Hardy Oil and Gas has elected not to exercise an option to increase its participating interest, by three per cent, in the D3 (KG-DWN-2003/1) exploration licence.

Following BP's announcement with respect to the acquisition of a 30 per cent interest in the RIL operated D3, D9 and Assam exploration licences (subject to GOI approval), Hardy waived its pre-emptive rights to increase its participating interest in all of these blocks, while retaining an option to increase its participating interest in D3 by three per cent from Reliance. If exercised, the consideration for the exercise of the three per cent option in D3 would have been a cash payment by Hardy to Reliance of approximately $150 million, payable in three instalments over a seven month period from the closing of the BP acquisition. The option consideration implies a gross value of approximately $5.0 billion for the D3 exploration licence.

After due consideration of the Company's cash position and future capital requirements under the existing Production Sharing Contracts, the Board has elected not to exercise this option which has now lapsed, and so Hardy's participating interest in the D3 exploration licence will remain at 10 per cent.

The D3 block is situated in the emerging world class Krishna Godavari Basin in India, and covers an area of 3,288 km2, in water depths ranging from 400 m to 2,200 m, and is located approximately 45 km offshore. To date, four exploration wells have been drilled resulting in four consecutive natural gas discoveries. The block has up to six different play types ranging from shallow Pleistocene, stratigraphically trapped biogenic gas sands to toe thrust related Miocene structural traps with mixed biogenic and thermogenic sourcing.

Yogeshwar Sharma, Chief Executive Officer of Hardy, commented, 'The acquisition by BP of a 30% interest in the D3 exploration licence is a significant endorsement of the resource potential of this extensive exploration block. We remain in the early stages of exploration with a growing prospect inventory and several untested play types. We welcome BP's involvement in D3 and look forward to further drilling following early exploration success on this block.'

Tags: Hardy Oil and Gas