Hardy Raising Working Capital for Activities in India, Nigeria
Hardy Oil and Gas plc is raising up to GBP21.0 million (before expenses) by way of a placing of up to 4,964,540 new ordinary shares of $0.01 each ("Ordinary Shares") at a price of 423p per share (the "Placing").
The Placing proceeds will be used to help fund the working capital requirements of the Company, further details of which are set out below.
Hardy floated on the AIM market of the London Stock Exchange in June 2005, raising GBP15m at a price per share of 144p. In February 2006 Hardy issued an additional 5.2m ordinary shares at a price of 283p raising GBP14.7m.
--CY-OS/2: Further to Hardy's announced discovery on the CY-OS/2 license, on 8 January 2007, an appraisal program on CY-OS/2 has been submitted for DGH approval --GS-01: On 15 May 2007 the Company announced another gas discovery on the RIL-operated GS-01 license located on the west coast of India --PY-3: Initial agreement reached on securing the PY-3 floating production facility to 2009, subject to DGH approval --D3: The D3 joint venture approved a budget for one exploration well following the completion of the current 3D seismic acquisition program --Corporate: Advanced talks in securing US$10m debt facility with an India-based bank
Reasons for the Placing
The next 24 months will be an active and exciting time for the Company. With the announced CY-OS/2 Fan A-1 discovery, Hardy now plans to proceed with the further appraisal of the CY-OS/2 license. The Phase III development program for PY-3 is expected to increase production, and ultimate recovery from the field, by the end of 2008.
The drilling program in GS-01 was accelerated with the drilling of a second exploration well on 5 March 2007. With the announced GS-01-B1 discovery further drilling and 3D seismic is expected.
With the extensive 3-D seismic program in the D3 block now underway (completion is anticipated by the beginning of the 3rd quarter of 2007) the Company's non-operated exploration program, over the next 24 months, is expected to include the drilling of 3 to 5 exploration wells on the GS-01, D9, and D3 licenses.
The Directors believe that the net proceeds of the Placing will enable the Company to fund its projected exploration and appraisal programs in India and development operations in Nigeria.
Details of the Placing
The Company on Friday entered into a placing agreement with Arden Partners plc ("Arden"), under which Arden has agreed to use its reasonable endeavors to procure placees for up to 4,964,540 new Ordinary Shares ("Placing Shares") at a price of 423p per share ("Placing Price"). The Placing Price represents a discount of 5.16 percent to the official closing market price of 446p of an existing Ordinary Share on 24 May 2007, being the latest practicable date prior to the release of this announcement. Assuming the maximum number of Placing Shares are issued pursuant to the Placing, such shares will represent 7.98 per cent of the Company's enlarged issued share capital.
The Placing Shares are being offered to certain institutional and other investors subject to the terms and conditions set out in the placing letters which have been sent out by Arden to placees this morning. The placing is not being underwritten. A further announcement will be made by the Company in due course confirming the level of participation in the Placing.
Two of the Directors, Paul Mortimer and Pradip Shah (and/or persons connected to them), are participating in the Placing in respect of 29,774 and 55,000 Placing Shares respectively. Accordingly upon completion of the Placing, Mr Mortimer will be interested in an aggregate of 870,051 Ordinary Shares and Mr Shah will be interested in an aggregate of 664,435 Ordinary Shares representing 1.40% and 1.07% of the Company's enlarged issued share capital respectively (assuming the maximum number of Placing Shares are issued).
Settlement and dealings
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will occur, and dealings in the Placing Shares will begin, at 8.00 am on 4 June 2007. The Placing Shares will, when issued, rank pari passu in all respects with the existing Ordinary Shares in issue, including the right to receive any dividends and other distributions declared following Admission.
Current trading and prospects
Hardy's current trading is in line with the Directors' expectations and they remain confident about the Company's prospects. The proposed exploration and drilling timetable with accompanying resource estimates for each exploration license are as follows:
LICENSE CATEGORY ACTIVITY (2007-08) TIMING ------------ ----------- -------------------- -------- GS-O1 Exploration Drill 1 exploration well* Q2/07 CY-OS/2 Appraisal Drill 1-2 appraisal well H2/08 D9 Exploration Drill 1 exploration well H2/07 D9 Exploration Drill 1-2 exploration well H2/08 D3 Exploration 3D seismic program Q2/07 D3 Exploration Drill 1 exploration well Q4/08 PY-3 Development 2 development wells Q4/08 Nigeria Development Testing & evaluation activities Q4/07 * Well completed in May 07 Oil & Gas Net entitlement Reserves (MMbbl) License P.I.1 Proven Probable Possible Note ---------- ---------- ---------- --------- ----------- -------- PY-3 18.0 2.95 1.05 0.80 4 Contingent Resources (MMBOE10) License P.I.1 Prospect Risk2 Gross Net Type Note ---------- ------- -------- --------- ------- ------- ------- ------- CY-OS/2 52.59 Fan-A 0.32 20.0 10.5 Oil 5 Oza 40.0 Field 0.40 6.0 2.4 Oil 6 Prospective Resources (MMBOE10) License P.I.1 Prospect Risk3 Gross Net Type Note ---------- ------- -------- --------- ------- ------- ------- ------- D9 10.0 6 0.33 to 0.258 5,600 560.0 Gas 6 D3 10.0 4 0.20 695 69.5 Gas 6 GS-01 10.0 >1 0.17 48 4.8 Oil & Gas 7 CY-OS/2 52.59 2 0.14 58 30.2 Oil & Gas 6 Atala 20.0 1 0.33 6.5 1.3 Oil 5 Note: 1. P.I. - Participating Interest for India licenses and working interest for Nigeria licenses, shown as a percentage 2. Risk for "Contingent Resources" means the estimated chance, or probability, that the volumes will be commercially extracted. 3. Risk for "Prospective Resources", means the chance or probability of discovering hydrocarbon in sufficient quantity for them to be tested to the surface. 4. Internal estimate, third party verification pending 5. Internal estimate gas potential not included 6. Internal estimate 7. Pre-discovery estimates from RIL 8. The biogenic Pliocene gas play has been assigned a lower risk due to discoveries on the offsetting RIL operated D6 block 9. Hardy's participating interest is 75% however the CY-OS/2 is a pre-NELP license and ONGC has an option to back-in for 30% should a commercial discovery be declared. Thus 52.5% has been used to calculate Hardy's net reserves 10. MMBOE: million barrels of oil equivalent. Gas to oil conversion is 8mcf per barrel of oil (8:1)
The Board remains firmly focused on executing our strategy for the continued growth of shareholder value. Good corporate governance is a key component in the execution of the Company's strategy and the Company is looking to further enhance the Board through the addition of another Director.
The Company's progress since flotation is expected to continue as it executes its stated objectives. In line with the Company's progress and continued shareholder support the Board anticipates that the Company will move to the Official List later this year.
Commenting on the Placing, Sastry Karra, Chief Executive, said:
"We are encouraged by the strong support from our investors. The Placing will
enable us to continue to move forward with the appraisal of our discoveries and
further exploration of our asset portfolio."
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