Hardy Oil and Gas plc, the oil and gas exploration and production company with assets in India and Nigeria, announces the discovery of hydrocarbons in the KGV-D3-A1 well on the Company’s D3 exploration licence, the spudding of a second exploration well on D3, an update on the expected commencement of the D9 block drilling programme, and the reduction of the Company’s shareholding in HOEC.

D3 Block

The D3 licence, in which the Company holds a 10% participating interest and is operated by Reliance, is located in the Krishna Godavari basin on the East Coast of India and covers an area of approximately 3,288km2.

The exploratory well KGV-D3-A1 commenced drilling on 28 December 2007 in water depths of 715m with the semi-submersible rig "C Kirk Rhein". The well was drilled to a depth of 1,937m MDRT and encountered natural gas within the interval 1,513m to 1,597m MDRT with a gross sand thickness of 84m.

One interval was selected for cased hole DST covering 1,565m to 1,585m MDRT and produced natural gas at a rate of 38.1 MMSCFD through a 120/64" choke.

Although early indications are encouraging, the potential extent and commerciality of the above discovery ("Dhirubhai 39") are yet to be established. Analysis of the well results is ongoing.

The D3 joint venture has moved the rig "C Kirk Rhein" to a second location and has spudded the well KGV-D3-B1 to evaluate Pleistocene and Late to Mid Miocene sandstone reservoirs. The well is expected to reach a TD of 2,740m.

D9 Block

The D9 licence, in which the Company holds a 10% participating interest and which is also operated by Reliance, is located in the Krishna Godavari basin on the East Coast of India and covers an area of approximately 11,605km2.

The oil and gas industry continues to experience significant shortage of specialty exploration and development equipment. This has been particularly apparent for offshore drilling ships capable of operating in water depths of greater than 2,000 m. As a result of this shortage Hardy’s D9 deepwater exploration licence has previously experienced delays in the drilling of the licence’s minimum work programme.

After careful consideration of the current equipment shortage and the priority of the operator to complete offsetting commercial developments, the Company is of the view that drilling on the D9 licence is unlikely to commence until the latter part of 2008 at the earliest. However, as experienced with the D3 licence, windows of availability do occur and Hardy will endeavour to ensure that our stakeholders are notified of developments on a timely basis.

HOEC

As at 30 November 2007, Hardy held 6,657,694 shares or approximately 8.5 per cent of the issued share capital of HOEC which is listed on both the National Stock Exchange of India and the Bombay Stock exchange. In early January 2008, Hardy participated in a rights offering resulting in an acquisition of 4,438,462 additional shares and a cash outlay of approximately $13.2 million. In December 2007 and January 2008, Hardy sold 4,981,411 shares of HOEC realising proceeds of approximately $20.6 million. As a result, Hardy’s cash resources have been augmented by approximately $7.4 million to date. Hardy currently owns 6,114,745 shares of HOEC representing approximately 4.7 per cent of the entire issued share capital of HOEC.

Commenting on the above developments, Sastry Karra, Chief Executive of Hardy said, "We are delighted with another positive result from our exploration drilling activity. We are encouraged by the initial results of the first well on the D3 block and the overall prospectivity of this extensive exploration licence. The reduction of our stake in HOEC has augmented our cash resources that will contribute to funding our exciting work programme for 2008."

Tags: Hardy Oil and Gas