential to reach 8,000 bbld.
Background - The PY-3 field is located off the east coast of India 80 km south
of Pondicherry in water depths between 40 m and 450 m. The Cauvery Basin was
developed in the late Jurassic / early Cretaceous period and straddles the
present-day east coast of India. The licence, which covers 81 km^2, produces
high quality light crude oil (49° API).
Block GS-OSN-2000/1 (GS-01): Appraisal (Hardy 10 per cent interest)
Update - Hardy continued discussion with the operator to facilitate the
preparation of a detailed field development plan for the Dhirubhai 33 natural
gas discovery. The field development plan is scheduled to be submitted to GOI
for review by the end of the year.
Outlook - The GOI's review of the field development plan will likely continue
Background -In 2011, the GS-01 joint venture secured the GOI's approval for a
DOC proposal for the Dhirubhai 33 discovery (GS01-B1, drilled in 2007) which
flow-tested at a rate of 18.6 mmscfd gas with 415 bbld of condensate through a
56/64 inch choke at flowing tubing head pressure of 1,346 psi. The GS-01
licence is located in the Gujarat- Saurashtra offshore basin off the west
coast of India, northwest of the prolific Bombay High oil field, with water
depths varying between 80 m and 150 m. The retained discovery area covers 600
Block CY-OS/2: Appraisal (Hardy 75 per cent interest - Operator)
Update - The dispute resolution process with the GOI, to secure an extension
of the production sharing contract, is progressing. The final hearing of the
tribunal took place in the third quarter of 2012.
Outlook - The award of the tribunal is expected prior to the end of 2012.
Background - Block CY-OS/2 is located in the northern part of the Cauvery
Basin immediately offshore from Pondicherry, India and covers an area of
approximately 859 km^2. The licence encapsulates the fields of PY-3 and PY-1.
In January 2007, the Company announced that the Fan A-1 exploration well had
discovered hydrocarbons. The Company proceeded to the appraisal of the
non-associated natural gas (NANG) discovery to establish potential
In 2009 the DGH informed the Company that, in their opinion, the discovery
should be classified as an oil discovery and that the allowed period to
declare commerciality had lapsed. Provisions of the CY-OS/2 production sharing
contract (PSC) provides for a period of 60 months to declare commerciality
from date of discovery for NANG discoveries whereas it is 24 months for oil.
As a result, the Company initiated formal dispute resolution as provided for
in the PSC.
The D3 exploration licence in the Krishna Godavari Basin remains at the core
of our near term growth potential. The Krishna Godavari Basin is a world-class
petroleum province and together with rapidly improving Indian gas pipeline
infrastructure and the high demand for gas, the prospects for the economic
development of gas resources in this area are excellent.
Through 2013 we will continue to collaborate actively with our partners
Reliance and BP to optimise the exploration programme for this highly
prospective block. The declaration of commerciality proposal for the D3 block
is being reviewed by the GOI and this process is expected to continue into
2013. Processing of 3D seismic data covering the eastern area of the D3 block
is also expected to be completed by the end of 2012. Assuming the arrival of
the drillship Dhirubhai Deepwater KG2 in Indian waters by the end of 2012,
drilling of the fifth exploration well is expected to commence in the first
half of 2013.
The resolution of the CY-OS/2 dispute and the securing of timely approvals for
the PY-3 redevelopment plan are additionally instrumental in shaping our
planned operating activity beyond 2013.
The working capital position of the Company remains strong and we are well
funded to meet our planned work programmes. We will continue to seek
opportunities to build value for shareholders.
GLOSSARY OF TERMS
$ United States Dollar
bbld stock tank barrel per day
BP BP plc
D3 Exploration licence KG-DWN-2003/1
D9 Exploration licence KG-DWN-2001/1
DGH Directorate General of Hydrocarbons
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
Dhirubhai 44 gas discovery on KGV-D3-R1 announced on 22 December 2009
Dhirubhai 52 gas discovery on KGV-D3-W1 announced on 31 August 2010
Ganesha non-associated gas discovery announced on 8 January 2007
GOI Government of India
GS-01 Exploration licence GS-OSN-2000/1
KG Basin the Krishna Godavari sedimentary basin located on the east coast
km^2 square kilometre
PSC production sharing contract
PSDM pre-stacked depth migration
PY-3 licence CY-OS-90/1
Reliance Reliance Industries Limited
NOTES TO THE EDITORS
Hardy Oil and Gas plc is an upstream oil and gas company focused on 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 is the operator of an offshore oil field in India's Cauvery basin. Hardy
also has interests in three offshore exploration blocks in India's Saurashtra,
Cauvery, and Krishna Godavari 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.
This information is provided by RNS
The company news service from the London Stock Exchange
IMSFSWFWWFESEEF -0- Nov/08/2012 07:00 GMT
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