We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hardy Oil & Gas Plc | LSE:HDY | London | Ordinary Share | GB00B09MB366 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 6.00 | 5.00 | 6.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMHDY
RNS Number : 9965P
Hardy Oil & Gas plc
24 November 2016
24 November 2016
Hardy Oil and Gas plc
("Hardy", the "Company" or the "Group")
Half Year Results
for the six months ended 30 September 2016
Hardy Oil and Gas plc (LSE: HDY), the oil and gas exploration and production company focused in India, reports its results for the six months ended 30 September 2016.
All financial amounts are stated in US dollars unless otherwise indicated.
SUMMARY
CY-OS/2 - Government of India's (GOI) second appeal of the CY-OS/2 international arbitration award, in favour of Hardy, (the Award) was dismissed. The GOI has subsequently escalated their appeal to the Supreme Court of India. Legal process to confirm the Award in the US is under consideration by the Washington, DC judiciary.
PY-3 - Maintained compliance activities while working closely with the GOI and the regulatory authority, Directorate General of Hydrocarbons (DGH), to establish a viable development solution to recommence production and optimise reserves.
GS-01 - Resolution of the quantification of liquidated damages (LD) associated with the unfinished minimum work programme (UMWP) is awaited - GOI's agreement with the uJV's proposed estimate of LD should facilitate the Company's plans going forward.
Financial - Total Comprehensive loss of $1.2 million for the six months ended 30 September 2016 (H1FY16 $4.2 million). Cash and short-term investments at 30 September 2016 amounted to $15.9 million; Hardy has no debt.
OUTLOOK
CY-OS/2 - The GOI Supreme Court appeal is expected to continue into 2017. Enforcement of the arbitration award within the India judicial system is our priority.
PY-3 - Well monitoring activity has been proposed and failing the timely adoption of a FFDP and past budgets, planning for abandonment will need to be initiated.
GS-01 - Resolution of penalties associated with UMWP are expected to continue into 2017. Further capital investment is dependent upon gas pricing under GOI's pricing policies.
Ian MacKenzie, Chief Executive Officer of Hardy, commented: "Our objectives remain the securing of key stakeholders' approvals and the initiation of activity that will take us closer to realising production from our portfolio of assets for the benefit of our shareholders. The enforcement of the CY-OS/2 Award would deliver new cash resources to expand our portfolio within or outside of India."
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 5900 James Felix, Ciaran Walsh Tavistock 020 7920 3150 Simon Hudson, Niall Walsh
OVERVIEW
The Company's strategy is to be an active participant in the upstream oil and gas industry, and realise value from the existing portfolio and pursue new opportunities as they arise. We have in place clear plans to achieve our objectives that we believe can optimise value for our shareholders. The successful conclusion to the enforcement of the CY-OS/2 Award process, could provide Hardy with significant funds and better position the Company to add new upstream assets.
India is the third largest consumer of oil and petroleum products in the world. The Country has sedimentary basins spanning 3.1 million km(2) yet domestic production meets less than 30 per cent of current consumption. Most domestic gas production is subject to a notified price, presently $2.5 per mcf, which is benchmarked to a basket of foreign exporting markets. Crude oil markets continued to trade within a band of $40 to $55 per barrel and we have observed a continuing trend of declining service and capital costs.
As at 30 September 2016, the Company had over $15.9 million of cash and short-term investments with no debt. The Group remains in a good financial position from which to either fund its planned work activity for the Indian asset portfolio or to implement a change of geographical focus. The Group maintains robust internal control and risk management systems appropriate for a Company of our size and resources.
OPERATIONS
The Company's exploration and production assets are based in India and are held through its wholly owned subsidiary, Hardy Exploration & Production (India) Inc. (HEPI).
Health, safety and environment
The Company is committed to excellent health and safety practices which are at the forefront in all of our activities. Although all offshore activities are currently suspended, maintaining high HSE standards throughout the organisation remains core to all our undertakings. The Company's HSE policy document is regularly reviewed and amended.
Block CY-OS/2:
Appraisal (Hardy 75 per cent interest - Operator)
Litigation - On 27 July 2016 the GOI's second appeal to the Delhi High Court was dismissed on the basis of jurisdiction. The GOI has subsequently filed a Special Leave Petition with the Supreme Court of India challenging the Delhi HC ruling. Hardy has previously filed an execution petition with the Delhi HC and this has run in parallel with the GOI's appeal although the matter has been continually adjourned due to the ongoing GOI appeal. It is expected that the execution hearings will progress upon the conclusion of the GOI's appeal to the Supreme Court of India.
The Company has initiated Confirmation proceedings in the Federal Court of Washington DC, United States of America. This action has been initiated to maintain the option to enforce the Award in the US. However, our primary objective is to conclude the appeal and enforcement processes within the Indian judicial system. The timely conclusion of the dispute resolution process within Indian institutions will validate our long-standing commitment to India and facilitate our future participation in meeting the country's growing energy requirements.
Contingent asset - As at 30 September 2016, Hardy's 75 per cent share of the compensation awarded by the Hon'ble Arbitration Tribunal amounted to approximately $57.6 million.
Objective - We will continue to seek the restoration of the block to the CY--OS/2 joint venture in a timely manner. The appeal and enforcement process in India is likely to continue into 2017. The Company believes that it has a strong position as the unanimous international award, passed by three former Chief Justices of India, is well reasoned. Hardy will recommence work on the appraisal of the Ganesha-1 natural gas discovery once the block has been restored to the CY-OS/2 joint venture.
Background - Hardy is the operator of the CY-OS/2 exploration block and holds a 75 per cent participating interest. The block is located in the northern part of the Cauvery Basin immediately offshore from Pondicherry, India and covers approximately 859 km(2) . Ganesha-1 - A natural gas discovery at a depth of 4,089 m which tested at a peak rate of 10.7 mmscfd. Award summary - relinquishment by the Ministry of Petroleum and Natural Gas (MOPNG) of the GOI was illegal; the unincorporated Joint Venture (uJV) shall be entitled to a period of three years from the date on which the block is restored to it, to carry out further appraisal; the uJV shall be paid compensation calculated at the simple rate of 9 per cent per annum on the amount of Rs. 5.0 billion from the date of relinquishment till the date of the award; interest will then accrue at a rate of 18 per cent per annum on the amount of Rs. 5.0 billion until such time as the block is restored to the uJV.
Block CY-OS 90/1 (PY-3):
Oil Field (Hardy 18 per cent interest - Operator)
Operations - A PY-3 Management Committee (MC) meeting was convened in FY16 to consider the Operating Committee's (OC) recommended Full Field Development Plan (FFDP) and budgets. Several agenda items were agreed but finalisation of the minutes of meeting remain pending.
In FY17 the Company has made two representations to the Hon'ble Minister of State, Sri Pradhan, senior members of the Administration of MOPNG, the Directorate General of Hydrocarbons (DGH) and the heads of the PY-3 uJV. Matters which have prolonged deliberation of the proposed FFDP and possible resolutions were discussed. It was stressed that the proposed FFDP is projected to generate considerable value directly to the GOI via levies, profit petroleum and taxes. The FFDP remains under consideration.
Hardy has proposed to initiate well monitoring activity to provide the PY-3 JV and MOPNG more time to conclude discussions and identify a mutually beneficial way forward. Should a mutual way forward not be achieved planning for abandonment may need to be initiated.
Objective - Secure timely approval of the FFDP from the GOI after which we intend to target the recommencement of production in FY18. This may be achieved by securing the appropriate offshore production and storage facilities while simultaneously initiating planning for a development drilling programme. This may require funding in excess of the Company's current resources.
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 licence, which covers 81 km(2) , produces high quality light crude oil. The field has produced over 24.8 mmbbl and was shut-in in July 2011 due to the expiry of the production facilities' marine classification and absence of budgetary approval to extend the contract.
Block GS-OSN-2000/1 (GS-01):
Appraisal (Hardy 10 per cent interest)
Operations - The matter of possible liquidated damages associated with unfinished minimum work programme (UMWP), being considered by the GOI since 2009, continued to be deliberated with the operator. The GS-01 uJV has conveyed to the GOI that this matter needs to be closed out prior to the progression of further activity on the block.
Objective - Finalise the quantum of liquidated damages outstanding prior to concluding discussions with our partner to acquire its participating interest and the Operatorship of the block. Following this, a priority will be to revisit a proposed FDP taking into consideration the prevailing commodity pricing and low cost environment.
Background - In 2011, the GS-01 joint venture secured the GOI's agreement for the declaration of commerciality (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, north west of the prolific Bombay High oil field, with water depths varying between 80 m and 150 m. The retained discovery area covers 600 km(2) .
FINANCIAL REVIEW
In the six months ended 30 September 2016, the Group recorded a total comprehensive loss of $1.2 million. As at 30 September 2016 the Company held total cash and short-term investments of $15.9 million with no debt.
Hot Features
Premium
H1 FY17 H1 FY16 FY2016
(unaudited) (unaudited) (audited)
US$ million US$ million US$ million
-------------------------------------------------- ------------ ------------ ------------
Operating expense
Costs associated with storage of inventory (0.1) - (0.2)
-------------------------------------------------- ------------ ------------ ------------
Unsuccessful exploration write-down - - (5.0)
-------------------------------------------------- ------------ ------------ ------------
Impairment of PY-3 - - (2.7)
-------------------------------------------------- ------------ ------------ ------------
Administrative expense
The Group realised a significant reduction
in administrative expenses attributed
to a reduction in employee costs and
exchange loss of $0.2 and $0.3 million
respectively. These reductions were slightly
offset by an increase in legal and advisory
fees of $0.2 million. (1.4) (1.6) (4.0)
-------------------------------------------------- ------------ ------------ ------------
Investment income and finance cost
The Group realised interest income of
$0.2 million and no finance costs. 0.2 0.2 0.3
-------------------------------------------------- ------------ ------------ ------------
Taxation
No current tax is payable for the 6 months
ended 30 September 20160.2. Having consideration
for the medium-term outlook for the oil
price and continued delay of sanctioning
of the PY-3 asset, the projected tax
payable that may be offset by the Group's
carried forward amount was not recognised.
The Group had previously provided for
the write-down of the deferred tax asset
by $5.2 million in FY16. - (2.7) (5.2)
-------------------------------------------------- ------------ ------------ ------------
Total comprehensive loss
The Group's significant improvement in
total comprehensive loss is attributable
to the write-downs, associated with PY-3
and GS-01 and the deferred tax assets,
provided for in FY16. (1.2) (4.2) (16.8)
-------------------------------------------------- ------------ ------------ ------------
H1 FY17 FY2016
(unaudited) (audited)
US$ million US$ million
----------------------------------------------------------------------- ------------ ------------
Non-current assets
Non-current assets primarily represent successful or work-in-progress
exploration expenditure. This includes $3.1 million of
Property Plant and Equipment (PPE) and Intangible asset
of $51.0 million which are attributable to PY-3 and CY-OS/2
respectively. For PPE, the Company regularly reviews the
underlying assumptions used to support the carrying value
of the assets including commodity prices, cost estimates
and any changes in taxation.
Contingent Asset - The CY-OS/2 Arbitration award in favour
of Hardy also entitles the Company to compensation of
$57.6 million. 63.1 63.0
----------------------------------------------------------------------- ------------ ------------
Current assets
The Group's cash and short-term investments reduced by
$1.6 million to $15.9 million. This is primarily due to
the payment of general and administrative expenses. Trade
and other receivables of $3.6 million represent amounts
due to be recovered from joint arrangements operated by
Hardy. 20.5 21.8
----------------------------------------------------------------------- ------------ ------------
Non-current liabilities
The Group's non-current liabilities represent a provision
for the decommissioning of the PY-3 field. The provision
has been estimated based on observed long-term industry
cost trends. 5.3 5.3
----------------------------------------------------------------------- ------------ ------------
Current liabilities
Trade and other accounts payable comprises of amounts
due to vendors and other provisions associated with various
joint arrangements. 7.9 7.8
----------------------------------------------------------------------- ------------ ------------
H1 FY17 H1 FY16 FY2016
(unaudited) (unaudited) (audited)
US$ million US$ million US$ million
-------------------------------------------------------- ------------ ------------ ------------
Cash flow (used in) operating activities
Cash used in operating activities of $1.4 million
comprised primarily of administrative costs.
Net debtor and creditor movement was $0.4 million
and the Company realised a tax refund of $0.1
million (1.7) (2.0) (3.7)
-------------------------------------------------------- ------------ ------------ ------------
Capital expenditure
The Company did not incur any material capital
expenditures in the year. A $0.2 million charge
is associated with the reinvestment of interest
accrued on a deposit committed to site restoration
of the PY-3 field (0.2) 0.2 (0.1)
-------------------------------------------------------- ------------ ------------ ------------
Financing activity
Interest and investment income, realised predominantly
from Indian rupee deposits, amounted to $0.2
million. 0.2 0.0 0.3
-------------------------------------------------------- ------------ ------------ ------------
Cash and short-term investments
Sufficient resources are available to meet ongoing
capital, operating and administrative expenditure.
The Group has no debt. 15.9 19.3 17.6
-------------------------------------------------------- ------------ ------------ ------------
PRINCIPAL RISKS AND UNCERTAINTIES
As an oil and gas exploration and production company with operations focused in India, Hardy is subject to a variety of risks and uncertainties. The Group has a systematic approach to risk identification and management which combines 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. The risk register is a part of a dynamic database in which new risks may be added when identified or removed as they are eliminated or become immaterial. The Board has formed a sub-committee on risk which reports periodically to the Audit Committee. The Board is provided with regular updates of the identified principal risks at scheduled Board meetings.
Principal risks and uncertainties
The underlying risks and uncertainties inherent in Hardy's current business model have been grouped into four categories; strategic, financial, operational and compliance. The Board has identified principal risks and uncertainties for FY17 and established clear policies and responsibilities to mitigate their possible negative impact on the business, a summary of which is provided below:
Risk or uncertainty Mitigation action
------------------------- -------------------------------------------------------
Strategic - The Group's strategy is predominantly driven by
the appraisal, development and production of its existing assets
in India. There are risks inherent in the appraisal, development
and production of oil and gas reserves and resources.
----------------------------------------------------------------------------------
1. Asset portfolio Preferential allocation of resources to advance
over-weighted to current discoveries to the development stage.
long-cycle appraisal Assess acquisition opportunities, consistent
and development with stated objectives, offering near-term production
licences increases.
------------------------- -------------------------------------------------------
2. Asset portfolio Convey business constraints to accomplishing
exclusively in our objective via direct and open dialogue with
one geopolitical government officials, active participation in
region industry lobby groups including the Association
of Oil and Gas Operators. Further additions
to the India portfolio will not be considered
until tangible progress is made in our existing
portfolio. Screening of acquisition opportunities
to be focused in other geographical locations
wherein most likely management have direct experience.
------------------------- -------------------------------------------------------
Financial - Volatility and decreases in international crude
oil prices and Indian natural gas prices have adversely affected
some of the Group's prospects and projected results from future
operations. Other major financial risks facing the Company
could be: financing constraints for further appraisal and development;
cost overruns; and adverse results from ongoing or pending
litigation.
----------------------------------------------------------------------------------
1. Prolonged delay Secure high quality and reputable legal counsel.
in enforcement Management of stakeholder expectation. Settlement
of CY-OS/2 Award unlikely without court order for enforcement.
Preserve right to enforce in other jurisdictions
including the US and UK.
------------------------- -------------------------------------------------------
2. Litigation - Sanctioning of the PY-3 FFDP could mitigate
the Company is a number of outstanding or pending disputes.
involved in a number The Company has secured high quality reputable
of disputes with legal counsel in India and other jurisdictions.
service providers, Proactive and constructive engagement with uJV
uJV partners and partners. In some instances security may be
Indian tax authorities required to avoid business disruption.
------------------------- -------------------------------------------------------
3. Cost of litigation Budget for litigation has increased substantially.
Effective management and monitoring of advisory
costs. Explore timely resolution of disputes
not strategic in nature.
------------------------- -------------------------------------------------------
4. Liquidated damages Monitor through media and dialogue with operator,
started (LD), unfinished prepare for dispute. The operator is expected
Minimum Work Programme to initiate arbitration. Provision made based
(MWP) (GS-01 and on management's view on likely outcome.
D9)
------------------------- -------------------------------------------------------
Operational - Offshore exploration and production activities
by their nature involve significant risks. Risks such as delays
in executing work programmes, construction and commissioning
of production facilities or other technical difficulties, lack
of access to key infrastructure, adverse weather conditions,
environmental hazards, industrial accidents, occupational and
health hazards, technical failures, labour disputes, unusual
or unexpected geological formations, explosions and other acts
of God are inherent to the business.
----------------------------------------------------------------------------------
1. Securing timely Proactive communication with partners to address
final approval individual interests and agendas. Clearly formulate
for the PY-3 FFDP and articulate mutually beneficial proposals.
Articulate that total combined benefit to the
GOI several multiples of ONGC projected loss.
Mitigate expenditures prior to budget approvals.
------------------------- -------------------------------------------------------
2. PY-3 HSE - status Three subsea wells were securely shut-in on
of PY-3 wells March 2012. The shut-in of wells has been longer
than expected and, in the absence of timely
sanctioning of the FFDP, monitoring of wells
or full abandonment of the PY-3 field will be
initiated.
------------------------- -------------------------------------------------------
3. Contractual Maintain communication with senior members of
dispute with uJV PY-3 uJV partners. Written MC approval of budgets
partners for FY2012 to date remain outstanding.
------------------------- -------------------------------------------------------
Compliance - The Group's current business is dependent on the
continuing enforceability of the PSCs, farm-in agreements, and
exploration and development licences. The Group's core operational
activities are dependent on securing various governmental approvals.
Developments in politics, laws, regulations and/or general adverse
public sentiment could compromise securing such approvals in
the future.
----------------------------------------------------------------------------------
1. Regulatory and Develop sustainable relationships with government
political environment and communities. Actively collaborate with industry
in India groups to formulate and communicate interests
to government authorities. Ensure full compliance
of all laws, regulations and provision of contracts.
------------------------- -------------------------------------------------------
2. Taxation and Secured the services of leading professional
third-party claims and legal service providers. Proactive communication
with taxation authorities to ensure queries
are addressed and assessments are agreed or
challenged as required.
------------------------- -------------------------------------------------------
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
Ian MacKenzie,
Chief Executive Officer
24 November 2016
INDEPENT REVIEW REPORT TO HARDY OIL AND GAS PLC
Introduction - We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the 6 months ended 30 September 2016 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash flows and the related explanatory notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company, as a body, in accordance with our instructions. Our review has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the opinions we have reached.
Directors' Responsibilities - The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note one, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our Responsibility - Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Scope of Review - We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion - Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 6 months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Crowe Clark Whitehill LLP
Statutory Auditor
London
24 November 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 30 September 2016
6 months 6 months
ended ended
30 September 30 September 12 months
ended
2016 2015 31 March
US$ US$ 2016
(Unaudited) (Unaudited) US$
(Audited)
================================== ============== ============== =============
Continuing Operations
Revenue - - -
Cost of Sales
Production costs (106,735) - (179,386)
Unsuccessful exploration costs (174) - (4,935,149)
Impairment of Block CY-OS-90/1
(PY3) - - (2,754,273)
Gross profit/ (loss) (106,909) - (7,868,808)
Administrative expenses (1,363,035) (1,626,168) (4,037,221)
================================== ============== ============== =============
Operating loss (1,469,944) (1,626,168) (11,906,029)
Interest and investment income 221,464 177,067 336,197
Finance costs - - -
================================== ============== ============== =============
Loss before taxation (1,248,480) (1,449,101) (11,569,832)
Taxation - (2,711,120) (5,187,327)
================================== ============== ============== =============
Total comprehensive loss for the
period attributable to owners
of the parent (1,248,480) (4,160,221) (16,757,159)
---------------------------------- -------------- -------------- -------------
Loss per share
Basic & diluted (0.03) (0.11) (0.23)
---------------------------------- -------------- -------------- -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6 months ended 30 September 2016
Share capital Share Premium Shares to Retained Total
US$ US$ be issued earnings
US$ / (loss) US$
US$
---------------------- -------------- -------------- ------------ ------------- -------------
At 1 April 2015 733,314 120,860,631 3,669,066 (36,970,336) 88,292,675
Total Comprehensive
loss for the period - - - (4,160,221) (4,160,221)
Share based payment - - 43,955 - 43,955
Adjustment of lapsed
vested options - - (2,095,606) 2,095,606 -
Restricted shares
issued - - - - -
-------------- -------------- ------------ ------------- -------------
At 30 September 2015
(Unaudited) 733,314 120,860,631 1,617,415 (39,034,951) 84,176,409
---------------------- -------------- -------------- ------------ ------------- -------------
At 1 April 2015 733,314 120,860,631 3,669,066 (36,970,336) 88,292,675
---------------------- -------------- -------------- ------------ ------------- -------------
Total Comprehensive
loss for the period - - - (16,757,159) (16,757,159)
---------------------- -------------- -------------- ------------ ------------- -------------
Share based payment - - 84,814 - 84,814
---------------------- -------------- -------------- ------------ ------------- -------------
Adjustment of lapsed
vested options - - (1,899,531) 1,899,531 -
---------------------- -------------- -------------- ------------ ------------- -------------
Restricted shares
issued 4,327 75,810 - - 80,137
---------------------- -------------- -------------- ------------ ------------- -------------
At 31 March 2016
(Audited) 737,641 120,936,441 1,854,349 (51,827,964) 71,700,467
---------------------- -------------- -------------- ------------ ------------- -------------
At 1 April 2016 737,641 120,936,441 1,854,349 (51,827,964) 71,700,467
Total Comprehensive
loss for the period - - - (1,248,480) (1,248,480)
Share based payment - - 40,860 - 40,860
Adjustment of lapsed
vested options - - (10,944) 10,944 -
Restricted shares
issued - - - - -
-------------- -------------- ------------ ------------- -------------
At 30 September 2016
(Unaudited) 737,641 120,936,441 1,884,265 (53,065,500) 70,492,847
---------------------- -------------- -------------- ------------ ------------- -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2016
30 September 30 September 31
2016 2015 March
US$ US$ 2016
(Unaudited) (Unaudited) US$
(Audited)
------------------------------- ---- ------------- ------------- -------------
Assets
Non-Current assets
Property, plant and equipment 3,054,145 5,815,012 3,062,290
Intangible assets 51,131,364 56,180,269 51,132,228
Site restoration deposits 4,470,829 4,040,926 4,311,198
Deferred tax asset 4,485,662 6,961,872 4,485,662
------------- ------------- -------------
Total non-current assets 63,142,000 72,998,079 62,991,378
Current assets
Inventories 942,365 1,164,988 942,365
Trade and other receivables 3,573,786 1,393,409 3,250,236
Short-term investments 15,431,336 16,090,811 16,767,941
Cash and cash equivalents 516,077 3,205,386 828,379
------------- ------------- -------------
Total current assets 20,463,564 21,854,594 21,788,921
------------------------------------- ------------- ------------- -------------
Total assets 83,605,564 94,852,673 84,780,299
------------------------------------- ------------- ------------- -------------
Equity and Liabilities
Equity attributable to owners
of the parent
Share capital 737,641 733,314 737,641
Share premium 120,936,441 120,860,631 120,936,441
Shares to be issued 1,884,265 1,617,415 1,854,349 Retained loss (53,065,500) (39,034,951) (51,827,964) ------------------------------------- ------------- ------------- ------------- Total equity 70,492,847 84,176,409 71,700,467 Non-current liabilities Provision for decommissioning 5,256,097 5,644,478 5,256,097 Current liabilities Trade and other payables 7,856,620 5,031,786 7,823,735 ------------------------------------- ------------- ------------- ------------- Total current liabilities 7,856,620 5,031,786 7,823,735 ------------------------------------- ------------- ------------- ------------- Total liabilities 13,112,717 10,676,264 13,079,832 ------------------------------------- ------------- ------------- ------------- Total equity and liabilities 83,605,564 94,852,673 84,780,299 ------------------------------------- ------------- ------------- -------------
Approved and authorised for issue by the Board of Directors on 23 November, 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months ended 30 September 2016
12 months
ended
6 months 6 months 31
ended ended
30 September 30 September March
2016 2015 2016
US$ US$ US$
(Unaudited) (Unaudited) (Audited)
-------------------------------------- ----------------- -------------- ----------------
Operating activities
Operating loss (1,469,944) (1,626,168) (11,906,029)
Unsuccessful exploration costs 174 - 4,935,149
Impairment of Block PY 3 - - 2,754,273
Depletion and depreciation 9,009 18,364 27,005
Share-based payments 40,860 43,955 164,951
Decrease / (increase) in inventory - - 222,623
Decrease / (increase) in trade
and other receivables (422,689) (409,283) (2,441,647)
(Decrease) / increase in trade
and other payables 32,710 (9,996) 2,505,598
----------------- -------------- ----------------
Cash flow (used in) operating
activities (1,809,880) (1,983,128) (3,738,079)
Taxation refund 99,139 18,550 21,023
-------------------------------------- ----------------- -------------- ----------------
Net Cash (used in ) operating
activities (1,710,741) (1,964,578) (3,717,056)
Investing activities
Expenditure on intangible assets
- others - (5,182) (5,182)
Expenditure on other fixed assets - (12,963) (22,294)
Site restoration deposit (159,631) 244,589 (25,683)
Realised from short term investments 1,336,606 1,672,438 995,304
----------------- -------------- ----------------
Net cash from investing activities 1,176,975 1,898,878 942,145
Financing activities
Interest and investment income 221,464 3,989 336,197
Financial costs - - -
----------------- -------------- ----------------
Net cash from financing activities 221,464 3,989 336,197
----------------- -------------- ----------------
Net increase / (decrease) in cash
and cash equivalents (312,302) (61,707) (2,438,714)
----------------- -------------- ----------------
Cash and cash equivalents at the
beginning of the period 828,379 3,267,093 3,267,093
-------------------------------------- ----------------- -------------- ----------------
Cash and cash equivalents at the
end of the period 516,077 3,205,386 828,379
-------------------------------------- ----------------- -------------- ----------------
1. Accounting Policies
i) Basis of preparation
These interim consolidated financial statements are for the six months ended 30 September 2016 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 2016 and are expected to be applied for the year ended 31 March 2017.
ii) Cyclicality
The interim results for the six months ended 30 September 2016 are not necessarily indicative of the results to be expected for the financial year 2017. The operations of Hardy Oil and Gas plc are not affected by seasonal variations.
iii) Full year comparative information in interim results
The financial information for the year ended 31 March 2016 does not constitute the company's statutory accounts for that year, but is derived from those accounts. Statutory accounts for 2016 are available at the company's website. The auditors reported on those accounts and their report was unmodified.
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 2016.
2. Critical Accounting Estimates and Judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are addressed below:
i) Intangible assets - exploration
Hardy has been awarded costs and interest after the conclusion of the arbitration on the CY-OS/2 block, in which it holds a 75 per cent participating interest. Hardy's share of these awards totals approximately $57.6 million and has been disclosed as a contingent asset. This is regarded as a significant area of judgment and full details are disclosed in note 7 to these financial statements.
ii) Decommissioning
The liability for decommissioning is updated to the current cost estimates of decommissioning. Accordingly, the provision made in the books will reflect the risk free discounted future cost for decommissioning and this is an annual adjustment based on the changes in costs as a result of technical advancements and other factors.
iii) Deferred Tax Asset
The deferred tax asset will be realised with the recommencement of production from PY-3 field and also from the production of oil and gas from those areas which are available for commercial development. Further details are contained in note 4.
iv) Depletion
Depletion is based on best estimates of commercial reserves existing as at the balance sheet date. The determination of commercial reserves is based on assumptions which include those relating to the future prices of crude oil and natural gas, capital expenditure plans, cost of production and other factors.
3. Segment analysis
The Group is organised into two business units as at end of the year: India and United Kingdom. The India business unit is operated by the wholly owned subsidiary, Hardy Exploration & Production (India) Inc. and Hardy Oil and Gas plc operates in the United Kingdom.
The India business unit focuses on exploration and production of oil and gas assets in India. The United Kingdom business unit is the holding company. Management monitors these business units separately for resource allocation, decision making and performance assessment.
September 2016
US$
India UK Inter-segment Total
eliminations
------------------------------------- -------------- ------------ --------------- -------------
Revenue
Other income - - - -
------------------------------------- -------------- ------------ --------------- -------------
Operating loss (625,386) (844,558) - (1,469,944)
Interest income 179,679 41,785 - 221,464
Interest income on inter-corporate
loan - 714,356 (714,356) -
Interest expense on inter-corporate
loan (714,356) - 714,356 -
------------------------------------- -------------- ------------ --------------- -------------
Loss before taxation (1,160,063) (88,417) - (1,248,480)
Taxation - - - -
------------------------------------- -------------- ------------ --------------- -------------
Loss for the period (1,160,063) (88,417) - (1,248,480)
Segment assets 68,781,923 14,844,285 - 83,626,208
Inter-corporate loan - 108,363,318 (108,363,318) -
Segment liabilities (12,996,953) (115,763) - (13,112,716)
Inter-corporate borrowings (108,363,318) - 108,363,318 -
Unsuccessful exploration
costs (174) - - (174)
Depreciation, depletion
and amortisation 3,405 5,604 - 9,009
------------------------------------- -------------- ------------ --------------- -------------
September 2015
US$
India UK Inter-segment Total
eliminations
------------------------------------- -------------- ------------ --------------- -------------
Revenue
Other income - - - -
------------------------------------- -------------- ------------ --------------- -------------
Operating loss (557,754) (1,068,414) - (1,626,167)
Interest income 173,787 3,280 - 177,067
Interest income on inter-corporate
loan - 580,825 (580,825) -
Interest expense on inter-corporate
loan (580,825) - 580,825 -
------------------------------------- -------------- ------------ --------------- -------------
Loss before taxation (964,792) (484,309) - (1,449,101)
Taxation (2,805,464) 94,344 - (2,711,120)
------------------------------------- -------------- ------------ --------------- -------------
Loss for the period (3,770,256) (389,965) - (4,160,221)
Segment assets 79,463,282 15,389,391 - 94,852,673
Inter-corporate loan - 108,027,725 (108,027,725) -
Segment liabilities (10,520,364) (155,900) - (10,676,264)
Inter-corporate borrowings (108,027,725) - 108,027,725 -
Capital expenditure (12,963) - - (12,963)
Depreciation, depletion
and amortisation (1,887) (16,477) - (18,364)
------------------------------------- -------------- ------------ --------------- -------------
2016
US$
India UK Inter-segment Total
eliminations
===================================== ============== ============ =============== =============
Revenue
Other income - - - -
------------------------------------- -------------- ------------ --------------- -------------
Operating loss (9,926,411) (1,979,618) - (11,906,029)
Interest income 308,692 27,505 - 336,197
Interest income on inter-corporate
loan - 1,218,911 (1,218,911) -
Interest expense on inter-corporate
loan (1,218,911) - 1,218,911 -
-------------- ------------ --------------- -------------
Loss before taxation (10,836,630) (733,202) - (11,569,832)
Taxation (5,311,032) 123,705 - (5,187,327)
-------------- ------------ --------------- -------------
Loss for the period (16,147,662) (609,497) - (16,757,159)
Segment assets 68,653,438 16,126,861 - 84,780,299
Inter-corporate loan - 107,151,962 (107,151,962) -
Segment liabilities (12,922,688) (157,143) - (13,079,831)
Inter-corporate borrowings (107,151,962) - 107,151,962 -
Capital expenditure 22,523 4,953 - 27,476
Unsuccessful exploration
costs (4,935,149) - - (4,935,149)
Impairment of Block CY-OS-90/1 (2,754,273) - - (2,754,273)
Depreciation, depletion
and amortisation (4,789) (22,216) - (27,005)
------------------------------------- -------------- ------------ --------------- -------------
The Group is engaged in one business activity, the exploration, development and production of oil and gas. Other income relates to technical services to third parties, overhead recovery from joint venture operations and miscellaneous receipts, if any. Revenue arises from the sale of oil produced from the contract area PY-3 India and the revenue by destination is not materially different from the revenue by origin.
4. Taxation
Analysis of taxation (credit) for the period
Sep 2016 Sep 2015 Mar 2016
US$ US$ US$
---------------------------- ---------- ---------- ----------
Current tax charge
UK corporation Tax - - -
Foreign Tax - India - - -
Minimum alternate tax - - -
Foreign tax - USA - - -
---------------------------- ---------- ---------- ----------
Total current tax (credit) - - -
Deferred tax (credit) - 2,711,120 5,187,327
---------------------------- ---------- ---------- ----------
Taxation (credit) - 2,711,120 5,187,327
---------------------------- ---------- ---------- ----------
Having consideration for the medium-term outlook for the oil price and continued delay of sanctioning of the PY-3 asset, the projected tax payable that may be offset by the Group's carried forward amount was not recognised.
Indian operations of the Group are subject to a tax rate of 41.2 per cent which is higher than UK and US corporation tax rates. To the extent that the Indian profits are taxable in the US and/or the UK, those territories should provide relief for Indian taxes paid, principally under the provisions of double taxation agreements. When considering deferred tax assets the Group considers the highest and best use of the losses available, this is considered to be in India. Based on the current expenditure plans, the Group anticipates that the tax allowances will continue to exceed the depletion charge of each year, though the timing of related tax relief is uncertain.
The deferred tax asset will be realised upon production from the PY-3 field which Management expects to recommence during 2018. The assumptions considered to determine a future tax liability that may be offset from the Group's carried forward tax losses has been consistent with those assumptions provided for in Note 6.
5. Loss per share
Loss per share is calculated on a loss of US$1,248,480 for the six months ended 30 September 2016 (September 2015: US$4,160,221) on a weighted average of 36,882,018 Ordinary Shares for the six months ended 30 September 2016 (September 2015: 36,766,125). No diluted loss per share is calculated.
6. Property, plant and equipment
Oil and Other
gas assets fixed assets Total
US$ US$ US$
------------ -------------- -----------
Cost
At 1 April 2015 35,465,279 1,800,361 37,265,640
Additions - 12,963 12,963
Depletions - - -
------------ -------------- -----------
At 30 September 2015 35,465,279 1,813,324 37,278,603
At 1 April 2016 35,465,279 1,780,170 37,245,449
Additions - - -
Depletions - - -
------------ -------------- -----------
At 30 September 2016 35,465,279 1,780,170 37,245,449
Depletion, Depreciation and amortisation
At 1 April 2015 29,684,318 1,761,274 31,445,592
Charge for the period - 17,999 17,999
------------ -------------- -----------
At 30 September 2015 29,684,318 1,779,273 31,463,591
At 1 April 2016 32,438,591 1,744,568 34,183,159
Charge for the period - 8,145 8,145
------------ -------------- -----------
At 30 September 2016 32,438,591 1,752,713 34,191,304
Net book value at 30 September
2016 3,026,688 27,457 3,054,145
Net book value at 30 September
2015 5,780,961 34,051 5,815,012
Impairment in prior year
The impairment charge of US$2,754,273 million in the previous year (FY 2015-16) against the PY-3 oil field was calculated by comparing the future discounted cash flows expected to be delivered from the production of commercial reserves (the value-in-use) with the carrying value of the asset.
The future cash flows were estimated using an oil price assumption of approximately US$50 to US$55 per bbl which is comparable to an average price per barrel of Dated Brent forward contract against the projected production profile provided for in the proposed FFDP. These projected cash flows were discounted at a rate of 10 per cent. Other assumptions involved in the impairment measurement included estimates of commercial reserves and production volumes, and the level and timing of expenditures all of which are inherently uncertain. The principal cause of the impairment charge recognised in the previous year was a reduction in the medium-term oil price assumption and changes to GOI policies in regard to calculation of levies and the criteria for extension of the PSC.
Sensitivity
A 1 per cent increase in the discount rates used when determining the value-in-use for each asset would result in a further impairment charge of approximately US$0.4 million and a US$1 per bbl reduction to the oil price for the life of the field would trigger an increase in the impairment charge of approximately US$0.6 million.
7. Intangible assets
Exploration Others US$ Total
US$ US$
------------------------------ ------------ ------------------- --------------
Costs and net book value
At 1 April 2015 56,175,450 - 56,175,450
Additions (Net of depletion) - 4,819 4,819
------------------------------ ------------ ------------------- --------------
At 30 September 2015 56,175,450 4,819 56,180,269
At 1 April 2016 51,128,272 3,956 51,132,228
Additions (Net of depletion) - (864) (864)
------------------------------ ------------ ------------------- --------------
At 30 September 2016 51,128,272 3,092 51,131,364
------------------------------ ------------ ------------------- --------------
The details of the intangible assets stated above are as follows:
US$
----------------------------------------- ------------
Exploration expenditure - block CY-OS/2 51,128,272
Total 51,128,272
Legal proceedings concerning block CY-OS/2
In March 2009, Hardy were informed by the Government of India that the block CY-OS/2, in which Hardy holds a 75 per cent participating interest, was relinquished as Hardy had failed to declare commerciality within the two years from the date of discovery which is applicable to an oil discovery. Hardy disputed this ruling believing that the discovery was a gas discovery and consequently that it was entitled to a period of five years from the date of discovery to declare commerciality. As no agreement was reached the dispute was referred to arbitration under the terms of the PSC.
The arbitrators ruled on 2 February 2013 that the discovery was a gas discovery and consequently that the order for the relinquishment of the block was illegal. The arbitrators have ordered the Government of India to restore the block to Hardy and its partners and to allow them a period of three years from the date of restoration to complete the appraisal programme. In addition, the arbitrators awarded costs of $0.2 million and interest on the exploration expenditure incurred to date. As at 30 September 2016, Hardy's 75 per cent share of the interest awarded is approximately $57.6 million. On 2 August 2013, the Government of India filed an appeal, against the arbitration award, with the High Court Delhi, and the Company subsequently filed an execution petition before the High Court Delhi. Delhi High Court dismissed the appeal filed by the Government of India on 27 July 2016 and the execution petition is schedule for hearing on 28 November 2016. Government of India has filed a Special Leave Petition with the Supreme Court of India on 5 November 2016 and the next hearing is scheduled in January 2017.
The Company believes that the unanimous international tribunal award is well reasoned and, based upon external legal advice that the award may not be subject to appeal in the Indian courts as per the India Arbitration and Conciliation Act 1996.
Impairment of Block GS-01 in prior year
The write-off of $5.0 million against the GS-01 exploration license was calculated by comparing the future discounted cash flows projected to be delivered from the production of resources provided for in an unapproved FDP submitted by the Group (the value-in-use) with the carrying value of the asset.
The future cash flows were estimated using a gas price equal to $3.1 per MMBTU, which was comparable to the notified price by the GOI, against the production profile provided for in a proposed FDP. These projected cash flows were discounted at a rate of 10 per cent. Other assumptions involved in impairment measurement included the estimates of resources and production volumes, and the level and of timing of expenditures all of which are inherently uncertain. The principal cause of the full impairment charge recognised in the year is that the low gas price prescribed under the GOI's policy does not provide reasonable level of return to justify the sanctioning of development. Should the GOI policy on gas pricing change, to allow free market pricing which is estimated to be between US$6 to US$8 per MMBTU, then the unapproved FDP for the Dhirubhai 33 gas discovery may be viable.
8. Share capital
The Company has authorised share capital of 200 million US$ 0.01 ordinary shares. Changes in issued and fully paid ordinary shares during the six months ended 30 September 2016 are as follows:
Number US$
0.01 Ordinary
shares US$
--------------------------------- --------------- --------
At 1 April 2016 73,764,035 737,641
Share options exercised during
the period - -
Restricted shares issued during
the period - -
At 30 September 2016 73,764,035 737,641
---------------------------------- --------------- --------
9. Share Options
Changes in outstanding share options during the six months ended 30 September 2016 are summarised below:
Weighted
Number of average
options price GBP
---------------------------------- ---------- -----------
Outstanding at beginning of the
period 1,715,000 0.90
Lapsed during the period 10,000 3.38
Outstanding at the end of the
period 1,705,000 0.90
Exercisable at the end of period 190,000 5.48
----------------------------------- ---------- -----------
Detail regarding the estimated fair value of granted share options has been set out in note 9 (page 61) of the Company's 2016 Annual Report and Accounts.
10. Contingent liabilities
Liquidated Damages
The Group has minimum work commitments in associated with various exploration licences granted by sovereign authorities through joint arrangements. A number of these commitments have not been fulfilled and as a consequence the Group is liable to pay liquidated damages. When a liquidated damage payment is probable a provision is created based on management's best judgement. In some instances there may be a high degree of uncertainty. In such instances an additional contingent liability is recognised. Currently a contingent liability estimated at $1.7 million associated with unfinished minimum work programme liquidated damages. Management do not expect this to be resolved in the next twelve months.
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
In addition, the parent company guarantees the Group's obligations under various PSC's to the Government of India. These guarantees are deemed to have negligible fair value and are therefore accounted for as contingent liabilities.
11. Dividends
The Board of Directors do not recommend the payment of an interim dividend for the period ended 30 September 2016.
12. Approval of interim Consolidated Financial Statements
These interim consolidated financial statements have been approved by the Board of Directors on 23 November 2016.
GLOSSARY OF TERMS
$ United States Dollar
APIdeg American Petroleum Institute gravity
bbl Stock tank barrel
bbld stock tank barrel per day
CY-OS/2 Offshore exploration licence CY-OS/2 located
on the east coast of India
DGH Directorate General of Hydrocarbons a department
of the MOPNG
Dhirubhai 33 gas discovery on GS-01-B1 announced on 15 May
2007
DOC Declaration of Commerciality
FFDP comprehensive full field development plan
FY Financial year ended 31 March
GAIL Gas Authority of India Limited
Ganesha-1 Non-associated natural gas discovery on Fan-A1
well located in CY-OS/2
GOI Government of India
GS-01 Exploration licence GS-OSN-2000/1
H1 First half of the fiscal year or the six months
ended 30 September
Hardy Hardy Oil and Gas plc
HC Delhi High Court of India
HEPI Hardy Exploration & Production (India) Inc
HSE Health Safety and Environment
km kilometre
km(2) square kilometre
LD Liquidated damages
LSE London Stock Exchange
m metre
MC Management committee - which is the composite
authority to approve budgets and work programmes
within the provision of PSC's. Membership includes
the participating interest holders and GOI officials.
mmscfd million standard cubic feet per day
mmscmd million standard cubic metres per day
MOPNG the Ministry of Petroleum and Natural Gas of
the Government of India
UMWP Unfinished minimum work programme - a biddable
commitment to the GOI to undertake certain field
operations in consideration of the award of exploration
rights to a defined area.
uJV unincorporated joint venture
NANG non associated natural gas
OC Operating Committee - a committee comprising
of participating interest holders in PSC's. The
committee is charged with establishing work programmes
and budgets to be recommended to the MC
PSC production sharing contract
psi pounds per square inch
PY-3 licence CY-OS-90/1
Rs. Indian rupee
the Award Tribunal arbitration award in favour of the CY-OS/2
uJV ruling that the GOI relinquishment of the
GS-01 PSC was illegal, the block is to be restored
and the uJV permitted three years to complete
appraisal of a gas discovery. Further compensation
is to be paid to the uJV.
the Company Hardy Oil and Gas plc
the Group Hardy Oil and Gas plc and Hardy Exploration &
Production (India) Inc.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UOSBRNBAAUAA
(END) Dow Jones Newswires
November 24, 2016 02:00 ET (07:00 GMT)
1 Year Hardy Oil & Gas Chart |
1 Month Hardy Oil & Gas Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
