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Financial Times: Hardy strikes gas off eastern India

By Mark Odell
Published: January 9 2007 02:00 | Last updated: January 9 2007 02:00

Hardy Oil & Gas said it had made a discovery off eastern India, its first exploration success since listing on Aim in mid-2005.

The shares rose as much as 10 per cent on the announcement, in thin trading, before settling down to close 22p up at 318¾, a rise of 7 per cent.

The find in the company’s CY-OS/2 licence in the Cauvery Basin, off Chennai, is its first success since the Hardy name returned to the market with a listing on Aim 18 months ago.

The success in the Fan-A-1 well follows the failure of Hardy’s first well in the same area. Both prospects were deemed high-risk because of the geology and the first dry well had left investors fearing a repeat.

Yogeshwar Sharma, managing director, was cautious of the implications of the discovery ahead of appraisal work but told the FT it “could potentially have a huge impact on valuation”.

Hardy has proved and probable reserves of more than 10m barrels after buying two marginal fields in Nigeria from Shell. The pre-drilling estimates for Fan-A-1 were up to 150m barrels of oil and some 300m boe [barrels of oil equivalent] of gas.

Hardy currently has a 75 per cent share of the CY-OS/2 licence but this would be diluted to 52 per cent under a back-in agreement that would see India’s state-owned Oil and Natural Gas Corporation take a 30 per cent stake if the licence area is declared commercial. Tests on the well produced high flow rates of gas from one zone but mechanical problems forced the company to abandon a deeper hydrocarbon interval, described by analysts at Arden, the company broker, as the “most exciting oil-bearing zone”. Mr Sharma said it was “very likely” that the company would re-enter the zone after other testing had finished.

He said he expected appraisal work and reserve estimates for the discovery in the next three months.

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