OilVoice - Hardy Oil and Gas Provides Update of Operations in India and Nigeria

Hardy Oil and Gas Provides Update of Operations in India and Nigeria

Monday, February 16, 2009

Hardy Oil and Gas plc provide the following update with respect to its operations in India and Nigeria.

HIGHLIGHTS

Exploration Update (India)
• D9: Commencement of exploration drilling is expected in H1 2009
• D3: acquisition of an additional 1,180 km2 of 3D seismic data has commenced and is expected to be completed in the first half of 2009
• D3: Operating committee has approved an appraisal programme for the Dhirubhai 39 and 41 gas discoveries
• CY-OS/2: Appraisal drilling is expected to commence in 2010, subject to the Government of India’s approval of an extension to the block
• Assam: Acquisition of 450 lkm of 2D seismic has commenced and is expected to be completed in the second quarter of 2009
• GS-01: Geophysical studies are ongoing

Development / Production Assets
• On 28 October 2008 the Company announced the commencement of operations for the drilling of a lateral well through re-entry of the PD4 well in the PY-3 field. The operations are now complete. Whilst the well tested at a rate of ~700stbd of oil with 30% water cut under nitrogen lift, it was unable to be reactivated as a self flowing well
• The well has been completed as a producer with a gas lift valve to allow for future production once gas lift compression facilities are installed on the FPU
• Further drilling on PY-3 will be determined after remapping of the field has been completed incorporating the results PD4-RL well. The PY-3 field is currently producing at a rate of approximately 3,000 stbd

REVIEW OF OPERATIONS

India

PY-3 (18%)
The PD4 vertical well was re-entered and side-tracked from 2,916 m MD (2,890 m TVDSS) and drilled down to 4,375 m MD (3,525 m TVDSS). The lateral (PR4-RL) well was drilled to increase the field production and the reservoir was prognosed to be encountered at 3,440m TVDSS; however the reservoir came in 25 m lower than the prognosed depth of 3,465 m TVDSS due to thickening of the overlying shale coupled with anomalous velocity variation, which is a common problem in the field. The well drilled a gross reservoir pack of 173 m MD (60 m TVD) within the reservoir section.

With the assistance of nitrogen lift, the well flowed at 700 stbd of oil with 30% water cut, however, the well was unable to be reactivated as a self flowing well. The well has been completed as a producer with a gas lift valve to allow for future production when gas lift compression facilities are installed on the FPU.

Further drilling on PY-3 will be determined after remapping of the field has been completed incorporating the results of the PD4-RL well.

The PY-3 field was shut-in between 26 November and 23 December 2008, due to FSO loading hose, mooring hawser and back-up rope failure during the tropical cyclone Nisha. The PY-3 field is currently producing at a rate of approximately 3,000 stbd.

CY-OS/2 (75%)
The CY-OS/2 joint venture has submitted a request to the Government of India for an extension of the licence to January 2012 to accommodate the appraisal programme and establish commerciality of the block in accordance with the terms of the CY-OS/2 production sharing contract. Subject to receipt of an extension, Hardy expects drilling to commence in 2010.

GS-01 (10%)
The GS-01 joint venture management committee reviewed and adopted an appraisal programme and budget for the GS01-B1 gas and condensate discovery (Dhirubhai - 33). The appraisal area comprises 5,890 km2 and the programme has an effective term through to May 2010. The GS-01 joint venture is conducting further technical studies to enhance our understanding of the block prior to committing to further drilling.

D9 (10%)
The operator has advised that the first exploration well in the D9 block may commence drilling in the first half of 2009, as the deepwater drilling ship “Deepwater Expedition” is currently engaged in development operations on an adjacent block.

D3 (10%)
Exploration: The acquisition of a further 1,180 km2 of 3D seismic data commenced on 13 February 2009 and is expected to be completed in the first half of 2009. Drilling of four additional exploration wells is anticipated to commence in 2010.

Appraisal: On 9 February 2009, the D3 joint venture operating committee reviewed and approved an appraisal programme for the evaluation of the Dhirubhai 39 and 41 gas discoveries. The appraisal area comprises 750 km2 covering a large portion of the northwest corner of the block. The appraisal programme provides for the initial undertaking of various geological, geophysical and development concept studies, following which, two appraisal wells could be drilled prior to February 2011. The proposed appraisal programme will be submitted to the Government of India shortly, for consideration by the joint venture management committee, which comprises representatives from DGH and the Ministry of Petroleum and Natural Gas.

In earlier 2008, Hardy had announced two gas discoveries on the D3 block. The Dhirubhai 39 discovery produced natural gas at a rate of 38.1 MMscfd through a 120/64” choke. MDT tests were conducted over several intervals of the Dhirubhai 41 discovery well confirmed the presence of hydrocarbons.

Assam (10%)
The planned 2D seismic acquisition programme has commenced and is expected to be completed in the second quarter of 2009. The programme is expected to acquire approximately 450 lkm of 2D seismic data.

Nigeria

Oza / Atala (20%)
The Oza joint venture has procured several long lead time items. The FEED study and ROW survey for pipelines are expected to be completed in the first quarter of 2009. Production is expected to commence in the fourth quarter of 2009.

The Atala joint venture continues to take steps to secure a swamp-barge drilling rig necessary to commence the planned re-entry and testing programme for Atala #1 well.