What's new:
■ Gas discovery in D9 Block
■ Commercial assessment underway
■ Fourth well planned for later this year
Shares in Hardy Oil & Gas moved upwards on confirmation that Reliance Industries - its senior partner in the D9 licence area - had made an initial gas discovery at the KGD9-A2 exploration well, which has been drilled to analyse the geological prospects within the Early and late Miocene channel levee complex. The D9 licence covers an area of approximately 8,695 square kilometres of the Krishna Godavari Basin on India's east coast.
Hardy's chief executive Yogeshwar Sharma said that the board was "encouraged by this discovery which extends the proven Miocene play fairway into the frontier D9 block. The discovery further enhances our understanding of the block's petroleum systems and reinforces our enthusiasm for unlocking its hydrocarbon potential".
The full commercial implications of this discovery (Dhirubhai-54) are now being assessed, but it's thought that the productive strata should cover a substantial area within the block. The competent person's report completed in March by consultants Gaffney, Cline and Associates estimated that Hardy's net contingent resource within the Miocene structure of KGD9-A2 at 230bn cubic feet of gas, which would add 51p to Hardy's underlying value.
Arden Partners says…
Buy. The drilling results illustrate the evolving understanding of the block's petroleum systems by Hardy and the block operator Reliance. The A1 well, which was drilled in 2009, tested a large structural closure with gas shows, but contained limited reservoir development. The subsequent B3 well tested a combination flank trap which penetrated multiple reservoir quality sandstones with associated strong gas shows, but with high water saturations. This is undoubtedly good news for Hardy. We await further clarification before changing any valuation factors but this first discovery on the block should improve the risked valuation of D9.
Macquarie says…
Neutral. Commerciality is still to be determined but the new discovery does de-risk to some extent the remaining Lower Miocene prospects. While the announcement of the first gas discovery in D9 Block is encouraging and potentially increases the chance of success for the remaining exploration prospects on the Block, there is no indication on the size of the commerciality of the discovery at this stage. We upgrade our recommendation from Underperform to Neutral and increase our target share price by 55p to 210p. We look forward to results from more data analyses on this discovery and further exploration results from this block
