Hardy Oil & Gas PLC Annual Report 2015

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FY2015 Annual Report · Hardy Oil & Gas PLC

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India focused
Development
driven

Hardy Oil and Gas plc
Annual Report and Accounts
FY2015

Who we are

Hardy Oil and Gas plc is an
upstream international oil
and gas company whose
operating assets are in India.

Its portfolio includes a blend of appraisal
and development assets.

Hardy’s goal is to evaluate and exploit
its asset base with a view to creating
significant value for its shareholders.

Index of contents

Strategic Report

Summary FY2015
Chairman’s Statement
Chief Executive Officer’s Strategic Review
Market Overview
Business Model
Key Performance Indicators
Operational Summary
Financial Review
Principal Risks and Uncertainties
Corporate Responsibility Summary
Board of Directors

Governance

Governance Summary
Governance Report
Audit Committee Report
Directors’ Remuneration Report
Nomination Committee Report
Directors’ Report

Financial Statements

Independent Auditor’s Report
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Parent Company Statement
of Changes in Equity
Parent Company Statement
of Financial Position
Parent Company Statement of Cash Flows
Notes to the Parent
Company Financial Statements

Additional Information

Reserve and Resources
Asset Description
Definitions and Glossary of Terms
Directors and Advisors

01
02
04
06
08
10
12
14
16
18
20

22
23
28
31
40
42

50
51

70
71

77
78
79
ibc

“ We have clear deliverables for
each asset and management
are fully accountable for the
implementation of the agreed
plans. The Group remains in
a strong financial position
from which to either fund its
planned work activity for the
Indian asset portfolio or to
implement a change of
geographical focus.”

Alasdair Locke
Chairman

Summary FY2015

• PY-3 – Achieved a consensus amongst partners on the PY-3 full field
development plan (FFDP) and subsequently submitted an Operating
Committee (OC) recommendation to the regulator for its review.

• GS-01 – A draft farmout agreement is under review by both parties and
the final outcome of these negotiations will be known in the near term.
A field development plan for the Dhirubhai 33 natural gas discovery is
with the Government of India (GOI).

• CY-OS/2 – The GOI’s appeal, against the Hon’ble tribunal award, in the
High Court of Delhi has been listed eight times and adjourned, at the
GOI’s request, on five occasions. The matter is now scheduled to
be heard again in July 2015.

• D3 – Having carefully considered the complex development scenarios
for existing discoveries, low projected natural gas pricing and possible
liability associated with unfinished minimum work programme (UMWP)
the D3 Joint Arrangement (JA) elected to exercise a one-time option to
exit the production sharing contract (PSC) with no further liability.

• An unsuccessful exploration cost of $22.6 million resulted in a total

comprehensive loss of $24.5 million (2013/14 – $4.8 million).

• Cash and short-term investments at 31 March 2015 amounted to

$21.0 million; Hardy has no debt.

Outlook

• PY-3 – Secure the GOI’s approval, via the Management Committee

(MC), of the recommended FFDP and corresponding budgets so that
the Company can commence work to target recommencement of
production in 2016.

• GS-01 – Conclude discussions with the Company’s joint venture

partner to acquire their participating interest in the block.

• CY-OS/2 – Hardy will recommence work on the appraisal of the

Ganesha-1 natural gas discovery once the block has been restored
to the CY-OS/2 joint venture.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationChairman’s Statement

A strong working
capital position

Introduction
The 2015 financial year (FY) presented
several challenges and opportunities
for Hardy and the upstream oil and gas
industry generally. We started the year
with great enthusiasm. A new
government had been elected in India
with a clear mandate for change and
we have observed improvements in the
overall working environment. Further,
the GOI has issued several policies
designed to resolve issues that had
created decision paralysis within a
bureaucracy concerned with potential
audit consequence to the detriment
of value creation activity.

We are disappointed in the GOI’s appeal,
to the High Court of Delhi, of the CY-OS/2
international arbitration award and
successive requests for adjournments
prolonging due process. In our opinion the
GOI’s appeal is in contravention of the PSC
which states the arbitration process is final
and binding on all parties, and inconsistent
with the latest Supreme Court precedent
that such international awards are not
appealable under India laws.

The second half of the year witnessed
the rapid and significant decline in global oil
prices which has put pressure on the
robustness of development projects
everywhere, including ours. Management
remained focused on building a consensus
with stakeholders regarding resumption of
production on our PY-3 asset and we are

Alasdair Locke
Chairman

Hardy Oil and Gas plc Annual Report and Accounts FY2015Our business model
Stage 1 – Hardy creates value through
the exploration and production of
hydrocarbons. In order to explore we
must first be granted a licence by the
government of the countries in which
we choose to invest. After extensive
analysis, exploration campaigns are
planned to try to discover oil and gas
fields within under-explored sedimentary
basins. When we have a significant
discovery we undertake appraisal
programmes which may include the
drilling of wells and further geotechnical
analysis to determine the size and quality
of the discovery.

Current focus
Stage 2 – If the appraisal programme
confirms that development of a
discovery will be commercially and
financially viable, we begin work on
a development plan. This maps out
how we will get the hydrocarbons into
production to generate revenue and
cash flow. We also create value through
the implementation of enhanced
production strategies to optimise the
value of recoverable hydrocarbons from
existing producing fields.

pleased to have established an equitable
way forward that is now being considered
by the GOI. Should we not make tangible
progress within our portfolio in a reasonable
time frame we will consider alternative
courses of action to secure value for our
shareholders that complement our India
based technical expertise and experience
in other geographical locations.

Market overview
Following successive years of stable high
oil prices and correlated cost inflation, in
2014/15 the industry has endured a rapid
decline in prices prompting a dramatic
scaling back of the capital investment plans
of global producers. The reduced activity
has left industry service providers with the
challenge of rationalising overcapacity.
As a result we have observed a significant
downward trend in overall costs.

India’s economic recovery is projected to
gain further traction in 2016 as improved
investment and household consumption
expenditure push GDP growth. However,
India’s oil and gas import dependence is
77 and 37 per cent respectively. Domestic
supply will need to double to achieve the
Prime Minister’s publicly stated target of
reducing import dependence by 10 per cent
by 2022. Without significant investment
domestic supply will not keep pace with
demand growth and a significant supply
deficit will continue to grow.

Performance
We made considerable progress on
our near-term production project at PY-3.
Until the objective of recommencement
of PY-3 production is achieved,
management will maintain tight control
of the Group’s administrative expenditure.
Having consideration for the resource
constraints of the Group and the overall
economic backdrop facing the Industry,
salaries remained unchanged in
FY2015. Key strategic objectives set for
management in FY2015 were not achieved
and as a result no bonus was awarded
to the Executive in the 12 months ended
31 March 2015. The Group’s net cash
used in continuing operating activities
was $3.5 million and as a result cash
reserves at 31 March 2015 decreased
to $21.0 million. The Group remains in
a strong financial position with no debt.

Governance
Following the resignation of Mr Yogeshwar
Sharma, Non-Executive Director, we
reviewed the composition of the Board and
concluded that the current membership is
sufficient to guide the Company to achieve
its strategic objectives. We will continue
to assess the Group’s leadership
requirements and the overall effectiveness
and composition of the Board. We are
committed to constructive engagement
with our shareholders.

The Board wishes to acknowledge
Mr Sharma’s immense contribution to
Hardy, which he co-founded in 1997 and
led in its early period of rapid growth.
He helped build the Company’s spread
of exploration acreage in India that led to
Hardy’s successful listing, first on AIM and
later on the Main Market of the London
Stock Exchange.

Risk management
The Group maintains robust internal
control and risk management systems
appropriate for a Company of our size and
resources. The Group’s near-term principal
risks remain: the timing or execution of
activities may not commence as forecast
and delays may be experienced; the
possible relinquishment of appraisal
acreage; and other liabilities related to
ongoing disputes (see pages 16 to 17).

Objectives and outlook
Our objectives remain to secure key
stakeholders’ approvals and initiate
activity that will take us closer to realising
production from our portfolio of assets.
We have clear deliverables for each asset
and management are fully accountable for
the implementation of the agreed plans.
Should the status quo in India remain
and tangible progress not be made in a
reasonable time frame we will re-evaluate
our current strategy of geographical focus
on India. The Board and management
have the benefit of significant experience of
other oil and gas provinces worldwide. The
Group remains in a strong financial position
from which to either fund its planned work
activity for the Indian asset portfolio or to
implement a change of geographical focus.

Alasdair Locke
Chairman
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationChief Executive Officer’s Strategic Review

Evaluating
and exploiting
our asset base

Introduction
Through FY2015 we made progress on a
number of initiatives set out for our India
focused portfolio. As operator of the
PY-3 oil field, we successfully facilitated
a consensus amongst partners outlining
a mutually equitable way forward. The
proposed comprehensive PY-3 FFDP is
now under review by the GOI. The D3
exploration asset was drawn to its
conclusion with the parties’ exit from
the block without any residual liability.
Other key objectives, including the
enforcement of the CY-OS/2 arbitration
award and farm-in to the GS-01 block,
remained outstanding. Cost mitigation
remained a focus and as a result,
administrative expenses remained flat
after adjustments for the duration of the
reporting period and non-cash charges.

The Group reported a significant increase
in loss due to the D3 unsuccessful
exploration charge.

Implementing our strategy
We believe Hardy’s India focused asset
portfolio provides a good platform from
which to create shareholder value. The
outcome of planned activity through 2015
and 2016 is expected to endorse this view
on the longer-term prospects of our
portfolio. We intend to undertake further
direct recruitment or engagement of
support personnel and resources, as we
advance execution of our plans for the
PY-3, GS-01 and CY-OS/2 assets.

For the FY2016 we have set ourselves
targets to accelerate progress within our
portfolio of Indian assets. Should these

Ian MacKenzie
Chief Executive Officer

Hardy Oil and Gas plc Annual Report and Accounts FY2015funded from current resources plus a
certain amount of financing which we are
confident of achieving.

On 23 December 2014 the D3 joint
arrangement (JA) elected to exit the PSC
under the provisions of a GOI Notification
O-22013/27/2012-ONG-D-V dated 10
November 2014. The GOI policy permitting
a one-time option to exit the D3 PSC was a
compromised solution to access restrictions
having been imposed by the GOI post
award of the contract. The parties to the
D3 PSC had deliberated at length over the
optimal course of action taking into account
the complex development scenarios for
existing discoveries, low projected natural
gas pricing under current GOI policy and
the regulator’s aggressive approach to
calculating liquidated damages payable
toward UMWP.

The GOI’s appeal, against the Hon’ble
Tribunal award in respect of CY-OS/2 (the
Award), in the High Court of Delhi has been
listed eight times, spanning a period of over
22 months and adjourned at the GOI’s
request five times. The next hearing is
scheduled to be called in July 2015 and
we anticipate the process of enforcing
the Award to continue through 2015.
The Company believes that the
unanimous international tribunal award
is well reasoned and, as per the India
Arbitration & Conciliation Act 1996, may
not be subject to appeal in Indian courts.
We believe that this position is further
supported by the recent Indian Supreme
Court judgement in a similar matter where
the award of a foreign seated arbitration
tribunal has been upheld.

The Company is continuing to
pursue the acquisition of the operator’s
participating interest in the GS-01 block
and subsequently progress the approval
of the proposed field development plan.
A draft agreement is under review by both
parties. The timely resolution regarding
liquidated damages associated with
UMWP should facilitate timely completion
of our farm-in efforts.

targets not be achieved, we will consider
shifting our strategic geographical focus
to activities that continue to leverage the
Group’s India-based technical expertise
and complement management’s
experience and expertise in other
geographical locations.

Health, safety and environment (HSE)
As an offshore operator, the Company is
committed to excellent health and safety
practices which are at the forefront in all
of our activities. Although all offshore
activities were suspended in March 2012
with our intention to initiate activities in the
future we will continue our commitment to
maintain high HSE standards throughout
the organisation. Our HSE policy stresses
leadership and accountability and our
commitment to HSE, operational integrity
and business ethics will be cornerstones of
future personnel recruitment as well as the
conduct of our business.

Operations
The Company’s activities are firmly
focused on the implementation of
the PY-3 comprehensive FFDP which
will enable us to meet our target to
recommence production in 2016. In FY2015
we achieved key milestones by building a
consensus amongst parties to the OC on
the PY-3 FFDP and subsequently submitted
an OC recommendation to the India
upstream regulator (DGH) for its review. Key
milestones remain including MC’s approval
of the FFDP and associated budgets, the
completion of tendering for major contracts
and long lead items and finally the execution
of required field activity. The MC comprises
the PY-3 participating interest holders and
the GOI’s representatives including DGH.

The OC proposal requires contractual
concessions by the independent
participants and the GOI to accommodate a
minimum return for the GOI nominee Oil and
Natural Gas Corporation ltd (ONGC) whilst
retaining robust economic and technical
parameters. The project’s viability is based
on several key assumptions including oil
prices remaining at or above current levels
and various contractual events including the
extension of the PSC term and levies being
cost recoverable at original contracted
rates. Providing for the excess capacity
in the service sector we would expect to
realise significantly lower costs than
projected in the FFDP. The Group’s share
of the PY-3 FFDP capital expenditure will be

Financial
The Group is reporting a total
comprehensive loss of $24.5 million for
the 12 months ended 31 March 2015
compared to a loss of $4.8 million for the
15 months ended 31 March 2014. The
significant increase is attributable to the
relinquishment of the D3 exploration
license which resulted in an unsuccessful
exploration cost of $22.1 million. Our
administrative expenditure of $3.8 million
was a modest reduction compared to the
previous 12 month period. Previously we
had reported administrative expenditure
of $6.2 million for the 15 months ended
31 March 2014. Adjusting for the reduced
reporting duration the further reduction in
expenditure can be attributed to foreign
exchange income of $0.4 million compared
to a $0.4 million expense in the previous 15
month period and the expected recovery
of JA costs amounting to $0.4 million.

Cash used in operating activities
amounted to $3.6 million for the 12 months
ended 31 March 2015 compared to a cash
outflow of $4.7 million for the 15 months
ended 31 March 2014. The Group’s capital
expenditure and investment income were
nominal at $0.4 million each. With cash and
short-term investments of $21.0 million as
at 31 March 2015, and no debt, the Group
is well funded to meet its future work
commitments on the Indian asset portfolio.

Outlook
Our primary objectives remain to secure key
stakeholders’ approvals, initiate activity that
will take us closer to realising production
from our portfolio of assets including PY-3
in 2016. We have clear deliverables for
each asset and management are fully
accountable for the implementation of the
agreed plans. Energy demand in India
continues to grow at an exceptional rate
and the GOI has set some ambitious
domestic production targets. To achieve
its targets, GOI policy will need to continue
to evolve to facilitate the timely exploitation
and development of the country’s natural
resources. We will continue to seek
opportunities to build value
for shareholders.

Ian MacKenzie
Chief Executive Officer
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationIndia oversight – A new federal
government was elected in 2014 with
a clear majority government and an
unprecedented mandate to see through its
plans. Energy security is continuing to be an
active topic on the national agenda. Industry
is providing a more coordinated voice
through the AOGO, an oil and gas operator
association, of which Hardy is an active
member. We have observed the beginnings
of a positive trend in the level of urgency in
decision making and an effort to foster a
more collaborative and constructive
regulatory environment. Notwithstanding
the GOI’s business friendly narrative we
have recently observed the GOI’s continued
pursuit of retrospective taxation claims and
an enthusiastic application of the judicial
system which continues to frustrate
the enforcement of many high
profile international arbitration
awards including our own.

The GOI issued the New Domestic Natural
Gas Guidelines, 2014 (the “Guidelines”).
The Guidelines are based on a modification
to the Rangarajan formula by:

a. Removal of both the Japanese and
Indian LNG import components in
the formula.

b. Consideration of Alberta Gas Reference
price in place of Henry Hub Prices for
Canadian consumption.

c. Consideration of Russian actual price
in place of National Balancing Point
price for the Russian consumption
considered under Former Soviet Union
(FSU) countries.

d. $0.5 deductions on account

of transportation and treatment
charges to apply to all sectors of the
economy, along with prevailing gas
allocation policy.

This price equates to approximately
$5.0 per mmbtu based on the net calorific
value (NCV) of the sales gas. This is an
increase of 30 per cent from the previous
notified price. Providing for the projected
shortfall in supply the gas pricing policy is
below expectation and is inconsistent with
PSC provisions which require gas value to
be determined by a regional competitive
arms-length price discovery process.

Equity markets – The Upstream Oil and
Gas sector generally underperformed the
market due in part to a fall in commodity
prices. It is our observation that in general
institutional investors’ appetite for mid to
small cap exploration and production
companies has diminished in the past
18 months due to a perception of better
returns in other sectors and to a lesser
extent poor exploration results. Hardy’s
share price underperformed the market
which was primarily the result of the
relinquishment of the D3 exploration
asset and prolonged delays in
securing sanction of development
and appraisal programmes.

Market Overview

Economic and political overview
The overall global economy has continued
to show improvement driven by US GDP
growth. Europe, South American and
Asian economic growth slowed or
stagnated. Global geopolitical tensions
continued in the Middle East and Eastern
European regions. Overall energy demand
continues to grow.

Oil price – Global oil prices suffered a
material downgrade in the latter part of
2014 with Brent crude falling from an
average of over $100 per bbl to as low as
$45 per bbl. Oil prices continue to show a
high level of volatility but have settled to a
narrower band between $55 and $70 per
bbl. The dramatic fall is likely the result of
sluggish demand growth, additional US
unconventional oil production and OPEC
unwillingness to cut production levels to
balance the supply/demand environment.
Currently the Brent ICE forward contract
are trading around $65 to $75 per bbl over
the next two years. Our current projects
remain viable under the current oil price
environment.

Industry costs – The fall in oil price
has resulted in a significant reduction in
planned capital expenditures and other
development projects being indefinitely
postponed. The service sector has reacted
with consolidation as evidenced by the
Halliburton Baker Hughes merger and
significant redundancies announced
across the sector. In the long-term this
consolidation may result in further cost
inflation however Hardy expects near-term
costs to fall as the service sector
rationalises overcapacity issues.

Natural gas – India’s demand for natural
gas is expected to grow by about 19 per
cent per annum (from 194 mmscmd in
2013 to 466 mmscmd in 2017) to meet the
ever increasing requirements of the power,
fertiliser and other industries. The CNG
and city gas sector are also projected to
see a quantum growth in natural gas use.
Furthermore, it is expected that by 2017,
300 cities will have the infrastructure for
gas distribution. Domestic supply by 2017
is projected to be 231 mmscmd, falling well
short of expected demand.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Hardy share closing price data

Since April 2014

100

-25

-50

-75

-100

A pr 1 4

J u n 1 4

A u g 1 4

O ct 1 4

D e c 1 4

F e b 1 5

A pr 1 5

J u n 1 5

Hardy equity

FTSE Allshare Index

FTSE 350 – Oil & Gas producers

Source: London Stock Exchange

India appeal
India’s political, legal and upstream
regulatory policies combined with globally
competitive fiscal terms provide a positive
foreign investment environment.

Dynamic political environment: India
represents the world’s largest democracy
with over a 1 billion population. The 2014
national election enjoyed over 65 per cent
participation. Combined with independent
news agencies, this political framework
provides a good level of transparency and
a solid platform for political discussion.

Robust institutions: The Indian legal
system is based on common law providing
protection of contractual rights and
enforcement of obligations.

Improving infrastructure: The pace
of economic and population growth has
outstripped investment in infrastructure.
The government has identified infrastructure
improvement as an area of focus and
meaningful progress is observed,
particularly in areas of transportation
and distribution.

India Econmy

GDP vs Inflation

Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15

Inflation

GDP

Source: Trading Economics

Growing economy: The Indian economy
realised GDP growth over 8 per cent per
annum in the past decade. Of late, GDP
growth had slowed to 5 per cent but is
now projected to increase to 7.5 per cent in
2014/15. Inflation remains relatively high at
4.5 per cent but has come down markedly
from 8.5 per cent in 2014.

Domestic upstream technical expertise:
As a result of the success of ONGC
(majority owned by GOI), there is a
strong community of upstream technical,
operating and commercial professionals
based in India. An established services
industry is present with some degree
of competition.

Competitive fiscal platform: PSCs
provide for fiscal stability; full cost
recovery of investment; seven-year tax
holiday on mineral oil; and free market
pricing provisions.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationBusiness Model

Value creation

Our objective is to create value through the discovery of commercial quantities of hydrocarbons,
and monetise such discoveries through the process of development, production and subsequent
sale of hydrocarbons. This value creation process requires significant capital over a long
investment life cycle (see chart below) and mitigation of significant risks and uncertainties
including operational, environmental, technical and financial risk.

Value differentiator Hardy’s has some distinct attributes which are identified as value differentiators

in the pursuit of our strategic objectives.

Governance practice – A Main Market
LSE listed company, Hardy maintains high standards
of governance.

Local presence – Cultivated a robust and
diverse network in the India upstream
petroleum sector.

Offshore operator – 20 years of experience
as a qualified offshore operator achieving
an excellent HSE record.

Technical expertise – Full cycle track record
with focus on small to medium size fields.

Obtaining exploration
rights (1–3 years)

Acquire directly through
national authorities or
indirectly via purchase
or farm-in

Obtaining hydrocarbon exploration
rights is accomplished through:
a. The granting of exploration licences
by the Government of the countries
in which we choose to invest. In
India this is accomplished via the
New Exploration Licensing Policy
(NELP), a periodic competitive
closed bid process.

b. The acquisition of exploration

licences from third parties. This can
be accomplished via direct farm-in,
purchase, or corporate mergers.

Exploration
(2–5 years)

Geoscience surveys and
studies, high-grade prospects,
verify via drilling

Exploration campaigns are planned to
try to discover oil and gas fields within
under-explored sedimentary basins.
Initial activity will typically involve
investment in extensive geotechnical
analysis which will typically include
geological modelling of sedimentary
basins and the acquisition of seismic
and other data, which is then
integrated to facilitate the identification
of possible subsurface hydrocarbons
accumulations (prospects). Drilling
of exploration wells commences if a
prospect has a reasonable chance of
success and meaningful size estimate.

Appraisal
(2–5 years)

Geotechnical and
engineering studies to
assess commerciality
of discoveries

When we have a significant discovery
we undertake appraisal programmes
which may include the drilling of wells
and further geotechnical analysis to
determine the size and quality of the
discovery. Initial development
concepts are also formulated at this
time to facilitate the determination of
commerciality. Presence of markets to
monetise the discovered hydrocarbon
are identified at this time.

CY-OS/2

Page 13 for the full review of CY-OS/2

GS-01

Page 13 for the full review of GS-01

Cash flow illustration

Hardy Oil and Gas plc Annual Report and Accounts FY2015 Expenditure

Revenue

Return profits to
shareholders

Establish sustainable
business, return capital to
shareholders

After retaining sufficient profit
to reinvest in the business, we
return profits to our shareholders.
Dispositions and farm-downs,
throughout the investment cycle
described above, may also accelerate
the return of profits to shareholders.

“ Our India focused portfolio
is a good platform from which
to create value”

H A R D Y F O C U S

Development
(3–10 years)

Production
optimisation
and enhanced
recovery

Finalise optimal development
plan implement plan and
commence production

Monitor production and
performance, identify viable
enhanced recovery techniques

If the appraisal programme confirms
that the development of a discovery will
be commercially and financially viable,
we begin work on a development plan.
The plan will map out the optimal
process to extract the hydrocarbons
in a cost effective manner and identify
which markets the production may
be sold into. Field developments are
complex, require significant capital
investment and may take many years
to implement.

GS-01

Page 13 for the full review of GS-01

Once a discovery is in production we
use our expertise and knowledge to
ensure strategies optimise recovery in
a safe and cost effective manner. Later
in a field’s life we create value through
the implementation of enhanced
production strategies to optimise the
value of recoverable hydrocarbons
from existing producing fields.

PY-3

Page 12 for the full review of PY-3

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationKey Performance Indicators (KPIs)

KPIs provide an illustration of management’s ability to successfully
deliver against the Company’s strategic objectives.

The Board periodically reviews the KPIs of the Group taking into
account the strategic objectives and the challenges facing
implementation of such. The Board has identified two financial
and three non-financial measures as KPIs for Hardy. The
measures reflect the Company’s appraisal and development
focused strategy, the importance of a positive cash position and

our underlying commitment to ensuring safe operations. In
addition to the five key measures the Company also recognises
that timely stakeholder approvals of our FDPs are important
milestones in our pursuit of realising production and creating
significant shareholder value.

We measure our progress through five KPIs closely aligned with
delivering our strategy. A summary is provided in the table below:

Category

KPI

Definition

Relevance

Progress

HSE

Operational

Total recordable injuries (TRIs)

Contingent resource

TRI includes fatalities, lost time injuries,
cases restricted for work, cases of
substitute work due to injury, and
medical treatment cases by medical
professionals (doctors, nurses, etc).
It does not include any first aid injury

This metric is used to provide guidance
as to the Group’s HSE performance

Those quantities of petroleum estimates,
as of a given date, to be potentially
recoverable from known accumulations
by application of development projects,
but which are not currently considered
to be commercially recoverable due to
one or more contingencies

Increasing contingent resources is a
good metric for the results of our
exploration activities. Objective to
migrate to Reserves

Absence of field activity and diligent
onshore procedures have maintained
no LTIs

Contingent resource reduced due to the
relinquishment of the D3 exploration
block which had four gas discoveries.

FY 2016 Outlook/target

No TRIs

Increase via GS-01

Key activity

Prior to recommencement of field
operations management will undertake
a comprehensive review and roll-out
of HSE policy and practice to staff
and contractors

Robust geotechnical evaluation adopting
industry best practice and external
advisors when required

TRI
2

bcf
200

200

150

100

2011

2012

2014

2015

2011

2012

2014

2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Financial

Wells drilled

Cash and short-term investments

Cash flow overhead

The number of appraisal and
development wells in India

Frequency of drilling of wells is a key
factor in realising value for Hardy

Liquid assets held as cash in term
deposits or liquidity funds that are
redeemable within one business day

Funding considerations play an
important role in the Company’s ability
to execute its planned activities

Cash administrative expense in India and
UK less partner recharges

Preservation of capital is an important
consideration of the Board. Net cash
from operating activities provides a good
measure of the level of capital erosion or
accretion experienced by the organisation

Operating Committee approval of the
PY-3 FFDP was secured in 2015. The
implementation of drilling activity
remains subject to Management
Committee approval

Two wells in PY-3 (subject to timely
MC approval)

Tight controls of expenditures
management facilitated conservation
of liquid resources in 2015/16

Reduced underlying cost base of
business. Further reductions may be
counterproductive

Maintain $5 million

Maintain current levels

Approval of PY-3 FDP and restoration of
CY-OS/2 will facilitate commencement
of planning for drilling campaigns

Robust budget process and regular
update of cash flow projections.
Postpone major expenditures until
operations are sanctioned

Robust budget process. Internal control
review undertaken in 2014

Wells
1

2011

2012

2014

2015

Million
$40

$35

$30

$25

$20

$15

$10

Million
$8.0

$6.0

$4.0

$2.0

2011

2012

2014

2015

2011

2012

2014

2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationOperational Summary

Chennai

since February 2015 and further activity is
subject to sanctioning of the recommended
FFDP by the Management Committee.

Ganesha-1 well

CY-OS/2

ARIYALUR-PON D ICHE RRY
SUB-B ASI N

L-XI

NEYVELI

Villupuram

Pondicherry

CY-ONN2002/1

OIL FIELD

BHUVANAGL02

GAS FIELD

CY-ONN2004/1

CY-OS/2

PY-1 FIELD

GAS CONCENTRATE FIELD

L-1

CY-ONN2002/2

MADANAM

CY-ONN2004/2

KALI

L-1 (EXTN)

MYLIADUTHURAI

PY-3 FIELD

CY-OS-90/1

KUTHALAM

TRANQUE BAR
SUB-BASIN

30 km

PY-3

Block CY-OS 90/1 (PY-3):

Oil Field (Hardy 18 per cent interest – Operator)

The Company’s exploration and production
assets are based in India and are held
through its wholly owned subsidiary Hardy
Exploration & Production (India) Inc. (HEPI).

Health, safety and environment
The Company is committed to excellent
health and safety practices which are at the
forefront in all of our activities. Although all
offshore activities are currently suspended,
maintaining high HSE standards throughout
the organisation remains core to all our
undertakings. The Company’s HSE policy
document is regularly reviewed and
amended. Recent amendments provided
for an increased focus on leadership
and accountability.

Block CY-OS 90/1 (PY-3):
Oil Field (Hardy 18 per cent interest –
Operator)
Operations – As operator of the PY-3
asset, Hardy convened multiple Operating
Committee meetings with partners to
build a consensus on a proposed field
development plan for the resumption of
production from the oil field. One of the
primary constraints has been fiscal
considerations being sought by the
Government of India nominee ONGC
which under the provisions of the PSC
are subject to additional levies. The
independent partners subsequently agreed
to proportionally share fiscal obligations in
the future. This concession is subject to
confirmation of PSC extension and
recognition of levies as a Contract Cost.
The Operating Committee recommended
FFDP has been under review by the GOI

Outlook – Secure timely approval of the
FFDP from the GOI after which we intend
to target the recommencement of
production in 2016. This will be achieved
by securing the appropriate offshore
production and storage facilities while
simultaneously initiating planning for a
development drilling programme. The
FFDP envisages a resumption of
production from one well at the rate of
around 3,000 bbld and subsequently drill
two new producers and undertake the
workover of a third well. Production is
estimated to peak around 8,000 bbld.

Background – The PY-3 field is located
off the east coast of India 80 km south of
Pondicherry in water depths between 40 m
and 450 m. The Cauvery Basin was
developed in the late Jurassic/early
Cretaceous period and straddles the
present-day east coast of India. The
licence, which covers 81 km2, produces
high quality light crude oil (49° API).

Block GS-OSN-2000/1 (GS-01):
Appraisal (Hardy 10 per cent interest)
Operations – Hardy continued
discussions with the operator to acquire
their 90 per cent interest and Operatorship.
General commercial terms have been
agreed and a draft farm-out agreement is
under review by both parties, following
which an agreement will be subject to the
GOI approval of the transfer of interest and
operatorship. A FDP, for the Dhirubhai 33
natural gas discovery, was submitted to
the GOI for review and approval in 2012.
The development plan provides for several
dry tree wells, an unmanned platform,
multiphase pipeline to shore and onshore
processing and export facilities.

Outlook – Conclude discussions with
our joint venture partner to acquire their
participating interest and the Operatorship
of the block. The timely resolution of
liquidated damages for UMWP could
accelerate conclusion of the acquisition
process. Following this, a priority will be to
secure GOI approval of the FDP and initiate
planning for development.

Background – In 2011, the GS-01 joint
venture secured the GOI’s approval for a
DOC proposal for the Dhirubhai 33 discovery

Hardy Oil and Gas plc Annual Report and Accounts FY2015(GS01-B1, drilled in 2007) which flow-tested
at a rate of 18.6 mmscfd gas with 415 bbld
of condensate through a 56/64 inch choke
at flowing tubing head pressure of 1,346 psi.
The GS-01 licence is located in the Gujarat-
Saurashtra offshore basin off the west coast
of India, northwest of the prolific Bombay
High oil field, with water depths varying
between 80 m and 150 m. The retained
discovery area covers 600 km2.

Block CY-OS/2:
Appraisal (Hardy 75 per cent interest
– Operator)
The GOI’s appeal against the unanimous
international arbitration award (further detail
provided on page 78) to restore the block
to the joint venture in the Delhi High Court
of India continued. The GOI appeal is
challenging the jurisdiction of the tribunal.

Hardy has also filed an execution petition
with the Delhi High Court. To date the High
Court has listed the case eight times and, at
the request of the GOI, adjourned the
hearing on five occasions. The next hearing
is scheduled to be called in July 2015.

Outlook – We will continue our endeavours
to facilitate the restoration of the block to the
CY-OS/2 joint venture in a timely manner.
The GOI appeal is being heard in the Delhi
High Court and this is likely to continue
through 2015. The Company believes that
it has a strong position as the unanimous
international award is well reasoned and, as
per the India Arbitration & Conciliation Act
1996, may not be subject to appeal in Indian
courts. Hardy will recommence work on
the appraisal of the Ganesha-1 natural gas
discovery once the block has been restored
to the CY-OS/2 joint venture.

GS-01

Block GS-OSN-2000/1 (GS-01):

Appraisal (Hardy 10 per cent interest)

Kodinar

ARABI AN SEA

M-1

N. TAPTI

MID. TAPTI

S. TAPTI

B2
ONGC

B3
ONGC

B-1
S-1

A-1

BM-16
ONGC

MUKTA

PANNA

B-1C
ONGC

BM-17
ONGC

BOMBAY
HIGH 1

BM-6

B-18
ONGC

BM-12
ONGC

OIL FIELD

GAS FIELD

SUB-SEA PIPELINE

BASSEIN

HEERA

RATNA

100 km

Dahanu

Mumbai

Contingent Asset – As at 31 March 2015,
Hardy’s 75 per cent share of the interest
awarded by the international tribunal
amounted to approximately $45.6 million.

Block KG-DWN-2003/1 (D3):
(relinquished)
Exploration (HEPI 10 per cent interest)
Operations – On 23 December 2014, the
D3 Management Committee considered a
proposal from Reliance Industries Limited,
the operator of the D3 block, in which the
Company holds a 10 per cent interest, for
the relinquishment of the block. The
proposal set out that, as per the GOI
notification O-22013/27/2012-ONG-D-V
dated 10 November 2014 (Policy), access
restrictions have been imposed by the GOI
and the Operator recommended the
relinquishment of the block with immediate
effect under clause 3.1 (a), and (e) and 3.2,
of the referenced GOI Policy.

The Operator conveyed that the previously
announced access restrictions imposed by
the Ministry of Defence (MOD) rule out any
further exploration/development activities
in the impact zone area and inhibited the
Contractor from undertaking any further
work and investment in the unrestricted
area of the Block due to the anticipated
increase in cost and risk. This untenable
position was further compounded by the
uncertainty of long-term natural gas pricing
in India following the GOI policy announced
earlier in the year which imposed pricing at
a significant discount to our expectation of
regional market pricing.

The relinquishment of the block will release
Hardy from any further liabilities including
possible liquidated damages related to the
UMWP. However, $22.1 million of the
Company’s Intangible Assets, which are
attributable to the D3 block, has been
written-down in the reporting financial year.

Group outlook
Our primary objectives remain to secure key
stakeholders’ approvals and initiate activity
that will take us closer to realising production
from our portfolio of assets. Importantly,
energy demand in India is growing at an
exceptional rate and the country’s structural
supply shortfall should promote a
geopolitical environment to complement our
efforts. The Company remains in a strong
working capital position from which to fund
its planned work activity and we look forward
to updating the market further in due course.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationFinancial Review

Overview
In the 12 months ended 31 March 2015, the Group recorded total comprehensive loss of $24.5 million and at year end had total cash
and short-term investments of $21.0 million with no debt.

Summary statement of comprehensive income

Unsuccessful exploration write-down
Following the relinquishment of D3 the Group has expensed $22.1 million of exploration costs incurred
in association with the drilling of gas discoveries on the D3 block. These expenses had previously been
capitalised and recorded under Intangible asset – exploration.

Administrative expense
Administrative expense fell by $2.3 million. Approximately $1.1 million is attributed to the previous
reporting period representing 15 months (due to adjustment in accounting reference date). A share-
based payment credit of $0.4 million was a result of a foreign exchange adjustment for prior year
awards compared to a $0.4 million charge in 2014. The India operations administration expense
was reduced by $0.4 million as a result of the recovery of expenditures incurred on behalf of joint
arrangements to which Hardy is the designated Operator.

Finance cost
Finance cost is primarily a decommissioning provision charge incurred due to the unwinding of future
value discounting.

Taxation
No current tax is payable for the 12 months ended 31 March 2015. The Group has recorded
a deferred tax credit of $1.7 million. The deferred tax asset is expected to be realised with the
recommencement of production from the PY-3 oil field.

Total comprehensive loss
The Group’s significant increase in total comprehensive loss is attributable to the unsuccessful
exploration expense resulting from the relinquishment of D3.

Summary statement of financial position

Non-current assets
Non-current assets primarily represents successful or work-in-progress exploration expenditure.
The $20.0 million decrease is largely the result of the D3 asset being relinquished and capitalised
expenditure attributable to exploration activity, including the drilling of four gas discoveries, was
written-off and expensed ($22.0 million) and an increase in deferred tax asset of $1.7 million.

Current assets
The Group’s cash and short-term investments reduced by $3.6 million. This is essentially due to the
payment of general and administrative expenses. The Group incurred an inventory write-down of
$0.5 million following a third party inspection of drilling tubing and other equipment. Trade and other
receivables of $0.8 million represent amounts due to be recovered from joint arrangements operated
by Hardy.

Non-current liabilities
The Group’s non-current liabilities is exclusively attributed to a decommissioning provision for the PY-3
asset. The provision was increased by $0.1 million due to the unwinding of future value discounting.
The provision has been estimated based on observed long-term industry cost trends. Recent volatility
in global commodity prices has resulted in a reduction in costs. Management will look for evidence of a
sustained reduction in industry costs prior to reviewing its underlying assumptions.

Current liabilities
Trade and other accounts payable comprises of amounts due to vendors and other provisions
associated with various joint arrangements.

FY
31 March 2015
(audited)
$ million

15 months ended
31 March 2014
(audited)
$ million

(22.6)

–

(3.8)

(6.2)

(0.2)

(0.4)

1.7

0.6

(24.5)

(4.8)

31 March 2015
(audited)
$ million

31 March 2014
(audited)
$ million

76.0

96.0

23.0

27.3

5.6

5.0

5.5

5.0

Hardy Oil and Gas plc Annual Report and Accounts FY2015Summary statement of cash flows

Cash flow (used in) operating activities
Cash used in operating activities comprised of $(3.5) million of administrative costs. Debtors and
Creditors movement of $(0.5) million was offset by a decrease in inventory of an equivalent amount.
As a result there was a minor change in working capital.

Capital expenditure
The Company incurred $0.2 million in capital expenditures in the year which was primarily associated
with the non-operated joint arrangement expenditure.

Financing activity
Interest and investment income realised predominantly from its Indian rupee deposits amounted to
$0.4 million

Cash and short-term Investments
Sufficient resources are available to meet ongoing capital, operating and administrative expenditure.
The Group has no debt.

FY 31
March 2015
(audited)
$ million

15 months ended
31 March 2014
(audited)
$ million

(3.5)

(4.7)

(0.2)

0.4

0.6

21.0

24.7

Liquidity risk management and going concern
The Company closely monitors and manages its liquidity risk. Cash forecasts are regularly produced and sensitivities run for different
scenarios including changes in timing of developments and cost overruns of our activity. At 31 March 2015, the Company had liquid
resources of approximately $21.0 million, in the form of cash and short-term investments, which is available to meet ongoing capital,
operating and administrative expenditure. The Company’s forecasts, taking into account possible changes as described above, show
that the Company will have sufficient financial resources for the 12 months from the date of approval of the Preliminary Results
Statement and Accounts for the 12 months ended 31 March 2015. At the present time, the Group does not have any debt.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationPrincipal Risks and Uncertainties

As an oil and gas exploration and production company with
operations focused in India, Hardy is subject to a variety of risks
and uncertainties. Managing risk effectively is a critical element of
our corporate responsibility and underpins the safe delivery of our
business plans and strategic objectives. The Group has a
systematic approach to risk identification and management which
combines the Board’s assessment of risk with risk factors
originating from and identified by the Group’s senior management
team. Risks are identified, assessed for materiality, documented,
and monitored through a risk register with senior management
involved in the process. Risks that are identified as high and/or
trending upwards are noted and assigned to the Executive
Director to monitor and, if possible, pro-actively mitigate. The risk
register is a part of a dynamic database in which new risks may be

Risk or uncertainty

Mitigating action

added when identified or removed as they are eliminated or
become immaterial. The Board has formed a sub-committee on
risk which reports periodically to the Audit Committee. The Board
is provided with regular updates of the identified principal risks at
scheduled Board meetings.

Principal risks and uncertainties
The underlying risks and uncertainties inherent with Hardy’s
current business model have been grouped into four categories;
strategic, financial, operational and compliance. The Board has
identified principal risks and uncertainties for 2015/16 and
establishing clear policies and responsibilities to mitigate their
possible negative impact on the business, a summary of which is
provided below:

Strategic

The Group’s strategy is predominantly driven by the appraisal, development
and production of its existing assets in India. There are risks inherent in the
exploration, appraisal, development and production of oil and gas reserves
and resources.

1. Asset portfolio over-weighted
to long-cycle appraisal and
development licences

Preferential allocation of resources to advance current discoveries to the development
stage. Continually assessing acquisition opportunities, consistent with stated objectives,
offering near-term production increases.

2. Asset portfolio exclusively in

one geopolitical region

Financial

1. Absence of PY-3 stakeholder

approval for proposed
development and appraisal
programmes

2. GS-01 – Failure to secure the
operator’s interest in the
block may result in deemed
relinquishment of the block

3. CY-OS/2 – significant delay in
enforcement of Tribunal award

4. Liquidated damages for

incomplete minimum work
programmes

Convey business constraints to accomplishing our objective via direct and open dialogue
with government officials, active participation in industry lobby groups including the
Association of Oil and Gas Operators (AOGO). The Group has experienced a persistently
challenging business environment which has frustrated the achievement of key strategic
objectives. In the absence of tangible progress the Company may consider further
opportunities outside of India.

Any volatility and further decreases in international crude oil prices or India natural
gas prices could materially and adversely affect the Group’s business, prospects,
financial condition and results of operations. Other major financial risks facing the
Company could be financing constraint for further exploration and development;
cost inflation and overruns.

Regular and proactive communication with stakeholders to identify and maintain an
understanding of key agendas and constraints. Maintain sufficient working capital to
allow for extended delays and maintain tight controls on overhead costs.

Hardy has advised the operator and the GOI of its intent to continue with the asset. Hardy
has issued a request for assignment by Reliance and is in regular communication with
senior GOI officials. The Group’s intangible assets include an amount of $5.0 million with
respect to exploration expenditure for the GS-01 block.

Contracted local legal expertise to effectively apply India Law to ensure the enforcement
of the International Tribunal’s award. The Group’s intangible assets include an amount
of $51.0 million with respect to CY-OS/2. The Tribunal award provides for interest on
investment amounting to $45.6 million as at 31 March 2015. Due to the uncertainty of the
timing of enforcement this amount is treated as a Contingent Asset (note 27 and page 68).

The Group has minimum work commitments on its exploration assets. The GS-01
and D9 blocks reached the end of their exploration phase with outstanding MWP
commitment. The Group makes provisions for estimated liquidated damages based on
management’s best estimate. The process of agreeing damages between the operator
and GOI can take several years.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Risk or uncertainty

Operational

Mitigating action

Offshore exploration and production activities by their nature involve significant
risks. Risks such as delays in executing work programmes, construction and
commissioning of production facilities or other technical difficulties, lack of access
to key infrastructure, adverse weather conditions, environmental hazards, industrial
accidents, occupational and health hazards, technical failures, labour disputes,
unusual or unexpected geological formations, explosions and other acts of God are
inherent to the business.

1. Securing timely final approval

for the PY-3 full field
development plan

Proactive communication with partners to address individual interests and agendas.
Clearly formulate and articulate mutual beneficial proposals. Mitigate expenditures prior to
budget approvals.

2. Loss of key staff and
succession planning

Compliance

The Company’s ability to compete in the upstream oil and gas exploration and
production industry is dependent on being able to retain and attract experienced
technical personnel. Structured performance based remuneration practices and the
promotion of a positive and rewarding work environment.

The Group’s current business is dependent on the continuing enforceability of the
PSCs, farm-in agreements and exploration and development licences. The Group’s
core operational activities are dependent on securing various governmental
approvals. Developments in politics, laws, regulations and/or general adverse
public sentiment could compromise securing such approvals in the future.

1. Regulatory and political
environment in India

Develop sustainable relationships with governments and communities. Indian PSC
includes fiscal stability clauses. Actively collaborate with industry groups to formulate
and communicate interests to government authorities.

2. Taxation and third

party claims

Secured the services of leading professional and legal service providers. Proactive
communication with taxation authorities to ensure queries are addressed and
assessments are agreed or challenged as required.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information“ We conduct our
business safely and in
a fair, honest and
ethical manner.”

Corporate Responsibility Summary

Raising concerns
Hardy employees and contractors are
encouraged to promptly report any
concerns they have about the Company’s
business practices or where someone is
concerned or suspects that the Code has
been breached. Where members of staff do
not feel comfortable reporting concerns to
their line manager or executive they have
been invited to contact the Senior Non-
Executive Director directly through a
confidential email address. The Board will
not tolerate retaliation against an individual
reporting in good faith.

Health, safety and environment
The Company is committed to excellent
health and safety practices which are at the
forefront in all of our activities. Although all
offshore activities are currently suspended,
maintaining high HSE standards throughout
the organisation remains core to all our
undertakings. The Company’s HSE policy
document was reviewed and amended
with increased focus on leadership
and accountability.

Hardy is committed to applying high
ethical standards to maintain and
enhance its reputation as an employer
and operator of choice.
Corporate social responsibility is a
fundamental part of implementing the
Group’s corporate strategy and has
both practical and ethical dimensions. It
includes managing business concerns,
such as risk, enhancing reputation
in conjunction with investing in the
community, and creating a place where
people feel good about working.

Governance – managing our business
ethically and with integrity
Code of Business Conduct
We have a comprehensive Code of
Business Conduct that was adopted in
2013 (the “Code”) which details the levels
of behavior we expect all employees
to adhere to when representing Hardy.
Everyone working for Hardy is personally
responsible for following the Code and
ensuring that we conduct our business
safely and in a fair, honest and ethical
manner. Full details of the policy
are available on our website
www.hardyoil.com.

Compliance awareness
The Chief Executive Officer personally
introduces the Code to all employees and
the Board and Executive are committed to
ensure that the Code is embedded
throughout the business.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Greenhouse gas (GHG) emissions
Hardy Oil and Gas plc’s total GHG emissions for the period 1 April 2014 to 31 March 2015
have been calculated as 216 tCO2e which equates to 10.3 tCO2e/FTE. Calculations have
been carried out in accordance with the Defra Environmental Reporting Guidelines (2013)
and emissions factors have been sourced from the Defra 2013 UK Government Conversion
Factors for Company Reporting. The figure presented includes all material Scope 1 and
Scope 2 emissions from all assets under Hardy Oil and Gas pic’s operational control.

Reporting
period

2014/15
2013/14

Scope 1
emissions
tCO2e

77
76

Scope 2
emissions
tCO2e

138
160

Total carbon
footprint
tCO2e

216
236

Intensity
metric
tCO2e/FTE

10.3
11.2

Total GHG emissions and intensity metric for the reporting period 01/04/2014-31/03/2015. Department for
Environment Food & Rural Affairs (2013) Environmental Reporting Guidelines: Including mandatory GHG emissions
reporting guidance.

Our people – being a rewarding, challenging and pleasant place to work
Local content
India has an extensive pool of upstream oil and gas professionals. As a result we have
been fortunate to assemble and maintain 100 per cent local content of our India-based
professionals and staff.

Development
We recognise that our success is clearly linked to the knowledge, skills, experience and
motivation of our team and their ability to develop innovative and creative solutions to our
opportunities and challenges. Management have set ambitious targets which will require
Hardy employees to maintain their high level of proficiency and strive for excellence.

The Board would like to take this opportunity to recognise the importance of our team
and acknowledge their efforts and patience in the past year.

Employees

India

Female

Male

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationBoard of Directors

Alasdair Locke (aged 61)

Ian MacKenzie (aged 58)

Peter Milne (aged 61)

Pradip Shah (aged 62)

Non-Executive Chairman

Chief Executive Officer

Senior Non-Executive Director

Non-Executive Director

Terms of appointment

Mr Locke was appointed to Hardy’s
Board as Non-Executive Chairman
in January 2012.

Mr MacKenzie was appointed to
Hardy’s Board as Chief Executive
Officer in February 2012.

Mr Milne was appointed to Hardy’s
Board as Senior Non-Executive
Director in March 2012.

Mr Shah was appointed to Hardy’s
Board as Non-Executive Director
in 1999.

Background and experience

Mr Milne has a proven track record in
the oil sector. For over 15 years he
was the finance director of Abbot
Group plc, the largest UK
headquartered drilling contractor.
During that period the company grew
from being a largely UK focused
business, with turnover of £50 million,
into a global organisation with more
than £1 billion turnover, operations
in 20 countries and employing over
8,000 people. This transformation
was achieved through a strategy of
organic and acquisition led growth.
Mr Milne qualified as a chartered
accountant with Deloittes in 1977
and was an executive director of
Abbot Group plc (a former FTSE 250
company) and KCA DEUTAG Drilling
Group up until 2010.

Mr Shah is the founder and chairman
of IndAsia Fund Advisors Private
Limited. He co-founded Indocean
Fund in October 1994 with affiliates
of Soros Fund Management and
Chemical Venture Partners and
founded and managed CRISIL, India’s
first and largest credit agency in 1988.
Mr Shah also assisted in setting up
Housing Development Finance
Company in 1977 and acted as
consultant to USAID, the World Bank
and the Asian Development Bank.
Mr Shah holds an MBA from Harvard
Business School and is a chartered
accountant and cost accountant.

Mr Locke is the former executive
chairman of Abbot Group plc, an oil
services company which he founded
in 1992. It was listed on the London
Stock Exchange from 1995 until its
sale in 2008 for £906 million to Turbo
Alpha Ltd, a company controlled by
a US private equity fund. He sold his
remaining interest in the group and
stepped down altogether in 2009.
His early career started in investment
banking at Citigroup in 1974, where he
specialised in shipping and oil.

Mr Locke holds a History and
Economics degree from Oxford.
He was the recipient of the Grampian
Industrialist of the Year (2001) award,
the Scottish Business Achievement
Awards Trust International Business
Achievement Award (2000) and the
Scottish Business Achievement
Awards Entrepreneur of the
year (1999).

Mr MacKenzie has a proven track
record of knowledge, experience and
achievement of high performance in
the management of oil and gas
operations, technical support
functions, and major design and
construction projects developed
through 30 years in the oil and
gas industry.

Mr MacKenzie was a group director
and member of the executive team
of KCA DEUTAG Drilling as well as a
director of group subsidiaries including
chairman of the main Norwegian
operating entity KCA DEUTAG Norge
A/S. Mr MacKenzie gained an honours
degree in Engineering Science from
Aberdeen University and a
postgraduate diploma in Offshore
Engineering from Robert Gordon
University, Aberdeen. He also has
formal qualifications in Finance and
Accounts. He is a Chartered
Mechanical Engineer; FEANI
registered European Engineer,
member of the Institution of
Mechanical Engineers, Energy
Institute, Society of Petroleum
Engineers, Institute of Directors and a
past External Examiner in the RGU Oil
& Gas MSc course.

External appointments

He is also chairman of Argenta
Holdings pic, an unlisted holding
company which trades in Lloyds of
London, and chairman of Ceramic
Fuel Cells Limited.

None

Mr Shah is founder and chairman of
IndAsia Fund Advisors, chairman of
Wyeth, Sonata Software and Shah
Foods and a director of BASF (India),
Godrej & Boyce, Panasonic Energy
India, Pfizer and Tata Investment
Corporation amongst other
companies.

Committee membership

Chairman of Nomination Committee,
member of Risk Committee and
Remuneration Committee.

Chairman of Risk Sub-Committee.

Chairman of the Audit Committee,
a member of the Remuneration
Committee, Nomination Committee
and Risk Committee.

Chairman of the Remuneration
Committee, a member of the Audit
Committee and Nomination
Committee.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Management committee

T.K. Ananth Kumar

Non-Executive Director
of HEPI

Richard Galvin

Sankalpa Mitra

CH. V. Satya Sai

Treasurer & Corporate Affairs
Executive

Senior Vice President Production
of HEPI

Vice President Geoscience
of HEPI

Terms of appointment

Mr Ananth Kumar was appointed
to HEPI’s board as Non-Executive
Director in 2014.

Mr Galvin joined Hardy in 2005
and was appointed to HEPI’s Board
in 2013.

Mr Mitra joined HEPI in 2006 and
was appointed Senior Vice President
in 2014.

Mr Sai joined HEPI in 2006 and was
appointed Vice President in 2014.

Background and experience

Mr Galvin has over 15 years of
commercial and corporate finance
experience in the upstream oil and
gas industry. Mr Galvin started his
career at Encana (formally AEC)
working in progressively senior
commercial roles over seven years.
Mr Galvin holds a master of business
administration from the London
Business School and a bachelor
of commerce from the University of
Calgary. Mr Galvin joined Hardy in
2005 as Business Development
Manager and was appointed an
Executive Officer of the Company in
2011. Mr Galvin is a Director of HEPI.

Mr Kumar has over 30 years of
experience in the oil and gas sector in
financial, accounts, treasury, strategic
and business development initiatives.
He recently superannuated as director
finance of Oil India Limited a $5 billion
Navaratna Company and India’s
second largest exploration and
production state enterprise. Mr Kumar
is a qualified chartered accountant, a
member of the Institute of Chartered
Accountants of India and has a
bachelors degree in Commerce from
Osmania University, India. Mr Kumar’s
recent achievements include leading
the GOI successful $590 million Offer
for Sale in Oil India; the $2.5 billion joint
acquisition of Videocon’s stake in
Mozambique gas fields in 2013, and in
2009 the landmark $550 million Initial
Public Offering (IPO) for Oil India.

Mr Mitra has over 31 years of
experience in the oil and gas industry.
He previously worked for ONGC over
23 years holding a position of chief
engineer – production having
experience in both onshore and
offshore operations and project
implementation. Mr Mitra joined HEPI
in 2006 as manager special projects
and has been heading the operations
team as general manager – PY3 since
2010. He holds a BE (Mechanical)
from Calcutta University.

Mr Satya Sai has over 29 years of
G&G experience in the oil and gas
industry. Mr Satya Sai previously
worked at ONGC for over 21 years,
holding a position of superintending
geophysicist prior to leaving. He holds
a masters degree in Geophysics and
a bachelor degree in Science from
Andhra University. Mr Satya Sai
joined Hardy in 2006 as Chief
Geophysicist and has been the
Head of G&G since 2012.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationGovernance Summary

Chairman’s introduction
The Board recognises that good governance is key to the future development and performance of the Company’s business and to
the attainment of the Board’s strategic objectives. This summary outlines the Group’s governance framework and describes the key
governance issues that have been addressed by the Board and its Committees during 2014/15, together with the governance issues
that will be a key focus for 2015/16.

Governance framework

Audit Committee

Nomination Committee

Remuneration Committee

Key areas of responsibility
Monitor integrity of interim and annual
financial statements; review of internal
control and risk management systems;
monitor effectiveness of external
audit function.

Risk Sub-Committee

Oversee risk management systems and
report to the Audit Committee.

Key areas of responsibility
Board composition and effectiveness,
oversight of Board performance; assess
organisational requirements and evaluate
corporate competencies.

Key areas of responsibility
Implementing policy on executive
remuneration; fixing remuneration of
individual Directors and monitoring level
and structure of remuneration of the
senior executive.

Succession planning
A focus of the Board and Nomination Committee through 2014/15 has been review of management competencies and future needs.
To facilitate assessment of senior management and corporate competencies the Board made adjustments to its meeting schedule to
incorporate more regular site visits to the Company’s Chennai based office.

Following the resignation of Mr Yogeshwar Sharma the Board undertook a review of the composition of the Board and the current
executive and senior management structure. It was concluded that the current structure is appropriate. However to deliver on our
longer-term strategy additional resources will be required. The Chairman will continue to assess the appropriateness of the Board’s
composition as the business develops.

Board composition and diversity
Provided below is a breakdown by gender of the number of persons who were Directors, senior managers and employees as at
31 March 2015. Those persons included in the category of “senior management” are those with responsibility for planning, directing
or controlling the activities of a strategically significant part of the Company.

Female
Male

Board Senior management

Employees

–
100%

19%
81%

The Strategic Report, as set out on pages 1 to 20, has been approved by the Board.

Alasdair Locke
Chairman
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Governance Report

The UK Corporate Governance Code
The Company maintains a listing on the London Stock Exchange
and under the UK Listing Rules, is required to comply with the UK
Corporate Governance Code published in September 2012 (the
UK Code). The UK Code is publicly available on the Financial
Reporting Council’s website at www.frc.org.uk.

Introduction
The Board is committed to ensuring that high levels of corporate
governance are achieved. Hardy Oil and Gas plc is incorporated
in the Isle of Man and is not subject to any corporate governance
regime in its place of incorporation. The Board remains focused
on effective risk management and strong corporate governance.
We have reviewed the changes to the 2014 UK Corporate
Governance Code (the “UK Code”) and the key changes to the
Code relate to remuneration, risk management and long-term
viability. We believe that Hardy is already largely compliant, but
further assessment and actions will take place in 2015. We believe
that the remuneration policy approved by shareholders at the
AGM in 2014 remains compliant.

This corporate governance report describes the manner in which
the Group has applied the main principles of governance set out in
the UK Code throughout the year. The Company is also required to
disclose whether it has complied with the provisions of the UK
Code during the year and, to the extent it has not done so, to
explain any deviations from them.

The Company is a small cap upstream oil and gas company with a
modest resource base. The Board has outlined a clear mandate to
optimise the allocation of limited resources to support its exploration
programme and development plans. As such, the Company strives
to maintain a balance between conservation of limited resources
and maintaining robust corporate governance practices. As the
Company evolves the Board is committed to enhancing the
Company’s corporate governance policies and practices deemed
appropriate for the size and maturity of the organisation.

Set out below are Hardy’s corporate governance practices
for the 12 months ended 31 March 2015. Disclosures below
include matters where Hardy has not fully complied during the
reporting period.

Leadership
The Company is headed by an effective Board which is collectively
responsible for the long-term success of the Company.

The role of the Board
The Board sets the Group’s strategy, ensuring that the necessary
resources are in place to achieve the agreed strategic priorities, and
reviews management and financial performance. It is accountable
to shareholders for the creation and delivery of both strong,
sustainable financial performance and long-term shareholder value.
To achieve this, the Board directs and monitors the Group’s affairs
within a framework of controls which enable risk to be assessed
and managed effectively. The Board also has responsibility for
setting the Group’s core values and standards of business conduct

and for ensuring that these, together with the Group’s obligations to
its stakeholders, are widely understood throughout the Group. The
Board has a formal schedule of matters reserved which is provided
later in this report.

Board meetings
The core activities of the Board are carried out in scheduled
meetings of the Board and its Committees. These meetings
are timed to link to key events in the Group’s corporate calendar
and regular reviews of the business are conducted. Additional
meetings and conference calls are arranged to consider matters
which require decisions outside the scheduled meetings. During
the 12 months ended 31 March 2015, the Board met on four
occasions. The Board endeavours to arrange for at least one
meeting to be held at its Indian based office. This provides senior
managers from across several disciplines with the opportunity to
present to the Board and to meet the Board members informally.
It also provides the Board with an opportunity to meet a broad
cross-section of staff and to assess senior managers at first hand.

Outside the scheduled meetings of the Board, the Chairman and
Chief Executive Officer make frequent contact with each other
and the other Directors to discuss any issues of concern they may
have relating to the Group or their areas of responsibility, and to
keep them fully briefed on the Group’s operations.

Matters reserved specifically for the Board
The Board has a formal schedule of matters reserved that can
only be decided by the Board. The key matters reserved are the
consideration and approval of:
– the Group’s overall strategy;
– financial statements and dividend policy;
– management structure including succession planning,
appointments and remuneration (supported by the
Nomination Committee);

– material acquisitions and disposal, material contracts,

major capital expenditure projects and budgets;

– capital structure, debt and equity financing and other matters;
– risk management and internal controls (supported by the

Audit Committee);

– the Company’s corporate governance and compliance

arrangements; and
– corporate policies.

Subject to those reserved matters, the Board delegates authority
for the management of the business primarily to the Executive
Director and members of the Group’s Senior Executive team.
Certain other matters are delegated to the Board Committees,
namely the Audit, Remuneration and Nomination Committees.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationGovernance Report continued

Summary of the Board’s work in the period
For the 12 months ended 31 March 2015, the Board considered
all relevant matters within its remit, but focused in particular on the
following key issues:
– strategy and management with a particular focus on the

optimisation of the Group’s India focused portfolio;

– financial management;
– regulatory/compliance;
– environment, health and safety;
– appointment and succession planning – this is dealt with more

fully in the Nomination Committee’s Report on pages 40 and 41;
and

– stakeholder relations.

Attendance at meetings:

Member

Meetings attended

Alasdair Locke (Chairman)
Ian MacKenzie
Peter Milne
Pradip Shah
Yogeshwar Sharma1

4 of 4
4 of 4
4 of 4
4 of 4
2 of 2

1 Yogeshwar Sharma retired from the Board on 30 September 2014 all other

Directors served in office for the 12 months ended 31 March 2015.

The Board is pleased with the high level of attendance and
participation by both Executive and Non-Executive Directors at
Board and Committee meetings.

Division of responsibility
There is a defined separation of the responsibilities between
Alasdair Locke, the Non-Executive Chairman and Ian MacKenzie,
the Chief Executive Officer, which has been set out in writing and
agreed by the Board. The Chairman is primarily responsible for the
effective working of the Board, whilst the Chief Executive Officer is
responsible for the operational management of the business, for
developing strategy in consultation with the Board and for
implementation of the strategy.

The Chairman
The Chairman sets the Board agenda and ensures adequate time
for discussion. On appointment as Chairman on 16 January 2012,
Alasdair Locke met the independence criteria set out in the UK
Corporate Governance Code.

Non-Executive Directors
The Non-Executive Directors bring a broad range of business and
commercial experience to the Company and have a particular
responsibility to challenge independently and constructively the
performance of the executive management and to monitor the
performance of the management team in the delivery of the
agreed objectives and targets. As part of this responsibility, the
Non-Executive Directors periodically meet without the Executive
Director present. Separately, the Chairman and Chief Executive
Officer hold informal discussions with the Non-Executive Directors
in respect of current issues affecting the Group.

As Senior Independent Non-Executive Director, Peter Milne
is available to meet shareholders if they have concerns that
cannot be resolved through discussion with the Chairman and/or
Chief Executive Officer or where such contact is considered
inappropriate. Efforts are made to ensure that the Non-Executive
Directors are briefed on the more technical and operational
aspects of our activities.

Non-Executive Directors are initially appointed for a term of
three years, which may, subject to satisfactory performance and
re-election by shareholders, be extended by mutual agreement.
Pradip Shah has been a member of the Board for over nine years.
As a result he is subject to re-election on an annual basis.

Delegations of authority
Board Committees
The Board has delegated matters to three Committees namely Audit,
Remuneration, and Nomination Committees. The memberships,
roles and activities of these Committees are detailed in separate
reports: the Audit Committee on pages 28 to 30, the Remuneration
Committee on pages 31 to 39, and the Nomination Committee on
pages 40 to 41. Each Committee reports to the Board and the issues
considered at meetings of the Committees are tabled by the
respective Committee chairmen. The terms of reference of each
Committee are reviewed by the Board every other year.

In 2013 the Board agreed to form a sub-committee of the Audit
Committee responsible for overseeing the risk and uncertainty
assessment function. The Board appointed Ian MacKenzie (Chair),
Alasdair Locke and Peter Milne as members. The Risk Committee’s
terms of reference are available on the Company’s website.

Other governance matters
All of the Directors are aware that independent professional
advice is available to each Director in order to properly discharge
their duties as a Director. In addition, each Director and Board
Committee has access to the advice of the Company Secretary.

The Company Secretary
The Company Secretary is Richard Vanderplank who is retained on
a consultancy basis. He is available to Directors and is responsible
for the Board complying with Isle of Man procedures. He is
supported by the Treasurer & Corporate Affairs Executive in the
provision of company secretarial services to the Company.

Effectiveness
The Board currently comprises of a Non-Executive Chairman,
Chief Executive Officer, and two Non-Executive Directors.
Biographical details of the Board members are set out on
page 20 to 21 of this report.

The Directors are of the view that the Board and its Committees
consist of Directors with an appropriate balance of skills,
experience, independence and diverse backgrounds to enable
them to discharge their duties and responsibilities effectively.

At the Company’s Annual General Meeting held on 7 August 2014,
shareholders re-elected Pradip Shah a Non-Executive Director.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Independence
The Non-Executive Directors bring a broad range of business and
commercial experience to the Company. The Board considers
Alasdair Locke, Peter Milne and Pradip Shah to be independent
Directors in character and judgement.

Pradip Shah has served as a Director for a period of more than
nine years. He held 260,233 employee stock options to purchase
Ordinary Shares in the Company which were awarded prior to the
Company listing on AIM in June 2005. Effective 7 June 2015 the
employee stock options reached the end of their term and as a
result lapsed. Mr Shah is based in India and is actively involved in
many business endeavours holding executive and non-executive
roles across a diverse range of industries and is well established
within India’s commerce and political communities. The Board
considers that Mr Shah is independent of management because a
Chief Executive Officer was appointed in 2012 with whom Mr Shah
has had no previous professional interaction. Notwithstanding
Pradip Shah’s tenure, the Board is fully satisfied that he
demonstrates complete independence, robustness of character
and judgement both in his designated role and as a Board member.

Board performance and evaluation
Hardy has a policy of appraising Board performance annually.
Having reviewed various approaches to Board appraisal, Hardy
has concluded that for a company of its current scale, an internal
process in which all Board members submit answers to a
questionnaire, that considers the functionality of the Board and its
Committees, is most appropriate at this stage. This questionnaire
also contains a series of questions to evaluate the performance of
individual Board members and that of the Chairman.

The Senior Independent Non-Executive Director is responsible
for reporting on this matter to the Board, including reviewing the
performance of the Chairman, with the exception of reviewing
his own performance which is carried out by the Chairman. The
process of completing the performance evaluation of the Board as
a whole, its Chairman, and individual Executive and Non-Executive
Directors, was completed in early 2015. The evaluation resulted
in constructive feedback which has resulted in actionable items
primarily regarding enhancement of communication between
Non-Executive Directors and the executive. Overall, it was felt that
the Board was functioning well.

Appointments
The Nomination Committee is responsible for reviewing the structure,
size and composition of the Board and making recommendations
to the Board with regards to any required changes. The Committee
is also concerned with succession planning which includes
assessment of senior management capabilities and development
requirements to compliment the Group’s requirements.

Commitments
All Directors have disclosed to the Board any significant
commitments outside their respective duties as Non-Executive
Directors and confirmed that they have sufficient time to discharge
their duties.

Induction
All new Directors receive an induction as soon as practical on joining
the Board. This includes meetings with the Executive Committee
members and other senior management and visits to the Group’s
principal office of operation. New Directors are also provided an
overview of their duties as a Director, corporate governance policies
and established Board procedures as part of the induction process.

Training
The Chairman regularly reviews training and development needs
with each Director. During the reporting period it was agreed that
each Director had the necessary current and relevant experience
and expertise to effectively discharge their respective responsibilities.

Conflict of interest
A Director has a duty to avoid a situation in which he or she has, or
can have, a direct or indirect interest that conflicts, or possibly may
conflict with the interests of the Group. The Board has satisfied itself
that there is no compromise to the independence of those Directors
who have appointments on the boards of, or relationships with,
companies outside the Group. The Board requires Directors to
declare all appointments and other situations which could result in a
possible conflict of interest.

Re-election
The Board has agreed that Alasdair Locke and Pradip Shah
will stand for re-election at the Company’s 2015 Annual General
Meeting. The Director’s position is subject to satisfactory
performance of their responsibilities and is subject to reappointment
by shareholders at the Annual General Meeting. The Board of
Directors is pleased with the attendance of all Directors at Board
and Committee meetings, despite significant travel and time
requirements. The Board of Directors is also satisfied with the
participation by all the Directors in formulating corporate strategies
and for their engagement in meaningful dialogue and discussions at
Board and Committee meetings.

Accountability
The Board is committed to providing shareholders with a clear
assessment of the Group’s position and prospects. This is achieved
through this report and, as required, other periodic financial and
trading statements.

The arrangements established by the Board for the application of
risk management and internal control principles are detailed on
pages 16 to 17. The Board has delegated to the Audit Committee
oversight of the relationship with the Company’s auditors as
outlined in the Audit Committee report on page 28.

Going concern
The Group’s business activities, together with factors likely to affect
its future operations, financial position, and liquidity position are set
out in the Strategic Report section of the Annual Report. In addition,
note 24 to the consolidated financial statements discloses the
Group’s financial risk management practices with respect to its
capital structure, foreign currency risk, liquidity risk, interest rate risk,
commodity price risk, credit risk, and other related matters.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationGovernance Report continued

The Directors, having made due and careful enquiry, are of the
opinion that the Group and the Company have adequate working
capital to execute their operations and have the ability to access
additional financing, if required, over the next 12 months. The
Directors, therefore, have made an informed judgement, at the
time of approving these financial statements, that there is a
reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the
foreseeable future. As a result, the Directors have continued to
adopt the going concern basis of accounting in preparing the
annual financial statements in accordance with Going Concern
and Liquidity Risk: Guidance for Directors of UK Companies 2009.

of the countries in which we choose to invest. After extensive
analysis, exploration campaigns are planned to try to discover oil
and gas fields within underexplored sedimentary basins. When we
have a significant discovery we undertake appraisal programmes
which may include the drilling of wells and further geotechnical
analysis to determine the size and quality of the discovery. If the
appraisal programme confirms that development of a discovery is
commercially viable, we begin work on a development plan. This
maps out how we will realise the production of and ultimately
generate revenue and cash flow. We also create value through the
implementation of enhanced production strategies to optimise the
value of recoverable hydrocarbons from existing producing fields.

Internal controls
The Board of Directors reviews the effectiveness of the Group’s
system of internal controls in line with the requirement of the UK
Code. The internal control system is designed to manage the risk
of failure to achieve its business objectives. This covers internal
financial and operational controls, compliances and risk
management. The Group had the necessary procedures in place
for the period under review and up to the date of approval of the
Annual Report and Accounts. The Directors acknowledge their
responsibility for the Groups’ system of internal controls and for
reviewing its effectiveness. The Board confirms the need for an
ongoing process for identification, evaluation and management
of significant risks faced by the Group and has formed a Risk
Committee which reports to the Audit Committee. A risk
assessment for each project is carried out by a team consisting of
the Executive Director and senior management and report to the
Risk Committee before making any material commitments. This
team meets as and when required. Internal and external risks,
including exploration and development risks, regulatory and
compliance obligations under various production-sharing contracts,
economics including oil price, interest rate and currency exposure,
as well as natural catastrophes are continuously assessed.

The Audit Committee regularly reviews and reports to the Board
on the effectiveness of the internal control systems. Given the size
of the Group, the relative simplicity of the systems and the close
involvement of senior management, the Board considers that there
is no current requirement for an internal audit function. The
procedures that have been established to provide internal financial
control are considered appropriate for a company of its size and
include controls over expenditure, regular reconciliations and
management accounts. Most of the assets are owned jointly with
others: budgets and expenditures are rigorously reviewed by joint
venture partners, and approvals as well as external project audits
take place with respect to capital and operating expenditures on
a regular basis.

The Directors are responsible for taking such steps as are
reasonably available to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.

Business model
Hardy strives to create value through participating in the full
exploration and production cycle. The cycle requires first the
acquisition of permits to explore issued by government authorities

Remuneration
The Board has delegated to the Remuneration Committee
responsibility for agreeing the remuneration policy for the
Chairman, Chief Executive Officer and senior executives. The
Directors’ Remuneration Report on pages 31 to 39 contains full
details of the role and activities of the Remuneration Committee.

Shareholder relations
Communication and dialogue
Open and transparent communication with shareholders is given
high priority and there is regular dialogue with institutional investors,
as well as general presentations made at the time of the release
of the annual and interim results. All Directors are kept aware of
changes in major shareholders in the Company and are available to
meet with shareholders who have specific interests or concerns. The
Group issues its annual results promptly to individual shareholders
and also publishes interim and annual results on the Company’s
website: www.hardyoil.com. Regular updates to record news in
relation to the Group and the status of its development programmes
are included on the Company’s website. Shareholders and other
interested parties can subscribe to receive these news updates
by email by registering online on the website free of charge.

The Chairman and Executive Director are available to meet with
institutional shareholders to assist them in gaining an understanding
of the Group’s business, its strategies and governance. At the 2014
Annual General Meeting of shareholders, the Chairman was present
and the Committee chairs participated via conference call. Peter
Milne currently serves as the Senior Independent Non-Executive
Director of the Company and is available to shareholders if they
have concerns that have not been resolved through the normal
channels of Chairman or Executive Director. Meetings are also held
with the corporate governance representatives of institutional
investors when requested.

Annual General Meeting
At every Annual General Meeting individual shareholders are given
the opportunity to put questions to the Chairman, Committee
chairs and other members of the Board. Notice of the Annual
General Meeting is sent to shareholders at least 20 working days
before the meeting. Details of proxy votes for and against each
resolution, together with the votes withheld are announced to the
London Stock Exchange and are published on the Company’s
website as soon as practical after the meeting.

Hardy Oil and Gas plc Annual Report and Accounts FY2015
At the Company’s 2014 Annual General Meeting eight resolutions were presented. Below is a summary of the voting results:

2a
2b
3

Description

Type

For

Against

Withheld

Total

Votes for %

Ordinary

Adopt annual accounts for the period ended
31 March 2014
To approve the Report on Remuneration
Ordinary
To approve the Directors’ Remuneration Policy Ordinary
Ordinary
To re-elect Pradip Shah as a Director of
the Company.
To re-elect Yogeshwar Sharma as a Director of
the Company.
To re-elect Ian MacKenzie as a Director of
the Company
Reappointment of Crowe Clark Whitehill LLP
as auditor
Disapplication 5% of issued share capital

Ordinary

Special

Total shares issued
Total issued share capital instructed

45,736,967

83,747

0 45,820,714

99.82%

34,198,822 10,762,311
33,696,491 12,106,030
34,124,353 11,454,445

859,581 45,820,714
18,193 45,820,714
241,916 45,820,714

74.64%
73.54%
74.74%

36,225,572

9,335,033

260,109 45,820,714

79.06%

45,817,301

3,413

0 45,820,714

99.99%

45,482,975

58,596

279,143 45,820,714

99.26%

2,382

0 45,820,714

99.99%

45,818,332

73,148,416
63 per cent

The Board has made note of the lower proportion of votes in favour of resolutions 3 and 4 which relate to remuneration and the
reappointment of Mr Shah. As outlined above Mr Shah is an important member of the Board and there are currently no plans to change
the composition of the Board and this is further discussed in the Nomination Committee report (page 41). In regard to remuneration we
have maintained an open dialogue with major shareholders and will re-evaluate our remuneration practices once circumstances change.
Further detail in regard to actions taken to address shareholder concerns and the rationale for current remuneration practices can be found
in the Director’s Remuneration Report (page 31).

Non-compliance with the UK Code
The Company did not comply with the UK Code in the following matters during the 12 months ended 31 March 2015:

Code provision

B.1.1

Subject matter

Non-Executive
Directors meeting
independence
requirements

Discussion

Pradip Shah has served on the Board for
more than nine years. Notwithstanding
the Board considers Pradip Shah to be
independent of management as the Chief
Executive Officer was appointed in 2012
with whom Mr Shah has had no previous
professional interaction. Furthermore
Mr Shah contributes relevant skills, expertise
and insight towards the Company’s stated
strategic objectives and provides valuable
advice as to the business and political
environment in India.

The Board believes all of the Non-Executive Directors provide valuable advice and counsel in furthering the business objectives of the Group.

Although Hardy is a publicly-listed company and has been listed on the London Stock Exchange’s main market for listed securities since
February 2008, the Company is a small cap upstream oil and gas company with a modest resource base. The Group has a clear mandate
to optimise the allocation of limited resources to support its appraisal and development programmes. As such, the Group strives to
maintain a balance between conservation of limited resources and maintaining robust corporate governance practices. As the Company
evolves, the Board is committed to enhancing the Company’s corporate governance policies and practices deemed appropriate
considering the size and maturity and complexity of the organisation.

Alasdair Locke
Chairman
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information
Audit Committee Report

A commitment to good corporate governance and risk
management are a key part of any successful business model.
The Audit Committee plays an integral role in achieving and
maintaining high standards. Internal control and risk management
processes were a key consideration in the past year. We are
pleased that throughout 2014 the internal controls have been
improved and initiatives are in place to further enhance and
streamline processes and practices within the Group.

The Committee will continue to oversee the implementation
of the agreed internal control and risk management process
enhancements. Another agenda item for the Audit Committee will
be the adoption of changes to the UK Corporate Governance Code
and revisions to the Financial Reporting Councils (IFRS) guidelines
published in 2014.

Peter Milne
Chairman of the Audit Committee

Governance
The Audit Committee comprises of two Non-Executive Directors
and oversees the Group’s financial reporting and internal controls,
and provides a formal reporting link with the external auditors.
Mr Milne, who has been the Chairman of the Audit Committee
since 2012, is a chartered accountant with over 30 years of oil
and gas sector experience. Pradip Shah, who was a member
of the Audit Committee throughout the year, is also a chartered
accountant. The Committee is satisfied that Mr Milne and
Mr Shah’s membership of the Committee satisfy the UK Code
requirements regarding recent and relevant financial experience.

The Chief Executive Officer and Treasurer were invited to attend all
meetings and other senior management and representatives of the
external audit were invited as appropriate. The external auditors
have unrestricted access to the Audit Committee Chairman.

The Committee has noted the updated UK Corporate Governance
Code and the new guidelines on Risk Management, Internal Control
and Related Financial and Business Reporting published in 2014 by
the FRC. The Audit Committee are assessing the implications of the
new requirements and ensure that the Company complies as
practical for a Company of our size and resources.

Summary of responsibilities
The ultimate responsibility for reviewing and approving the Annual
Report and Accounts and the half-yearly reports remains with the
Board. The Audit Committee met four times in the 12 months
ended 31 March 2015 and the attendance of members at the
Audit Committee meetings held in the current reporting period
were as follows:

Committee member

Peter Milne (Chairman)
Pradip Shah
Yogeshwar Sharma1

Meetings attended

4 of 4
4 of 4
2 of 2

1 Yogeshwar Sharma retired from the Board on 30 September 2014.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Main responsibilities
The Audit Committee acts as a preparatory body for discharging
the Board’s responsibilities in a wide range of financial matters by:
– monitoring the integrity of the financial statements and formal

announcements relating to the Company’s financial
performance;

– reviewing significant financial reporting issues and accounting

policies and disclosures in financial reports;

The Audit Committee audit planning and update on
relevant accounting developments
– The Company prepares financial statements under International

Financial Reporting Standards (IFRS) as adopted by the
European Union.

– The Audit Committee continued to review the appropriateness
of the Company’s accounting policies and was satisfied that
the policies adopted by management are currently appropriate.

– overseeing that an effective system of internal control and risk

– The Audit Committee approved the scope of the work to be

management systems are maintained;

– ensuring that effective whistle-blowing, anti-fraud and bribery

procedures are in place;

– considering the Company’s internal audit requirements and

make recommendations to the Board;

– overseeing the Board’s relationship with the external auditors
and, where appropriate, the selection of new external auditors;
– approving non-audit services provided by the external auditors
and ensuring the independence and objectivity of the external
auditors is safeguarded when appointing them to conduct
non-audit services; and

– ensuring compliance with legal requirements, accounting
standards and the Listing Rules and the Disclosure and
Transparency Rules.

Following the stepping down of Mr Sharma, the Board agreed
to amend the Audit Committee’s terms of reference to require a
minimum of two members. The Audit Committee terms of reference
can be accessed via the Company’s website www.hardyoil.com.
The Committee fully discharged its responsibilities during the year.

Consideration and review of six month interim statements
and results for the 12 months ended 31 March 2015
– The Audit Committee monitored the current business

environment and in particular commodity price volatility and the
geopolitical environment in India while considering the
appropriateness of the Group’s statements.

– The Audit Committee met with the external auditors as part

of both the six month interim statements and annual accounts
approval processes.

– The Audit Committee considered the most appropriate

treatment and disclosure of any new or judgemental matters
identified during the audit of the 12 month accounts or interim
statement review, as well as any other recommendation or
observation made by the external auditor.

undertaken by the external auditors for the interim review and
year-end statutory audit.

– Considered new requirements provided for in the 2014 updated

UK Corporate Governance Code, EU’s Transparency and
Accounting Directives and other IFRS.

Review of risk management systems and internal control
process and procedures
– The management via the Risk Committee provided the Audit
Committee with clear updates of risk and uncertainties facing
the Company and accompanying actions to mitigate such risk.
– Following a review the Audit Committee was satisfied with the
appropriateness of the risk management framework which
provides for a systematic approach to risk identification and
management which combines the Board’s assessment of risk
with risk factors originating from and identified by the Group’s
senior management.

– The Audit Committee mandated several internal control

enhancements following observations made by the External
Auditor. The Audit Committee is currently overseeing the
implementation of other improvements including the upgrading
of accounting software which will be in place in 2015.

Review of the effectiveness of the Audit Committee
– During the period the Board completed a review of its

effectiveness which included the assessment of the Audit
Committee. The review was coordinated by the Treasurer.
As a result the Audit Committee was considered to be
operating effectively and in accordance with the UK Code.

Review of the requirement for an internal audit function
– The Committee considered the requirement for an internal
audit function. The Audit Committee considered the size of
the Group, the relative simplicity of the systems and the close
involvement of senior management. Following the Committee’s
review it was recommend to the Board that an internal audit
function is not appropriate at this time.

Financial reporting
The Committee monitored the integrity of the Financial Statements
and the Group’s other financial reports and reviewed the significant
financial reporting issues and accounting policies and disclosures in
the financial reports. The Committee met with the external auditors
as part of the full year and interim accounts approval processes.
The process included the consideration of key audit risks identified
as being significant to the 2015 accounts.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationAudit Committee Report continued

Significant issues considered in relation to the financial statements
The primary areas of judgement considered by the Audit Committee in relation to the 2015 accounts and how these were addressed
are detailed below:

Issue

Action taken by the Committee

Intangible assets – exploration CY-OS/2
There is continuing uncertainty over the status of the
block due to the ongoing legal dispute with the GOI.
The value of the intangible asset in relation to CY-
OS/2 is material to the Group balance sheet. Details
of the dispute and arbitration award are provided for
on Note 16 on pages 62 to 63.

PY3 field and deferred tax asset
The PY3 field has been shut-in since July 2011
and has a carrying value of $5.78 million. In order
to assess whether any impairment in value has
taken place the financial viability of the field has to
be assessed in light of current circumstances. The
deferred tax asset carrying value of $9.7 million is
recoverable only if sufficient profits are generated after
the restart of production on PY3.

GS-01 field
The GS-01 has a carrying value of $5.0 million. If the
Group is unable to reach agreement with the operator
to acquire its interest in the field, the block will be
relinquished to the GOI and the value of the asset
written off in full.

Legal matters
The Group is currently involved in a number of
disputes with taxation authorities and third parties
which in the event of adverse findings could result
in an unexpected material cash outflow.

The Audit Committee reviewed and considered the external legal advice
obtained by management concerning the enforcement of the CY-OS/2
arbitration award in favour of Hardy and is satisfied to continue to recognise
CY-OS/2 as an intangible asset, valued at $51.0 million in the Group balance
sheet and that the disclosures concerning the dispute are fair and balanced.

The Committee has reviewed the progress made by management in achieving
approval of the Field Development Plan by all partners at Operating Committee
level and the subsequent steps taken to date to achieve final approval at
Management Committee level in order that production may recommence.
In light of a recent fall in oil price the Committee challenged management’s
assumptions provided for in the field’s financial model including fiscal structure
production profiles, and cost estimates. The Committee is satisfied that no
impairment in the value of these assets has occurred.

The Committee has reviewed the status of the Group’s advanced
stage of negotiations with Reliance and is satisfied that no write-off is
currently necessary.

The Committee has reviewed with management and its professional advisers
the current status of various disputed matters and their likely outcomes.
Taking into account the range of possible outcomes and their probabilities the
Committee is satisfied that sufficient provisions or contingent liabilities have
been recognised in the financial statements where necessary

current partner is due to rotate off the engagement after completing
the March 2017 audit. Taking into consideration the transitional rules
issued by the Competition Commission as an indication of best
practice, the Company would intend to put the audit out to tender
after the end of the 2019 audit at the latest.

The UK Code states that the Audit Committee should have
primary responsibility for making a recommendation on the
appointment, reappointment or removal of the external auditors.
On the basis of the Audit Committee’s review of the external
auditor’s performance, effectiveness and independence, the
Committee recommends to the Board that it recommends to
shareholders the reappointment of the auditors at the Company’s
2015 Annual General Meeting.

Peter Milne
Chairman of the Audit Committee
10 June 2015

External auditor
The Company’s external auditors are Crowe Clark Whitehill LLP.
Authorisation of non-audit services provided to the Group is a
matter reserved for the Audit Committee. In the 12 months ended
31 March 2015 Crowe Clark Whitehill LLP did not provide any
non-audit related services to the Company. Crowe Clark Whitehill
did undertake a review of the Company’s Interim Statement and
Accounts for the six months ended 30 September 2014.

The external auditors have unrestricted access to the Audit
Committee Chairman. During the current audit process, the Audit
Committee Chairman met with the audit engagement partner from
Crowe Clark Whitehill LLP, without the presence of management.

The Committee is satisfied that Crowe Clark Whitehill LLP has
adequate policies and safeguards in place to ensure that auditor
objectivity and independence are maintained. The external auditors
report to the Audit Committee annually on their independence from
the Company. In accordance with professional standards, the
partner responsible for the audit is changed every five years, and
last changed in December 2012. The current auditors, Crowe Clark
Whitehill LLP were first appointed by the Company in 1999 and the

Hardy Oil and Gas plc Annual Report and Accounts FY2015Directors’ Remuneration Report

On behalf of the Board, I am presenting the Remuneration
Committee’s report for the 12 months ended 31 March 2015,
the report comprises three sections;
– An annual statement providing a summary of the year under

review and the Committee’s forward plans;

– The Directors’ Remuneration Policy Report, which sets out the
three-year Directors’ remuneration policy for the Company
which commenced on 1 April 2014. This section has been
included in line with best practice; and

– An Annual statement providing a summary of the Committee’s

activities in the 12 months ended 31 March 2015 and its
intention going forward.

Summary of major decisions for
Executive Director Remuneration Policy for 2015 – The Committee
has set out short to medium-term performance objectives, which
are linked to the Company’s strategy, for the award of bonus and
equity based long-term incentives (LTI). We maintain that the
Company’s remuneration policy, including vesting conditions
placed on stock option awards, provides competitive remuneration
for the executive is appropriate for a company of our size, scope and
circumstance. Once normal operations commence, meaningful and
measurable criteria will be at the disposal of the committee. This will
facilitate the adoption of other conventional industry specific
performance criteria.

Remuneration policy – The Committee regularly considers the
guidelines on executive remuneration set out by the Association
of British Insurers. Hardy is an Isle of Man incorporated company
and is therefore not subject to the UK company law requirement to
submit its remuneration report to a binding policy vote on Director
pay to shareholders. However, we adopted the new remuneration
report format and sought approval from shareholders at the
Company’s 2014 Annual General Meeting. The Remuneration
Committee has not recommended any changes to the
current policy.

Shareholder dialogue – At the Company’s 2014 Annual General
Meeting the resolutions to adopt the remuneration report and
approve the Remuneration Policy received approximately 75 per
cent in favour. General reason cited for not voting in favor of the
report were in regard to the terms and conditions of stock options
awarded to the Executive Director including vesting provisions
being subject to a single performance condition, multiple testing,
and the absence of personal targets. Throughout the year we
have discussed the Company’s remuneration policy and practices
with major shareholders and we have committed to review vesting
conditions once circumstances allow.

On behalf of the Board I would like to thank shareholders for their
continued support. Should any shareholder wish to contact me in
connection with the Company’s senior executive remuneration
policy, please email me at investor.relations@hardyoil.com.

Pradip Shah
Chairman of the Remuneration Committee
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information
Directors’ Remuneration Report continued

Directors’ remuneration policy (voluntary disclosure)
This part of the Remuneration Report sets out Hardy’s
remuneration policy for the Company which commenced 1 April
2014. This section further outlines how the remuneration policy will
be operated during the 12 months ended 31 March 2016.

Non-executive remuneration
Policy
The main goals of the Company’s Remuneration Policy for the
Chairman and Non-Executive Directors is designed to assure
alignment with shareholders, maintain independence, recognise
time commitments and attract and retain outstanding candidates.

Policy overview
The principles of the Remuneration Policy are to ensure that
remuneration promotes the attraction, motivation and retention
of the highest-quality executives who are key to executing our
strategy and delivering substantial returns to shareholders.
A meaningful proportion of executive remuneration is structured to
link rewards to corporate and individual performance, conservation
of limited capital resources, and an alignment of interests with
those of shareholders and to incentivise them to perform at the
highest levels.

The remuneration package for the executive and senior
management will comprise of base salary, annual bonus, taxable
benefits, pension payments and participation in the Company’s
share incentive arrangements.

Consideration of shareholders’ views
The Remuneration Committee considers shareholder feedback
received at the Annual General Meeting each year and, more
generally, guidance from shareholder representative bodies.
This feedback, plus any additional feedback received from time
to time, is considered as part of the Company’s review of
remuneration policy.

Employment conditions elsewhere in the Group
In setting the remuneration policy and remuneration level for
the Executive Directors, the Committee is cognisant of the
approach to rewarding employees in the Group and levels
of pay increases generally.

Operation of share plans
The Committee will operate the Unapproved Share Option Plan,
Executive Share Option Plan and Restricted Share awards according
to their respective rules and in accordance with the Listing Rules and
HMRC rules where relevant. The Committee retains discretion over a
number of areas relating to the operation and administration of the
plans in relation to senior management including the Executive
Directors. These include (but are not limited to) the following:
– who participates;
– the timing of grant of awards and/or payment;
– the size of awards and/or payment;
– discretion relating to the measurement of performance in

the event of a change of control or reconstruction;

– determination of a good leaver (in addition to any specified

categories) for incentive plan purposes and a good
leaver’s treatment;

– adjustments to awards required in certain circumstances (e.g.
rights issues, corporate restructuring and special dividends);
and

– the ability to adjust existing performance conditions
for exceptional events so that they can still fulfil their
original purpose.

The remuneration of the Non-Executive Directors is determined
by the Chairman and the Executive Director outside the framework
of the Remuneration Committee and approved by the Board of
Directors. The fees paid are set at a level to attract individuals
with the necessary experience and ability to make a significant
contribution to the Group’s activities, while also reflecting the time
commitment and responsibility of the role. None of the Directors
participate in any discussion or votes on any proposal relating to
his or her own remuneration.

Director fees
Each Non-Executive Director currently receives a basic annual fee
of £50,000. The Chairman of the Board will receive an additional
annual fee of £65,000 to reflect his additional responsibilities as
Chairman of the Board. The Audit Committee Chairman will
receive an additional annual fee of £10,000 to reflect additional
responsibilities. Each Non-Executive Director is also entitled to the
reimbursement of necessary travel and other expenses. In certain
circumstances a non-executive may receive additional fees to
compensate for time spent in excess of what would normally be
expected in the execution of responsibilities.

Non-Executive Directors are entitled to an annual restricted shares
award equivalent to 25 per cent of their basic annual fee based on
the market value of Hardy shares on the last trading day prior to
the date of issue. These shares will remain restricted for three years
from the date of issue. The shares will become unrestricted and are
delivered to the individual three years after the date of issue. The
share award will be in addition to the annual basic fee. In the event
of change of control of Hardy and the participant is no longer a
Director going forward, all of the restricted shares will vest. In the
event of death of a Director, all shares will become fully vested.
Upon the Director not being re-elected at a general meeting of
shareholders after offering himself for re-election as a Director at
a general meeting, the shares will vest. In all other circumstances,
shares that will remain restricted are forfeited if the participant is no
longer a Director of Hardy. In addition, for a Good Leaver (defined
as death, injury or disability, redundancy, retirement, his office or
employment being either with a company which ceases to be in
the Group or relating to a business or part of a business which is
transferred to a person who is not a party to the Group or any other
reason the Committee so decides) the Board has discretion to
accelerate vesting on a date determined by it.

Chairman’s additional remuneration
Alasdair Locke’s terms of agreement provide for a one time award
of restricted shares equivalent to £50,000 in the event that the
average price of the Company’s Ordinary Shares remains above
£3.00 for any consecutive three-month period during the term of
his appointment.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Remuneration scenarios for the Executive Director
The chart below shows how the composition of the Executive
Director’s remuneration package varies at different levels of
performance under the remuneration policy, as a percentage
of total remuneration opportunity and as a total value.

Chief Executive Officer

£’000

1,000

750

500

250

165

100
21

250

Threshold

Expected

Maximum

Salary
Annual bonus – cash

Pension and benefits
Annual LTI award

Service agreement
All of the service contracts with Directors are on an evergreen
basis, subject to termination provisions. The Company may, in lieu
of notice, terminate the Executive Director’s employment with
immediate effect by making a payment which does not exceed:
a lump sum equal to basic salary, pension entitlement and other
benefits at the rate prevailing at the date of termination for a period
which does not exceed 12 months; and a bonus to the extent
earned and awarded by the Company at the date of termination.
The appointment of the Executive Directors is subject to
termination by no greater than 12 months by either party.
The appointments of Non-Executive Directors are subject
to termination upon at least three months’ notice.

Chief Executive Officer
The service contract of Ian MacKenzie is on an evergreen basis until
terminated by not less than 12 months written notice by either party.
If a written notice is given by either party, the Company may require
the Executive Director to continue to perform such duties as the
Board may direct during the notice period or require the Executive
Director to perform no duties. In each case, the Company will
continue to pay salary and provide all other benefits arising under
the service contract until the end of the notice period.

External appointment
The Board has not introduced a formal policy in relation to the
number of external directorships that an Executive Director may
hold. Currently the Executive Director does not hold any other
external appointment.

Policy for new appointments
Executive
Base salary levels will take into account market data for the
relevant role, internal relativities, the individual’s experience and
their current base salary. Where an individual is recruited at below
market norms, they may be realigned over time (e.g. two to three
years), subject to performance in the role. Benefits will generally
be in accordance with the approved policy.

The Committee may consider buying out incentive awards which
an individual would forfeit upon leaving their current employer
although any compensation would, where possible, be consistent
with respect to currency (i.e. cash for cash, equity for equity),
vesting periods (i.e. there would be no acceleration of payments),
expected values and the use of performance targets.

For external and internal appointments, the Committee may agree
that the Company will meet certain relocation and/or incidental
expenses as appropriate.

Non-executive
A one-time restricted share award will be made to a new Non-
Executive Director on joining the Board under the same terms
and conditions outlined for non-executive annual restricted share
award. The market value of the one-time award of Hardy Ordinary
Shares will not be greater than 100 per cent of the annual fee
entitlement. In exceptional circumstance this amount may be
revised as deemed appropriate by the Remuneration Committee
with Board approval.

Policy for loss of office
The Chief Executive Officer’s service contract is terminable by
him or the Company on 12 months notice. There are no specific
provisions under which the Executive Directors are entitled to
receive compensation upon early termination, other than in
accordance with the notice period. On termination of an Executive
Director’s service contract, the Committee will take into account
the departing Director’s duty to mitigate his loss when determining
the amount of any compensation. Disbursements such as legal
and outplacement costs and incidental expenses may be payable
where appropriate.

Any unvested awards held under the Unapproved Share Option
Plan, ExSOP plan or restricted shares awards will lapse at cessation
unless the individual is a Good Leaver in which case the Board may
permit the extension of unvested options to a later date not to
exceed 12 months from date of cessation.

The appointments of any Non-Executive Director may be
terminated by either party on three months written notice.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationDirectors’ Remuneration Report continued

Summary Directors’ remuneration policy
The table below sets out a summary of each element of the Directors’ remuneration packages, their link to the Company’s strategy,
the policy for how these are operated, the maximum opportunity and the performance framework.

Summary of Directors’ remuneration policy
EXECUTIVE DIRECTOR

Base salary

Purpose and link to strategy

Operation

Opportunity

To provide an appropriate level of fixed cash income to attract and retain individuals with
the personal attributes, skills and experience required to deliver our strategy.

Generally reviewed annually with increases effective from 1 January. Base salaries will be
set by the Committee taking into account the:
– scale, scope and responsibility of the role;
– skills, experience and performance of the individual; and
– retention risk.

Base salary of other individual undertaking similar roles in companies of comparable size
and complexity.

Increases to the current Executive Director salary, presented in the “Application of policy in
2014/15” row below, will not normally exceed the average increase awarded to other UK-
based employees. Increases may be above this level in certain circumstances, for instance
if there is an increase in the scale, scope or responsibility of the role or to allow the base
salary of newly appointed executives to move towards market norms as their experience
and contribution increase.

Framework for recovery

None.

Application of policy in 2015/161

Executive Director Base salary £250,000 (will be reviewed annually by the Committee
effective 1 January).

Pension and benefits

Purpose and link to strategy

Operation

Opportunity

To attract and retain individuals with the personal attributes, skills and experience required
to deliver our strategy.

Salary supplement contribution to personal pension plan. Membership of a medical
scheme, life and long-term disability assurance cover, and professional dues and other
professional services.

Pension: 7.5 per cent of base salary. Benefits: The range of benefits that may be provided
is set by the Committee after taking into account local market practice in the country where
the executive is based. Additional benefits may be provided, as appropriate.

Framework for recovery
Application of policy in 2015/161

None.
No change.

Incentive

Purpose and link to strategy

Operation

To provide a simple, competitive, incentive plan that: will attract, retain and motivate
individuals with the required personal attributes, skills and experience; provide a real incentive
to achieve our strategic objectives; and align the interests of management to shareholders.

Annual bonus plan – personal performance targets are set for the executive which the
Committee deem appropriate and effective in aligning and motivating the executive toward
the achievement of the Company’s short-term objective:
– Annual award of cash bonus based on personal target linked performance ranging

from nil up to the equivalent of 100 per cent of the executive base salary.

Annual long-term equity-based award will be made in line with the Committee’s
assessment of the strategic targets:
– Unapproved Share Option Plan, ExSOP (a structured option plan) or restricted shares;
– annual long-term equity based award based on performance of the Company and

personal performance; and

– option and restricted share awards will normally vest after three years, subject to

certain performance conditions and continued service.

Hardy Oil and Gas plc Annual Report and Accounts FY2015
Incentive

Opportunity

Annual bonus plan – the maximum annual level of award is 100 per cent of salary for
Executive Directors.

Annual long-term share or option award – the maximum face value for an annual award of
option or share-based LTIs is equivalent to 100 per cent of the executive’s base salary. Face
value is the product of market value at time of award and number of options/shares awarded.

Framework for recovery

Claw back: Unvested restricted shares and options can be terminated by the Board in
instances of material misstatement or serious misconduct.

Application of policy in 2015/16

Award will be based on the Boards assessment of performance in meeting strategic targets

Threshold
Target
Cap

Bonus

20%
40%
100%

LTI (Option based
award)

nil%
65%
100%

LTI – Option vesting will be conditional on the Company’s share price appreciating at an
average compounded rate of 5 per cent over three to five years from the date of grant. At the
time of award the Board may apply additional vesting conditions as it deems appropriate.

The Board has adopted a simple and effective incentive arrangement which it believes best
serves the mission that management is charged with, which is to create additional value
leading to a higher share price for all shareholders, subject to general market conditions.

To provide an appropriate fee level to attract individuals with the necessary experience
and ability to make a significant contribution to the effectiveness of the Board and to the
Group’s activities while also reflecting the time commitment and responsibility of the role.

The Chairman and the Non-Executive Directors are paid a basic annual fee with additional
responsibility fees for the chairing of the Audit Committee. Fees are normally reviewed
annually. Each Non-Executive Director is also entitled to a reimbursement of necessary
travel and other expenses and when applicable extra fees for additional work beyond
the normal Non-Executive Director responsibilities. Restricted shares are issued to the
Chairman and each Non-Executive Director on an annual basis equivalent to 25 per cent
of their basic annual fee.

There is no maximum prescribed fee increase although fee increases for Non-Executive
Directors will not normally exceed the average increase awarded to the Executive Director.
Increases may be above this level if there is an increase in the scale, scope or responsibility
of the role.

NON-EXECUTIVE DIRECTOR

Purpose and link to strategy

Operation

Opportunity

Framework for recovery

None.

Application of policy in 2015/16

Current Non-Executive Director fees
Basic annual non-executive
Additional fees
Chairman of the Board
Chairman Audit Committee
Fee’s remained at the same level as 2014/15

£50,000

£65,000
£10,000

Each Director will be entitled to Restricted Share award equivalent to 25 per cent of basic
annual fee in the first quarter of 2015.

1 Not part of the policy report.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information

Directors’ Remuneration Report continued

Non-Executive Director terms of appointment
The services of Alasdair Locke, Peter Milne and Pradip Shah are,
as Non-Executive Directors, provided under the terms of
agreements with the Company dated as follows:

The Remuneration Committee met two times in the 12 months
ended 31 March 2015 and all Committee members served in
office throughout the period. The attendance of members at the
Remuneration Committee meetings was as follows:

Non-Executive Director

Alasdair Locke
Peter Milne
Pradip Shah

Year of
appointment

2012
2012
1999

Number
of years
completed

Date
of current
engagement
letter

3
3
16

12 January 2012
29 February 2012
2 June 2005

Committee member

Pradip Shah (Chairman)
Alasdair Locke
Peter Milne

Number of meetings
attended

2 of 2
2 of 2
2 of 2

Committee evaluation
The performance of the Remuneration Committee was evaluated
as part of the Board evaluation which was completed in 2015. The
review was coordinated by the Chairman of the Audit Committee
and the Treasurer. As a result the Remuneration Committee was
considered to be operating effectively.

Committee advisors
No remuneration advisors were retained by the Remuneration
Committee during the 12 months ended 31 March 2015.

The Company also consults with the Company’s major investors
and investor representative groups as appropriate. No Director
takes part in any decision directly affecting their own remuneration.
The Company Chairman also absents himself during discussion
relating to his own fees.

Remuneration review
Executive
The Chief Executive Director’s base salary remained unchanged
at £250,000. The base salary is below industry average. The Chief
Executive Director’s remuneration was last revised in 2013. The
Group did not achieve the performance objectives set out by the
Board and as a result the Remuneration Committee did not
recommend a bonus payment during the 12 months ended
31 March 2015.

Non-Executive
The Non-Executive Director fees remained unchanged.

Annual Report on Remuneration
This part of the report provides details of the operation of the
Remuneration Committee, how the remuneration policy was
implemented in the 12 months ended 31 March 2015 (including
payment and awards in respect of incentive arrangements) and
how shareholders voted at the 2014 Annual General Meeting.
This part of the report is to include a summary of how the policy
will be operated for the next financial year however, for ease of
reference, this is presented within the Remuneration Policy
Report on pages 31 to 39.

The Remuneration Committee – Governance
The Company’s Remuneration Committee comprises of three
Non-Executive Directors: Pradip Shah (Chairman), Alasdair Locke
and Peter Milne.

Hardy’s Remuneration Committee operates within the terms of
reference approved by the Board. A copy of the Remuneration
Committee’s terms of reference can be found on the Company’s
website www.hardyoil.com.

Committee’s main responsibilities
– The Remuneration Committee considers remuneration policy,
employment terms and remuneration of the Executive Director
and also reviews the remuneration of senior management.

– The Remuneration Committee’s role is advisory in nature and it

makes recommendations to the Board on the overall
remuneration packages for Executive Directors and senior
management in order to attract, retain and motivate high
quality executives capable of achieving the Group’s objectives.

– The Remuneration Committee also reviews proposals for the

share option plans and other incentive plans, makes
recommendations for the grant of awards under such plans
as well as approving the terms of any performance-related
pay schemes.

– The Board’s policy is to remunerate the Group’s senior
executives fairly and in such a manner as to facilitate
the recruitment, retention and motivation of suitably
qualified personnel.

– The Remuneration Committee, while considering the

remuneration packages of Hardy executives, has reviewed
the policies of comparable groups in the industry. The
remuneration of the Non-Executive Directors is determined
by the Chairman and the Executive Director outside the
framework of the Remuneration Committee.

Hardy Oil and Gas plc Annual Report and Accounts FY2015
Single total figure of remuneration for each Director (audited)
Set out below are the emoluments of the Directors for the years indicated ($):

Executive

Fixed

Long term

Name of Director

Ian MacKenzie1

Non-Executive

Name of Director

Alasdair Locke

Peter Milne2

Pradip Shah3

Yogeshwar Sharma6

Salaries/fees
(a)

403,703
469,145

Benefits
(b)

2,915
5,415

Bonuses
(c)

LTI Vesting
(d)

–
–

2014/15
2013/14

Pension
Contribution5
(e)

34,341
42,722

Other
(f)

–

Total

440,959
517,282

Fixed

Long term

Salaries/fees

Benefits

Bonuses

Share Awards

Pension
Contribution

Other

Total

2014/15
2013/14
2014/15
2013/14
2014/15
2013/14
2014/15
2013/14

(a)
183,540
204,698
95,760
120,018
79,800
83,087
41,520
77,267

(b)
–
–
–

–
–
–
–

(d)
43,102
79,347
22,488
36,525
18,740
28,565
–
22,898

(e)
–
–
–

–
–
–
–

(f)
–
–
–

–

–
–

226,642
284,045
118,248
156,543
98,540
111,652
41,520
100,165

Ian Mackenzie’s benefits included life and medical insurance.

1
2 Peter Milne was awarded an extra fee of $16,546 due to extraordinary services provided to the Company in FY2013/14.
3 Pradip Shah was awarded an extra fee of $5,820 due to extraordinary services provided to the Company in FY2013/14.
4 Remuneration figures for 2013/14 comprised of 15 months ended 31 March.
5
Includes Employer NI savings attributed to HSBC salary sacrifice scheme.
6 Retired from the Board effective 30 September 2014.

Long-term incentive plans
Unapproved Share options
As announced on 11 April 2014, the Committee recommended the award of 250,000 options to the Chief Executive Officer. The
options awarded will vest between the third and fifth anniversary of the date of grant (the Vesting Period) subject to the satisfaction of a
Performance Condition. The Performance Condition shall be satisfied where at any time during the Vesting Period, the volume weighted
average market price of an Ordinary Share for any ten consecutive London Stock Exchange trading days is equal to or greater than the
Ordinary Share price of the Company on the date of grant as increased by compounded growth of 5 per cent per annum in the share price
as at the end of such 10-day period. In the event that the Performance Condition is not satisfied by the fifth anniversary of the date of grant,
the options shall lapse. Options will vest immediately upon the occurrence of a Rule 8 Event under the unapproved share option scheme
(relating to change of control etc).

ExSOP scheme
The Committee did not recommend any awards under the ExSOP scheme.

Directors’ Share Options
Set out below is certain information pertaining to share options granted to Directors who held office at 31 March 2015:

Director

As at
31 March
2014

Ian MacKenzie1

750,000

Pradip Shah2

Total

260,233

1,010,233

Granted
during
2014/15

–
250,000
–

250,000

Forfeited
during
2013/14

–

As at
31 March
2015

750,000
250,000
260,233

1,260,233

Date of
grant

14–Mar–12
11–Apr–14
7–Jun–05

Vested at
end of
2014

–
–
260,233

260,233

Expiry date

13–Mar–22
10–Apr–24
6–Jun–15

Exercise price
per share
(£)

1.55
0.65
1.44

1 Mr MacKenzie’s options awarded in 2012 and 2014 are subject to the conditions outlined above.
2 The legacy share options awarded to Non-Executive Director Mr Shah lapsed on 6 June 2015.

No price was paid for any grant of options by the Directors to the Company. There were no variations made during the year in the terms
and conditions with respect to any outstanding share options granted by the Company.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information

Directors’ Remuneration Report continued

Termination payments
Mr Sharma stepped down as Non-Executive Director 30 September 2014. No compensation for loss of office was paid.

Material contract
There have been no other contracts or arrangements during the financial year in which a Director of the Company was materially interested
and/or which were significant in relation to the Group’s business.

Performance graph
Ordinary Shares of the Company were listed on the Official List of the London Stock Exchange’s market for listed securities (Main Market) from
20 February 2008. In the circumstances, and since the Company’s principal business is upstream oil and gas exploration, development and
production, the Company has chosen to compare its performance with the FTSE All-Share Index and FTSE 350 Oil and Producers Index.

Shareholders return and index performance
5 June 2005–31 March 2015

Hardy Share Closing Price Data

Since June 2005

500%

400%

300%

200%

100%

-100%

J u n 0 5

D e c 0 5

J u n 0 6

D e c 0 6

J u n 0 7

D e c 0 7

J u n 0 8

D e c 0 8

J u n 0 9

D e c 0 9

J u n 1 0

D e c 1 0

J u n 1 1

D e c 1 1

J u n 1 2

D e c 1 2

J u n 1 3

D e c 1 3

J u n 1 4

D e c 1 4

J u n 1 5

Hardy equity

FTSE Allshare Index

FTSE 350 – Oil & Gas producers

Source: London Stock Exchange

Chief Executive Officer remuneration

Total remuneration ($)
Months of service
Total remuneration ($/mth)
Annual bonus (%)2
Option vesting

2010

2011

20121

2013/2014

2014/15

347,113
12
28,926
Nil
Nil

399,350
12
33,279
Nil
Nil

359,077
11
32,646
Nil
Nil

508,954
15
33,930
Nil
Nil

440,636
12
36,720
Nil
Nil

1 CEO remuneration figure includes Mr MacKenzie’s total remuneration in 2012, he was appointed CEO designate effective 1 February 2012.
2 The CEO was entitled to a bonus of nil to 40 per cent of annual salary equivalent. No bonus has been awarded by the Board.

On 31 March 2015, the market price of an Ordinary Share of Hardy was £0.285 per share. The highest and lowest market price of an
Ordinary Share of Hardy during the 12 months ended 31 March 2015 was £1.20 and £0.25 respectively.

Percentage change in Chief Executive Officer’s remuneration
The table below shows the percentage change in the Chief Executive Officer’s total remuneration between the financial period ended
31 March 2014 and financial year 31 March 2015 compared to that of the average for all employees of the Group.

Chief Executive
Average employees

Salary

Benefits

Bonus

6.50%
10.60%

0
0

Note: Percentage figures provided in the table above are determined based on the currency in which individuals are paid.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Relative importance of spend on pay
The following table shows the Company’s actual spend on pay for all employees relative to dividends.

Total employee remuneration ($ million)
Dividend and share buyback

1 Weighted average change.
2 15 months ended 31 March 2014.

2013/142

2014/15

2
0

1.5
0

(6)
Nil

Shareholder voting at the last Annual General Meeting
At last year’s Annual General Meeting (7 August 2014) the Company’s Remuneration Report and Policy received the following votes
from shareholders:

Report

Policy

Total number of votes
% of votes cast

34,198,822
74.64

33,696,491
73.54

10,762,311
23.48

12,106,030
26.42

45,820,714

859,581

45,820,714

18,193

73,148,416
62.64

For

Against

Total cast for
and against

Votes withheld

Total issued share
capital instructed

A number of shareholders voted against the 2013/14 Remuneration Report and Remuneration Policy. The general reasons cited for
not voting in favour of the report were regarding the terms and conditions of stock options awards to the Executive Director. Specific
concerns were regarding vesting provisions being subject to a single performance condition (share price appreciation); multiple testing;
the absence of linked to personal targets and no individual limits. We maintain that the Company’s remuneration policy including the
vesting conditions placed on stock option awards to the executive are appropriate for a company of our size and scope as we strike a
balance between conserving resources and maintaining robust governance practices. It is our intention to review our remuneration
policies and practices as the Company circumstances evolves.

Directors’ interests in the share capital of the Company
The Directors who held office at 31 March 2015 and who had beneficial interests in the Ordinary Shares of the Company are
summarised in the table below. There are no minimum shareholding requirements for Directors:

Name of Director

Alasdair Locke
Peter Milne
Ian MacKenzie
Pradip Shah

Position

Non-Executive Chairman
Senior Non-Executive Director
Chief Executive Officer
Non-Executive Director

As at
31 March 2015

As at
31 March 2014

976,999
204,210
352,969
739,536

883,503
155,430
352,969
698,886

Other than above, the Directors do not have any beneficial interest in the Ordinary Shares or any other securities of the Company,
except for stock options.

Other matters
The Company does not manage any pension scheme for any of the Directors.
The Company has not paid out any excess retirement benefits to any Directors or past Directors.
The Company has not paid any compensation to past Directors.
The Company has not paid any sums to third parties with respect to any services of Directors.

Approved on behalf of the Board of Directors.

Pradip Shah
Chairman of the Remuneration Committee
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationNomination Committee Report

Committee’s role
The Nomination Committee reviews the composition and balance
of the Board and senior executive team on a regular basis to
ensure that the Board and senior management have the right
structure, skills and experience in place for the effective
management of the Company’s business.

Main responsibilities
The main duties of the Nomination Committee are summarised
below:
– review the structure, size and composition of the Board and
make recommendations to the Board with regard to any
changes;

– succession planning for Directors and other senior executives;
– identifying and nominating, for Board approval, candidates to

fill Board vacancies as and when required;

– reviewing annually the time commitment required of Non-

Executive Directors; and

– make recommendations to the Board regarding membership

of the Audit and Remuneration Committee in consultation with
the Chairman of each Committee.

Committee membership
The Nomination Committee currently comprises of three
Non-Executive Directors with Alasdair Locke as Chairman.
The Nomination Committee met twice in the 12 months ended
31 March 2015. The membership and attendance of members
at Committee meetings held are provided below:

Committee member

Meetings attended

Alasdair Locke (Chairman)
Peter Milne
Pradip Shah
Yogeshwar Sharma1

2 of 2
2 of 2
2 of 2
1 of 1

1 Yogeshwar Sharma retired from the Board on 30 September 2014.

The main role of the Nomination Committee is to ensure that
the Board has the necessary skills and expertise to support the
Company’s current and future activities. Further we work to ensure
that the Company’s senior management have the necessary
competencies to execute the organisations strategic objectives.

The Hardy Board comprises of four members including
three Non-Executive Directors and one Executive Director.
Mr Yogeshwar Sharma, Non-Executive Director, stepped down as
a Director at the end of September 2014. Following Mr Sharma’s
departure the Committee reviewed the composition of the Board
and concluded that the current membership is sufficient to guide
the Company to achieve its strategic objectives. The Nomination
Committee will continue to assess the Group’s leadership
requirements and the overall effectiveness and composition
of the Board.

Alasdair Locke
Chairman of the Nomination Committee
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015UK Code compliance – The Committee has noted shareholder
feedback regarding independence of non-executives.

Independence – Mr Pradip Shah, a Non-Executive Director, does
not meet the requirements for independence within the framework
of the UK Code, primarily due to term of service. The Committee
considers that Mr Shah is independent of management as the
Chief Executive Officer was appointed in 2012 and with whom
Mr Shah has had no previous professional interaction.
Furthermore Mr Shah’s contributes relevant skills, expertise and
insight towards the Company’s stated strategic objectives and
provides valuable advice as to the business and political
environment in India.

The Committee have concluded that the current Board members
are the most appropriate for the needs of the organisation. We will
continue to closely monitor the composition of the Board in this
regard and take action when appropriate.

Gender diversity – All of the Executive and Non-Executive
Directors are male reflecting the relatively low level of gender
diversity at senior levels in the upstream oil and gas industry
generally. The Committee recognises the benefit of gender
diversity however with due consideration for current
circumstances there is no immediate plan to change the
composition of the Board. The Board is diverse in respect
to skills, experience and cultural background.

Committee activities
The principal activities of the Committee during the 12 months
ended 31 March 2015 and subsequent to year end.

Board membership changes – As announced on 29 August
2014 Mr Yogeshwar Sharma stepped down as Director of the
Company. Mr Sharma had co-founded Hardy in 1997 and led
Hardy in its early period of growth. Mr Sharma was a member
of the Audit and Nomination Committees. The Committee
subsequently recommended to the Board that the reduced
membership continued to provide an effective balance of skills
and experience.

Management resources – The Committee had recommended
that the Board arrange periodic site visits of the Company’s India
project office to facilitate assessment of the Company’s senior
management capabilities and expertise. The Committee is
satisfied that the Company currently has sufficient human
resources to achieve the Company’s short-term objectives and
has identified areas of enhancement to be put in place as our
projects mature.

Board Committee membership – As a result of the reduced
board membership the Committee recommended the amendment
of all Committee terms of reference to require a minimum of two
members. A copy of the Committee’s terms of reference can be
found on the Company’s website www.hardyoil.com. The
Committee recommended membership of Board Committees
remains unchanged.

Committee evaluation – The performance of the Nomination
Committee was evaluated as part of the Board evaluation which
was completed in early 2015. The review was coordinated by the
Senior Non-Executive Director with the assistance of management.
The review showed that the Nomination Committee was considered
to be operating effectively.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information
Directors’ Report

The Directors of Hardy Oil and Gas plc present their annual report
together with the audited financial statements for the 12 months
ended 31 March 2015. These will be presented before the
shareholders at the Annual General Meeting scheduled to be held
on 3 September 2015.

Election and re-election of Directors
At the next Annual General Meeting of the Company, to be held
on 3 September 2015, Alasdair Locke and Pradip Shah will offer
themselves for re-election as Non-Executive Directors. Biographical
details for Mr Locke and Mr Shah are set out on pages 20 to 21.

Business review and future developments
Hardy is an international upstream oil and gas company focused
in India. The Company is incorporated in the Isle of Man and its
registered office is Fort Anne, Douglas, Isle of Man, IM1 5PD.
Hardy’s objective is to be a leading independent exploration and
production company in India and deliver consistent step change
growth in shareholder value through the exploration of potential
commercial hydrocarbon accumulations. A full review of the
Group’s activities during the 12 months ended 31 March 2015 and
plans for the 2015/16 financial year can be found in the Strategic
Report section on pages 1 to 20 of the Annual Report, which are
incorporated herein by reference.

Directors
The Directors that served in office throughout the 12 months
ended 31 March 2015 were:

Board member

Position

Committee member

Alasdair Locke

Non-Executive
Chairman

Ian MacKenzie

Peter Milne

Chief Executive
Officer
Executive Director

Non-Executive
Director

Pradip Shah

Non-Executive
Director

Remuneration,
Nomination,
(Chairman) Risk

Risk (Chairman)

Audit (Chairman),
Remuneration,
Nomination Risk

Remuneration
(Chairman), Audit,
Nomination

Yogeshwar Sharma1 Non-Executive

Audit, Nomination

Director

1 Yogeshwar Sharma retired from the Board on 30 September 2014.

Indemnity provision for Directors
Subject to the Isle of Man Companies Acts 1931 to 2004, but
without prejudice to any indemnity to which a Director may
otherwise be entitled, every Director shall be entitled to be
indemnified out of the assets of the Company against all costs,
charges, losses, damages and liabilities incurred by the Director in
the actual or purported execution of his or her duties. The Group
has a Directors’ and officers’ liability insurance policy in place.

Results and dividends
The Group is reporting a total comprehensive loss of
$24,494,385 for the 12 months ended 31 March 2015 compared
to a comprehensive loss of $4,793,638 for the 15 months ended
31 March 2014. The Directors do not recommend the payment
of a dividend.

Messrs Locke, Milne and Shah have entered into engagement
letters with the Company in respect of their appointments as
Non-Executive Directors of the Company. The appointments
are subject to termination upon at least three months notice
by either party.

Alasdair Locke is the Non-Executive Chairman of the Board and
chairs the Company’s Nomination Committee and is a member of
the Remuneration Committee. Mr Locke has been a member of
Hardy’s Board and served as the Non-Executive Chairman for
more than three years.

Pradip Shah chairs the Company’s Remuneration Committee and
is a member of the Audit and Nomination Committees. Pradip
Shah has served as a Director for more than 16 years.

The Board of Directors believe that the contribution being made
by these Directors continue to be invaluable and is satisfied that
they conduct themselves in an appropriate manner and in the best
interest of shareholders. The Board of Directors is satisfied that
the performance of all Directors continues to be effective and is
also satisfied as to their commitment to their role as Directors.

Capital structure and significant shareholders
The Company’s authorised and issued share capital and changes
thereto are disclosed in note 20 to the consolidated financial
statements. Disclosures with respect to share options are provided
in note 9 to the consolidated financial statements and in the
Directors’ Remuneration Report.

At 31 March 2015 and at the date of this report, there were
73,331,342 Ordinary Shares of Hardy issued and fully paid. Major
interests in share capital of the Company, in excess of 3 per cent1,
as of the date of this report are as follows:

Seren Capital Management

Limited

Universities Superannuation

Scheme Limited

Aberforth Partners LLP
Aequitas Investments Limited
Henderson Global Investors
NFU Mutual Insurance Society

Limited

Yogeshwar Sharma
Gadus SE
John Grahame Whateley
Legal & General Group Plc (L&G)

16,286,017

22.21%

9,243,931
8,161,830
3,928,866
3,277,403

2,713,479
2,662,438
2,554,829
2,438,169
2,245,667

12.61%
11.13%
5.36%
4.47%

3.70%
3.63%
3.48%
3.32%
3.06%

Total

53,161,026

72.49%

Hardy Oil and Gas plc Annual Report and Accounts FY20151 The Company relies on TR-1 notifications to track major shareholdings. Such

notification is to be issued by the shareholder to the Company and appropriate
authority following which the Company is required to disclose via an RNS.
There is no mechanism in place for the Company to verify the accuracy of
such disclosures.

GHG emissions
The disclosure concerning GHG emissions is included in the
Strategic Report on page 19.

Diversity
The disclosures concerning Director, management and employee
gender diversity as required by law are included in the Strategic
Report on page 19.

Annual General Meeting
The Company’s next Annual General Meeting will be held at
Skene House, Rosemount Viaduct, Aberdeen, AB25 1NX, Scotland
on 3 September 2015 at 11.00 BST. The notice of meeting and the
explanatory circular to shareholders setting out business to be
conducted at the Annual General Meeting accompanies this
Annual Report. The notice includes an item of special business
which is explained by the Chairman in his letter contained in the
circular. The item of special business concerns the disapplication
of the pre-emption rights set out in article 5.1 of the Company’s
Articles of Association.

Statement of Directors’ responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable law and IFRS as
adopted by the European Union. Under such requirements,
the Directors are required to prepare Consolidated and Parent
Company financial statements of Hardy Oil and Gas plc for the
12 months ended 31 March 2015, which comprise Consolidated
Statement of Comprehensive Income, Consolidated and Parent
Company Statements of Financial Position, Consolidated and
Parent Company Statements of Cash Flows, Consolidated and
Parent Company Statements of Changes in Equity, and related
notes. In preparing these financial statements, the Directors are
required to:
– select suitable accounting policies and apply them

consistently;

– make judgements and estimates that are reasonable and

prudent;

– state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and

– prepare the financial statements on a going concern basis.

The Directors are responsible for ensuring that proper accounting
records are kept and which disclose with reasonable accuracy at
any time the financial position of the Company and of the Group
and to enable them to ensure that the financial statements comply
with the Isle of Man Companies Acts 1931 to 2004. The Directors
are responsible for ensuring the Directors’ Report and other
information included in the Annual Report are prepared in
accordance with company law of the Isle of Man and are also
responsible for ensuring that the Annual Report includes
information required by the rules of the London Stock Exchange.

In addition to the above, the Directors are also responsible for
safeguarding the assets of the Company and of the Group and
hence for taking reasonable steps for the prevention and detection
of fraud or other irregularities.

Directors’ responsibility statement pursuant to disclosure
and Transparency Rule 4.1.12
The Directors confirm that, to the best of their knowledge:
a) the financial statements, which are prepared in accordance

with IFRS as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit or
loss of the Group; and

b) the Annual Report and statement of accounts includes a fair
review of the development and performance of the business
and the position of the Group, together with a description of
the principal risks and uncertainties that they face.

Internal control and risk management systems
The Board has the ultimate responsibility for the Group’s internal
control and risk management systems. The Audit Committee
monitors internal controls and risk management systems on an
annual basis. The Group has established a system of control and
risk management involving an appropriate degree of oversight by
senior management.

Charitable and political donations
During the 12 months ended 31 March 2015, the Group made
no payments to charitable institutions or political associations.

Payment policy
Hardy’s policy with respect to payments to its vendors is to
establish terms of payment when contracting for goods or
services and generally abide by those payment terms. Normal
credit terms are generally 30 days.

Reappointment of auditors
Crowe Clark Whitehill LLP have expressed their willingness
to continue as auditors. In accordance with the Isle of Man
Companies Acts 1931 to 2004, a resolution reappointing Crowe
Clark Whitehill LLP as auditors of the Company will be proposed
at the next Annual General Meeting.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationDirectors’ Report continued

Going concern
The Group’s business activities, together with factors likely to
affect its future operations, financial position, and liquidity position
are set out in the Strategic Report section of the Annual Report. In
addition, note 24 to the financial statements disclosed the Group’s
financial risk management practices with respect to its capital
structure, foreign currency risk, liquidity risk, interest rate risk,
commodity price risk, credit risk, and other related matters.

The Directors, having made due and careful enquiry, are of the
opinion that the Group has adequate working capital to execute
its operations over the next 12 months. The Directors, therefore,
have made an informed judgement, at the time of approving
financial statements, that there is a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. As a result, the Directors
have continued to adopt the going concern basis of accounting
in preparing the annual financial statements.

Events subsequent to 31 March 2015
There have not been any material events that have occurred since
31 March 2015 to the date of this report.

Approved by the Board of Directors.

Alasdair Locke
Chairman
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Independent Auditor’s Report to the Shareholders of Hardy Oil and Gas plc

Basis for opinions
We have audited the consolidated financial statements in
accordance with applicable law and International Standards
on Auditing (ISAs) (UK and Ireland). Our responsibilities under
those standards are further described below under Respective
Responsibilities of Directors and Auditor. In performing our audit,
as required by those standards, we complied with the Financial
Reporting Council’s Ethical Standards for Auditors including those
requiring us to be independent and objective.

An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate
to the Group’s and the Parent Company’s circumstances and
have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information
in the Chairman’s Statement, Strategic Report, Directors’ Report,
Governance Report, Audit Committee Report, Nomination
Committee Report and the unaudited sections of the Directors’
Remuneration Report to identify material inconsistencies with
the audited financial statements or with knowledge acquired by us
in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider
the implications for our report.

Opinion on financial statements
In our opinion:
– the financial statements give a true and fair view of the Group’s
and of the Parent Company’s state of affairs as at 31 March
2015 and of the Group’s loss for the period then ended;

– the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;

– the Parent Company financial statements have been properly

prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Isle of Man Companies Acts 1931 to 2004;
and

– the financial statements have been prepared in accordance

with the requirements of the Isle of Man Companies Acts 1931
to 2004 and, as regards the Group financial statements, Article
4 of the IAS Regulation.

The financial statements of Hardy Oil and Gas plc comprise the
Consolidated Statement of Comprehensive Income, Consolidated
and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Cash Flows,
the Consolidated and Parent Company Statements of Changes in
Equity, and the related notes. The financial reporting framework that
has been applied in their preparation is applicable law and IFRSs
as adopted by the European Union and, as regards the Parent
Company financial statements, as applied in accordance with the
provisions of the Isle of Man Companies Acts 1931 to 2004.

Going concern
As required by the Listing Rules we have reviewed the Director’s
statement on page 44 that the Group is a going concern.
We confirm that:
– we have not identified material uncertainties related to events
or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern which we believe would
need to be disclosed in accordance with IFRSs as adopted by
the European Union; and

– we have concluded that the Director’s use of the going concern

basis of accounting for the preparation of the financial
statements to be appropriate.

However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationIndependent Auditor’s Report to the Shareholders of Hardy Oil and Gas plc continued

Auditor commentary
Our assessment of risks significant to the audit
We identified the following risks which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team:

Risk

How the scope addressed the assessed risk

Carrying value of the PY-3 field and the deferred tax asset
The PY-3 field has been shut in since July 2011. With the fall in
global oil prices there is a risk that the carrying value of the field,
US$5.78 million, is impaired. The deferred tax asset totalling
US$9.67 million will only be recoverable in the short to medium
term from profits generated from the PY-3 field. If the field is
considered uneconomic then there is a risk that the deferred
tax asset is not recoverable.

Intangible Assets – CY-OS/2
There is an ongoing legal dispute over the status of the CY-OS/2
block, if the block is relinquished an impairment test will be
required which could have a material impact on the Group.

Intangible Assets – GS-01
Under accounting standards the point at which a formal
impairment test is required on the exploration assets of the Group
can be a matter of judgement and this could have a material
impact on the Group.

We have discussed the plans for the recommencement of
production from the field with Management and have reviewed
the Field Development Plan which has been approved by the
block Operating Committee. We reviewed the underlying economic
models and considered sensitivities, including changes in the
oil price and the blocks taxation arrangements. To assess the
recoverability of the deferred tax asset we considered the potential
for profits to be available in the future, against which the deferred
tax asset may be utilised.

We have reviewed the arbitration award, made in Hardy’s favour,
in February 2013 and considered the legal advice received by
the Group in respect of the enforcement of the award. As part
of our procedures we discussed the matter directly with Hardy’s
legal advisors.

We have discussed with Management, and relevant personnel,
the status on the block and their future plans. We have considered
the impairment indicators contained in IFRS 6 Exploration for and
Evaluation of Mineral Resources. As exploration is not planned in
the next 12 months we challenged Management as to whether a
formal impairment assessment needed to be undertaken.

Legal matters
The Group is involved in a number of legal disputes with taxation
authorities and third parties. In the event of adverse findings there
could be a material cash outflow from the Group.

We have reviewed the progress on the outstanding cases, the legal
advice received and where necessary discussed matters directly
with Hardy’s legal and professional advisors. Following this review
we considered the adequacy of liabilities recognised.

Process for making accounting estimates
Included in the financial statements are a number of material
estimates and judgements. We were alert to the risk of
management exercising those judgements in an inappropriate
way, either individually or collectively.

We examined whether there was any evidence of management
bias in the preparation of the financial statements This included
an examination, review and challenge of critical estimates and
judgements including an assessment of whether estimates
are consistently made at the prudent or aggressive end of the
possible range.

Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole, they were not designed
to enable us to express an opinion on these matters individually and we express no such opinion.

The Audit Committee’s consideration of these matters is set out on pages 29 to 30.

Our assessment of materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be
expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus
our testing and to evaluate the impact of misstatements identified.

When assessing the level of materiality we considered the pre-tax loss, and the net and gross assets of the Group. We determined
overall materiality for the Group financial statements as a whole to be US$900,000. We conducted our audit of particular groups of
balances or transactions at a level of materiality less than overall materiality (“performance materiality”). We agreed with the Audit
Committee to report all errors identified to the Committee in excess of US$20,000. Errors below that threshold would be reported
to the Committee if, in our opinion as auditors, disclosure was required on qualitative grounds.

Unadjusted errors totalling US$62,000 were reported to the Audit Committee, these would have increased the reported loss.

Hardy Oil and Gas plc Annual Report and Accounts FY2015The scope of our audit
The Parent Company and its subsidiary are accounted for
from one central operating location in Chennai, India. Our audit
was conducted from the central operating location which the
Responsible Individual visited during the course of the audit work.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Acts 1931 to 2004 require us to report
to you if, in our opinion:
– proper books of account have not been kept by the Parent

Company and proper returns adequate for our audit have not
been received from branches not visited by us; or

– the Parent Company’s statement of financial position and
statement of comprehensive income are not in agreement
with the books of account and returns; or

– certain disclosures of Directors’ remuneration specified by law

are not made; or

– we have not received all the information and explanations we

require for our audit.

Under the Listing Rules we are required to review:
– the Directors’ statement in relation to going concern; and
– the part of the Corporate Governance Statement relating to the
Company’s compliance with the nine provisions of the UK
Corporate Governance Code specified for our review.

Respective responsibilities of Directors and auditors
Responsibility of Directors for the financial statements
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view.

Auditor’s responsibility
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Report Council’s
Ethical Standards for Auditors.

This report is made solely to the Parent Company’s members,
as a body, in accordance with section 15 of the Isle of Man
Companies Act 1982. Our audit work has been undertaken so
that we might state to the Company’s members those matters we
are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.

Matthew Stallabrass
Responsible Individual
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
10 June 2015

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationConsolidated Statement of Comprehensive Income
For the year ended 31 March 2015

Continuing operations
Revenue
Cost of sales
Production costs
Unsuccessful exploration costs

Gross profit/(loss)
Administrative expenses

Operating loss
Interest and investment income
Finance costs

Loss before taxation
Taxation

Loss after taxation
Total other comprehensive income
Total comprehensive loss for the period attributable to owners of the parent

Loss per share
Basic & diluted

Year ending
31 March 2015
US$

15 months ending
31 March 2014
US$

Notes

4
5

6
11
12

–

–
(22,560,297)

(22,560,297)
(3,831,445)

(26,391,742)
393,131
(171,230)

(26,169,841)
1,675,456

(24,494,385)
–
(24,494,385)

486,095
–

486,095
(6,160,451)

(5,674,356)
689,803
(420,709)

(5,405,262)
611,624

(4,793,638)
–
(4,793,638)

(0.33)

(0.07)

Hardy Oil and Gas plc Annual Report and Accounts FY2015Consolidated Statement of Changes in Equity
For the year ended 31 March 2015

At 1 January 2013
Total comprehensive loss for the period
Share-based payment
Adjustment of lapsed vested options
Restricted shares issued

At 31 March 2014
Total comprehensive loss for the period
Share-based payment
Share-based payment – Forex adjustment
Restricted shares issued

Share
capital
US$

730,327
–
–
–
1,157

731,484
–
–
–
1,830

Share
premium
US$

120,611,951
–
–
–
166,180

120,778,131
–
–
–
82,500

Shares option
reserve
US$

4,598,745
–
939,120
(1,835,262)
–

3,702,603
–
355,904
(389,441)
–

Retained
earnings/(loss)
US$

(9,517,575)
(4,793,638)
–
1,835,262
–

(12,475,951)
(24,494,385)
–
–
–

Total
US$

116,423,448
(4,793,638)
939,120
–
167,337

112,736,267
(24,494,385)
355,904
(389,441)
84,330

At 31 March 2015

733,314

120,860,631

3,669,066

(36,970,336)

88,292,675

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationConsolidated Statement of Financial Position
As at 31 March 2015

Assets
Non-current assets
Property, plant and equipment
Intangible assets – exploration
Site restoration deposits
Deferred tax asset

Total non-current assets
Current assets
Inventories
Trade and other receivables
Short-term investments
Cash and cash equivalents
Total current assets

Total assets

Equity and liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Shares option reserve
Retained loss

Total equity
Non-current liabilities
Provision for decommissioning
Current liabilities
Trade and other payables

Total current liabilities

Total liabilities

Total equity and liabilities

Approved and authorised for issue by the Board of Directors on 10 June 2015.

Notes

31 March 2015
US$

31 March 2014
US$

15
16
22
13

17
18
19
24

20
21
21

5,820,048
56,175,450
4,285,515
9,672,992

5,840,028
78,049,506
4,083,776
7,997,536

75,954,005

95,970,846

1,164,988
829,600
17,763,245
3,267,097
23,024,930

1,689,947
915,269
20,652,380
4,004,674
27,262,270

98,978,935

123,233,116

733,314
120,860,631
3,669,066
(36,970,336)

731,484
120,778,131
3,702,603
(12,475,951)

88,292,675

112,736,267

5,644,478

5,512,694

5,041,782

4,984,155

5,041,782

4,984,155

10,686,260

10,496,849

98,978,935

123,233,116

Hardy Oil and Gas plc Annual Report and Accounts FY2015Consolidated Statement of Cash Flows
For the year ended 31 March 2015

Operating activities
Cash flow (used in) operating activities
Taxation refund

Net cash (used in) operating activities
Investing activities
Expenditure on intangible assets – exploration
Expenditure on other fixed assets
Site restoration deposit
Realised from short-term investments

Net cash from investing activities
Financing activities
Interest and investment income
Bank guarantee charges

Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period

Notes

Year ending
31 March 2015
US$

15 months ending
31 March 2014
US$

(3,537,113)
1,635

(5,013,695)
297,373

(3,535,478)

(4,716,322)

(223,584)
(20,820)
(201,739)
2,889,135

(230,710)
(1,737)
(113,148)
5,380,427

2,442,992

5,034,832

394,355
(39,446)

354,909
(737,577)
4,004,674

694,079
(60,065)

634,014
952,524
3,052,150

Cash and cash equivalents at the end of the period

3,267,097

4,004,674

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationNotes to the Consolidated Financial Statements
For the year ended 31 March 2015

1. Accounting policies
The following accounting policies have been applied in preparation of consolidated financial statements of Hardy Oil and Gas plc
(“Hardy” or the “Group”). The domicile, country of incorporation, address of the registered office and a description of the Group’s
principal activities can be found in the Director’s Report.

These financial statements are for the year ending 31 March 2015. The prior period was for 15 months ending 31 March 2014 and hence
is not entirely comparable. Last year a change in accounting reference date was done to synchronise the period end date with other
reporting requirements and to introduce budgetary and reporting efficiencies.

a) Basis of measurement
Hardy prepares its financial statements on a historical cost basis except as otherwise stated.

b) Going Concern
The Group has in the past generated working capital from its production activities and successfully raised finance to provide additional
funding for its ongoing exploration and development programmes. The Directors have considered the guidance given in the document
“Going concern and liquidity risk; Guidance for Directors” issued in October 2009 by the Financial Reporting Council. The Directors
have also reviewed the Group’s ongoing activities including its future intentions in respect of the drilling of exploration wells and having
regard to the Group’s existing working capital position and its ability to potentially raise finance, if required, the Directors are of the
opinion that the Group has adequate resources to enable it to undertake its planned work programme of exploration, appraisal and
development activities over the next 12 months from the date of these financial statements (in coming to this opinion the Directors
have not included the receipt of any funds from the CY-OS/2 arbitration award).

c) Basis of preparation
Hardy prepares its financial statements in accordance with applicable International Financial Reporting Standards (IFRSs) and
interpretations issued by the International Accounting Standards Board as adopted by the European Union.

As at the date of approval of these financial statements, there are a number of standards and interpretations that are in issue but not yet
effective. The Directors do not anticipate that the adoption of these standards and interpretations in future reporting periods will have a
material impact on the Group’s results.

d) Functional and presentation currency
These financial statements are presented in US dollars which is the Group’s functional currency. All financial information presented is
rounded to the nearest US dollar.

e) Basis of consolidation
The consolidated financial statements include the results of Hardy Oil and Gas plc and its subsidiary undertaking. The Group comprises
of the Parent Company, Hardy Oil and Gas plc, and the wholly owned subsidiary Hardy Exploration & Production (India) Inc. which is
incorporated under the Laws of State of Delaware, United States of America. The members of the Group are engaged in the business
of exploration and production of oil and gas and all are included in the consolidated financial statements.

The Group participates in several unincorporated joint arrangements which involve the joint control of assets used in the Group’s oil and
gas exploration and production activities. The Group accounts for all its joint arrangements as joint operations by recognising its share
of assets, liabilities, income and expenditure of joint arrangement in the Consolidated Statement of Financial Position and Consolidated
Statement of Comprehensive Income as appropriate.

f) Revenue
Revenue represents the sale value of the Group’s share of oil (which excludes the profit oil sold and paid to the Government of India as a
part of profit sharing). Revenues are recognised when crude oil has been lifted and title has been passed to the buyer.

Hardy Oil and Gas plc Annual Report and Accounts FY20151. Accounting policies continued
g) Oil and gas assets
i) Exploration and evaluation assets
Hardy has adopted the successful efforts based accounting policy for its oil and gas assets.

Costs incurred prior to acquiring the legal rights to explore an area are expensed immediately in the income statement.

Expenditure incurred in connection with and directly attributable to the acquisition, exploration and appraisal of oil and gas assets are
capitalised for each licence granted under the production sharing contracts and are undepleted within intangible exploration assets until
the licence to explore the contract area has ended or commercial reserves have been declared.

Exploration expenditure incurred for geological and geophysical activities before the commencement of exploratory drilling is initially
capitalised within intangible exploration assets. Exploration drilling costs are initially capitalised on a well-by-well basis until the success or
otherwise of the well has been established. The success or failure is assessed on a well-by-well basis. Exploration well costs are written off
on completion of the well unless the results indicate the presence of hydrocarbons which have reasonable commercial potential.

Following appraisal of such wells, if commercial reserves are established and technical feasibility for extraction is demonstrated, the
related capital intangible exploration and appraisal costs are transferred into a cost centre within the Property Plant and Equipment –
development assets after testing for impairment, if any. Where exploration well results indicate the presence of hydrocarbons which are
ultimately not considered commercially viable, all related costs will be written-off to the income statement.

ii) Oil and gas development and producing assets
Development and production assets are accumulated on a field-by-field basis. These comprise the cost of developing commercial
reserves discovered to put them into production and the exploration and evaluation costs transferred from intangible exploration and
evaluation assets, as stated in the policy above. In addition, interest payable and exchange differences incurred on borrowings directly
attributable to development projects, if any, and assets acquired for the production phase, as well as cost of recognising provision for
future restoration and decommissioning, are capitalised.

iii) Decommissioning
At the end of the producing life of a field, costs are incurred in removing and decommissioning facilities, plugging and abandoning
wells. The full discounted cost of decommissioning is estimated and considered as an asset and liability. The decommissioning cost is
included within the cost of property, plant and equipment development assets. Any revision in the estimated cost of decommissioning
which alters the provisions required also adjusted in the cost of asset. The amortisation of the asset, calculated on a unit of production
basis based on proved reserves, is shown as “Decommissioning charge” in the Statement of Comprehensive Income and unwinding of
the discount on the provision is included in the finance costs.

iv) Disposal of assets
Proceeds from any disposal of assets are credited against the specific capitalised costs included in the relevant cost pool and any loss
or gain on disposal is recognised in the Statement of Comprehensive Income.

h) Depletion and impairment
i) Depletion
The net book values of the producing assets are depreciated on a field by field basis using the unit of production method, based on
proved and probable reserves. Hardy periodically obtains an independent third party assessment of reserves which is used as a basis
for computing depletion.

ii) Impairment
Exploration assets are reviewed regularly for indications of impairment following the guidance in IFRS 6 Exploration and Evaluation
of Mineral Resources, where circumstances indicate that the carrying value might not be recoverable. In such circumstances, if the
exploration asset has a corresponding development/producing cost pool, then the exploration costs are transferred to the cost pool
and depleted on unit of production. In cases where no such development/producing cost pool exists, the impairment of exploration
costs is recognised in the Statement of Comprehensive Income. Impairment reviews on development/producing oil and gas assets for
each field is carried out on each year by comparing the net book value of the cost pool with the associated discounted future cash
flows. If there is any impairment in a field representing a material component of the cost pool, an impairment test is carried out for the
cost pool as a whole. If the net book value of the cost pool is higher than the associated discounted future cash flows, the excess
amount is recognised in the Statement of Comprehensive Income as impairment and deducted from the pool value.

1. Accounting policies continued
i) Property, plant and equipment
Property, plant and equipment, other than oil and gas assets, are measured at cost and depreciated over their expected useful
economic lives as follows:

Leasehold improvements
Furniture and fixtures
Information technology and computers
Other equipment

Annual rate (%)

over lease period
20
33
20

Depreciation
method

Straight line
Straight line
Straight line
Straight line

j) Intangible assets
Intangible assets, other than oil and gas assets, are measured at cost and depreciated over their expected useful economic lives as
follows:

Computer software

Amortisation charges are included within administrative expenses.

k) Investments
Investments by the Parent Company in its subsidiaries are stated at cost.

Annual rate (%)

Depreciation
method

Straight line

l) Short-term investments
Short-term investments are regarded as “financial assets at fair value through profit or loss” and are carried at fair value. In practice,
the nature of these investments is such that all income is remitted and recognised as interest and investment income and the fair value
equates to the value of initial outlay and therefore, in normal circumstances, no fair value gain or loss is recognised in the Statement of
Comprehensive Income.

m) Inventory
Inventory of crude oil is valued at the lower of average cost or net realisable value. Average cost is determined based on actual
production cost for the year. Inventories of drilling stores are recorded at cost including taxes, duties and freight. Provision is made
for obsolete or defective items where appropriate, based on technical evaluation.

n) Financial instruments
Financial assets and financial liabilities are recognised at fair value in the Group’s Statement of Financial Position based on the
contractual provisions of the instrument.

Trade receivables are not interest bearing and their fair value is deemed to be their nominal value as reduced by necessary provisions
for estimated irrecoverable amounts.

Trade payables are not interest bearing and their fair value is deemed to be their nominal value.

o) Equity
Equity instruments issued by Hardy are recorded at net proceeds after direct issue costs.

p) Taxation
The tax expense represents the sum of current tax and deferred tax.

Current tax is based on the taxable profit of the year. Taxable profit differs from net profit as reported in the Statement of
Comprehensive Income as it excludes certain items of income or expenses that are taxable or deductible in years other than the current
year and it further excludes items that are never taxable or deductible. The current tax liability is calculated using the tax rates that have
been enacted or substantially enacted by the year end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
liability method.

Hardy Oil and Gas plc Annual Report and Accounts FY20151. Accounting policies continued
Deferred income tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available in the future against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply in the periods in
which temporary differences reverse, based on tax rates and laws enacted at the year end date.

q) Foreign currencies
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. At the year end date,
all foreign currency monetary assets and monetary liabilities are restated at the closing rate. Exchange difference arising out of actual
payments/realisations and from the year end restatement are reflected in the Statement of Comprehensive Income.

Rate of exchanges were as follows:

£ to US$
US$ to Indian Rupees

31 March 2015

31 March 2014

1.49
62.12

1.66
59.93

r) Leasing commitments
Rental charges payable under operating leases are charged to the Statement of Comprehensive Income as part of production cost over
the lease term.

s) Share-based payments
Hardy issues share options to Directors and employees, which are measured at fair value at the date of grant. The fair value of the equity
settled options determined at the grant date is expensed on a straight-line basis over the vesting period. In performing the valuation of
these options, only market conditions are taken into account. Fair value is derived by use of the binomial model. The expected life
used in the model is based on management estimates and considers non-transferability, exercise restrictions and behavioural
considerations. In case of lapsed vested options, the amount recognised in the shares option reserve is adjusted to retained
earnings as a reserve movement.

t) Contingent assets
Contingent assets are disclosed but not recognised where the receipt of income is probable but not virtually certain. The asset and
related income is only recognised in the period when the receipt becomes virtually certain.

2. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are addressed below.

i) Intangible assets-exploration
Hardy has been awarded costs and interest after the conclusion of the arbitration on the CY-OS/2 block, in which it holds a 75 per cent
participating interest. Hardy’s share of these awards totals approximately US$45.6 million and has been disclosed as a contingent
asset. This is regarded as a significant area of judgement and full details are disclosed in note 16 to these financial statements.

ii) Decommissioning
The liability for decommissioning is reviewed based on cost estimates which are predominated by the charter hire charges of drill ships
and supply boats. Accordingly, the provision made in the books will reflect the risk free discounted estimated future cost for
decommissioning. Further details are contained in note 22.

2. Critical accounting estimates and judgements continued
iii) Deferred tax asset
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that future taxable profits will be available
against which the losses can be utilised. Judgement is required to determine the value of the deferred tax asset, based upon timing
and level of future taxable profits. Should production not recommence from the PY-3 field or should production from the field be less
profitable than expected due to further declines in the global oil price or technical issues with the field an assessment of the carrying
value of the deferred tax asset would be made which could result in a derecognition of all or part of the asset. Further details are
contained in note 13.

iv) Carrying value of property, plant and equipment
Management has performed an impairment test on the Group’s oil and gas assets due to the substantial falling during the year.
The calculation of the recoverable amount requires estimation of future cash flows. Key assumptions and estimates in the impairment
models relate to: commodity prices that are based on forward commodity price estimates, fiscal structuring specific to individual assets,
commercial reserves and the related cost profiles. Further deterioration of market prices will require further assessment and may result
in an impairment.

3. Segment analysis
The Group is organised into two business units as at end of the year: India and United Kingdom. The Indian business unit is operated by
the wholly owned subsidiary, Hardy Exploration & Production (India) Inc. and Hardy Oil and Gas plc operates in the United Kingdom.

The India business unit focuses on exploration and production of oil and gas assets in India. The United Kingdom business unit
is the holding company. Management monitors these business units separately for resource allocation, decision making and
performance assessment.

2015
US$

–

(2,455,146)
10,866
1,117,150
–
–

(1,327,130)
295,386

Inter-segment
eliminations

–

–
–
(1,117,150)
–
1,117,150

Total

–

(26,391,742)
393,131
–
(171,230)
–

–
–

(26,169,841)
1,675,456

(1,031,744)
17,108,311
106,682,121
(171,564)
–
17,317
–
(38,538)

–
–
(106,682,121)
–
106,682,121
–
–
–

(24,494,385)
98,978,935
–
(10,686,260)
–
244,404
(22,560,297)
(40,800)

India

–

(23,936,596)
382,265
–
(171,230)
(1,117,150)

(24,842,711)
1,380,070

(23,462,641)
81,870,624
–
(10,514,696)
(106,682,121)
227,087
(22,560,297)
(2,262)

Revenue
Other income

Operating loss
Interest income
Interest income on inter-corporate loan
Finance costs
Interest expense on inter-corporate loan

Loss before taxation
Taxation

Loss for the period
Segment assets
Inter-corporate loan
Segment liabilities
Inter-corporate borrowings
Capital expenditure
Unsuccessful exploration costs
Depreciation, depletion and amortisation

Hardy Oil and Gas plc Annual Report and Accounts FY20153. Segment analysis continued

Revenue
Other income

Operating loss
Interest income
Interest income on inter-corporate loan
Finance costs
Interest expense on inter-corporate loan

Loss before taxation
Taxation

Loss for the period
Segment assets
Inter-corporate loan
Segment liabilities
Inter-corporate borrowings
Capital expenditure
Unsuccessful exploration costs
Depreciation, depletion and amortisation

2014
US$

–

(3,911,112)
24,092
1,400,810
–
–

(2,486,210)
537,801

Inter-segment
eliminations

–

–
–
(1,400,810)
–
1,400,810

–
–

Total

–

(5,674,356)
689,803
–
(420,709)
–

(5,405,262)
611,624

India

–

(1,763,244)
665,711
–
(420,709)
(1,400,810)

(2,919,052)
73,823

(2,845,229)
103,042,734
–
(10,323,356)
(104,606,209)
231,432
–
(13,242)

(1,948,409)
20,190,382
104,606,209
(173,493)
–
1,015
–
(41,089)

–
–
(104,606,209)
–
104,606,209
–
–
–

(4,793,638)
123,233,116
–
(10,496,849)
–
232,447
–
(54,331)

The Group is engaged in one business activity, the exploration, development and production of oil and gas. Other income relates to
technical services to third parties, overhead recovery from joint arrangement operations and miscellaneous receipts, if any. Revenue
arises from the sale of oil produced from the contract area PY-3 India and the revenue by destination is not materially different from the
revenue by origin.

4. Cost of sales
Production costs, related to PY-3, included in the cost of sales consists of:

Production costs
Reversal of over accrual in prior years
Production cost net credit (expense)

5. Unsuccessful exploration costs
Unsuccessful exploration costs consist of:

Impairment of Block D3
Other liquidated damages accrual

2015
US$

–
–
–

2015
US$

22,097,640
462,657
22,560,297

2014
US$

(58,925)
545,020
486,095

2014
US$

–
–
–

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2015

6. Operating loss
Operating loss is stated after charging:

Unsuccessful exploration costs
Depreciation and amortisation
Operating lease costs – Land and buildings
External auditors’ remuneration
– Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
– Audit related assurance services
Exchange (gain)/ loss

2015
US$

22,560,297
40,800
159,663

82,456
13,287
(189,331)

2014
US$

–
54,331
195,645

81,820
26,560
605,045

The Group has a policy in place which requires approval of the Audit Committee for the award of non-audit services to be provided
by the auditors. No non-audit services were provided during the year.

7. Reconciliation of operating loss of continuing operations to operating cash flows

Operating loss
Unsuccessful exploration costs
Depletion, amortisation, and depreciation
Share-based payment expense

Other non-cash movements

Decrease in inventory
(Increase) in trade and other receivables
(Decrease) in trade and other payables
Cash (used in) operating activities

8. Staff costs

Wages and salaries
Social security costs
Share-based payments charge

2015
US$

2014
US$

(26,391,742)
22,560,297
40,800
211,247

(5,674,356)
–
54,331
1,328,323

–

59,117

(3,579,398)
524,959
(77,651)
(405,023)
(3,537,113)

(4,232,585)
334,555
(27,809)
(1,087,856)
(5,013,695)

2015
US$

2014
US$

1,231,738
222,473
139,803

1,819,890
178,451
479,643

1,594,014

2,477,984

Staffs costs, including Executive Directors’ salaries, fees, benefits and share-based payments, are shown gross before amounts
recharged to joint arrangements.

The average monthly number of employees, including Executive Directors and individuals employed by the Group working on joint
arrangement operations are as follows:

Management and administration
Operations

2015

10
11

2014

12
11

Hardy Oil and Gas plc Annual Report and Accounts FY20159. Share-based payments
Share options have been granted to subscribe for Ordinary Shares of US$0.01 each in the capital of the Company, which are
exercisable between 2015 and 2025 at prices of £0.66 to £7.69 per Ordinary Share.

Hardy has an unapproved share option scheme for the Directors and employees of the Group. Options are exercisable at the quoted
market prices of the Company’s shares on the date of grant. The vesting period is three years with a stipulation that the options are
granted in proportion to the period of employment after the grant subject to a minimum of one year, or, with respect to options from
2010 onwards, the period is three years. The options are exercisable for a period of 10 years from the date of grant. Details of the share
options outstanding during the years are as follows:

2015

2014

Number of options

Weighted
average price

Number of options

Weighted
average price

Outstanding at beginning of the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year

Exercisable at the end of the year

3,169,933
250,000
–
3,419,933

2,094,933

£1.98
£0.66
–
£1.98

£2.48

3,626,933
275,000
(732,000)
3,169,933

1,675,933

The inputs into the binomial model for computation of value of options granted during the period are as follows:

Share price at grant date
Option exercise price at grant date
Expected life
Expected volatility
Expected dividend
Risk free rate
Cost per option

2015

£0.65
£0.65
5
40%
–
2.2%
£0.28

£2.94
£0.66
£3.45
£1.98

£2.57

2014

£0.66
£0.66
5
40%
–
1.9%
£0.28

Expected volatility was determined by calculating Hardy’s historical volatility. The expected life used has been adjusted based on
management’s best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Details of
outstanding options at the end of the year with the weighted average exercise price (WAEP) as follows:

2005–2015
2006–2016
2007–2017
2008–2018
2010–2020
2012–2022
2014–2024
2015–2025

2015

Number

1,130,933
30,000
395,000
120,000
419,000
800,000
275,000
250,000

WAEP

£1.51
£3.02
£4.01
£7.69
£2.12
£1.52
£0.66
£0.66

2014

Number

1,130,933
30,000
395,000
120,000
419,000
800,000
275,000
–

WAEP

£1.51
£3.02
£4.01
£7.69
£2.12
£1.52
£0.66
–

The weighted average contractual life of options outstanding is 4.6 years (2014: 5.5 years).

Restricted Ordinary Shares are issued to Non-Executive Directors in consideration for services rendered in 2014 at a price of 30.75
pence per Ordinary Share, being the closing price on the day prior to issue. The cost of issuing such shares is charged to the Statement
of Comprehensive Income for the year ending 31 March 2015.

9. Share-based payments continued
On 11 March 2015, the Company issued 182,926 restricted Ordinary Shares having an aggregate market value of US$84,330 (£56,250)
to its Non-Executive Directors and Chairman in the following manner;

Name

Alasdair Locke (Chairman)
Peter Milne
Pradip Shah

Total

Number of
Ordinary Shares
Issued

93,496
48,780
40,650

182,926

The Group has expensed a net amount of US$211,247 in the current period (2014: US$1,328,323) towards equity settled share-based
payments. Equity shares option reserve is revalued at the exchange rate as at 31 March 2015. The revaluation gain for the year ended
31 March 2015 is US$389,441 (2014: Revaluation loss US$390,836). The value of share option reserves as at 31 March 2015 are
US$3,669,066 (2014: US$3,702,603).

10. Directors’ emoluments
Details of each Director’s remuneration and share options are set out in the Directors’ Remuneration Report that forms part of the
Company’s Annual Report. Director’s emoluments are included within the remuneration of the key management personnel in note 28.

11. Interest and investment income

Bank interest
Other interest income
Dividend

12. Finance costs

Bank guarantee charges
Other finance costs

2015
US$

382,265
–
10,866

393,131

2015
US$

39,446
131,784

171,230

2014
US$

589,118
84,980
15,705

689,803

2014
US$

60,065
360,644

420,709

Other finance cost is a charge incurred as a result of the unwinding of the discount to the decommissioning provision.

13. Taxation
a) Analysis of taxation (credit) for the year

Current tax charge
UK corporation tax
Foreign tax – India
Minimum alternate tax
Foreign tax – USA

Total current tax (credit)
Deferred tax (credit)

Taxation (credit)

2015
US$

2014
US$

–
–
–
–

–
(1,675,456)

(1,675,456)

–
(611,624)

(611,624)

Hardy Oil and Gas plc Annual Report and Accounts FY201513. Taxation continued

Charge in respect of change in tax rates

Losses incurred during the year

Origination and reversal of temporary differences

Deferred tax credit

Deferred tax analysis:

2015
US$

2014
US$

2,251,461

761,670

(6,958,713)

–

3,031,796

(1,373,294)

(1,675,456)

(611,624)

2015
US$

2014
US$

Difference between accumulated depletion, depreciation and amortisation and capital allowances

(1,562,789)

3,577,657

Carried forward losses

Deferred tax asset

b) Factors affecting tax charge for the year

Loss before taxation from continuing operations
Profit before taxation multiplied by the rate of tax in India of 42.23% (2014: 23%)

Adjustment for expired carried forward losses

Disallowable expenditure

Other

Effect of change in tax rates

Foreign tax on overseas income – current year

Total tax credit

11,235,781

4,419,879

9,672,992

7,997,536

2015
US$

2014
US$

(26,169,841)
(10,343,979)

(5,405,262)
(1,243,210)

6,484,019

–

208,171

(66,958)

(338,257)

2,251,462

761,670

–

(1,675,456)

(611,624)

Indian operations of the Group are subject to a tax rate of 43.26 per cent which is higher than UK and US corporations tax rates. To the
extent that the Indian profits are taxable in the US and/or the UK, those territories should provide relief for Indian taxes paid, principally
under the provisions of double taxation agreements. When considering deferred tax assets the Group considers the highest and best
use of the losses available, this is considered to be in India (2014: UK). Based on the current expenditure plans, the Group anticipates
that the tax allowances will continue to exceed the depletion charge of each year, though the timing of related tax relief is uncertain.

The deferred tax asset will be realised upon production from the PY-3 field which Management expect to recommence during 2016.

14. Loss per share
Loss per share is calculated on a loss of US$24,494,385 for the year ended 31 March 2015 (2014; US$4,793,638) on a weighted
average of 73,158,941 Ordinary Shares for the year ended 31 March 2015 (2014: 73,066,870). No diluted loss per share is calculated.

Diluted loss per share on loss attributable the Parent Company for the year ended 31 March 2015 and 31 March 2014 have not
been calculated.

15. Property, plant and equipment
Oil and gas assets represent interest in producing oil and gas assets falling under the India cost pool. Other fixed assets consist of office
furniture, computers, workstations and office equipment.

Cost
At 1 January 2013
Additions
Disposals

At 1 April 2014

Additions
Disposals

At 31 March 2015

Depletion, depreciation and amortisation
At 1 January 2013
Charge for the period
Disposals

At 1 April 2014

Change for the year

Disposals

At 31 March 2015

Net book value at 31 March 2015

Net book value at 31 March 2014

Oil and gas
assets
US$

Other fixed
assets
US$

Total
US$

35,524,396
(59,117)
–

1,783,890
1,737
(5,372)

37,308,286
(57,380)
(5,372)

35,465,279

1,780,255

37,245,534

–
–

20,820
(714)

35,465,279

1,800,361

37,265,640

29,684,318
–
–

1,676,765
49,795
(5,372)

31,361,083
49,795
(5,372)

29,684,318

1,721,188

31,405,506

–

40,800

(714)

40,800

(714)

29,684,318

1,761,274

31,445,592

5,780,961

39,087

59,067

5,820,048

5,840,028

Oil and gas assets relate to the PY-3 field which has not produced since July 2011 and therefore no depletion has been charged.

The (negative) additions figure of US$59,117 in the 15 months period ended 31 March 2014 represents the reversal of an over accrual
in previous periods of a capitalised cost.

16. Intangible assets – exploration

Costs and net book value
At 1 January 2013
Additions
Unsuccessful exploration cost

At 1 April 2014

Additions
Unsuccessful exploration cost

At 31 March 2015

The details of the intangible assets stated above are as follows:

Exploration expenditure – block CY-OS/2
Exploration expenditure – block GS-01

Total

India
US$

77,818,796
230,710
–

78,049,506

223,584
(22,097,640)

56,175,450

US$

51,128,272
5,047,178

56,175,450

Hardy Oil and Gas plc Annual Report and Accounts FY2015
16. Intangible assets – exploration continued
Legal proceedings concerning block CY-OS/2
In March 2009, Hardy were informed by the Government of India that the block CY-OS/2, in which Hardy holds a 75 per cent
participating interest, was relinquished as Hardy had failed to declare commerciality within the two years from the date of discovery
which is applicable to an oil discovery. Hardy disputed this ruling believing that the discovery was a gas discovery and consequently
that it was entitled to a period of five years from the date of discovery to declare commerciality. As no agreement was reached the
dispute was referred to arbitration under the terms of the PSC.

The arbitrators ruled on 2 February 2013 that the discovery was a gas discovery and consequently that the order for the relinquishment
of the block was illegal. The arbitrators have ordered the Government of India to restore the block to Hardy and its partners and to allow
them a period of three years from the date of restoration to complete the appraisal programme. In addition, the arbitrators awarded
costs of US$0.2 million and interest on the exploration expenditure incurred to date. As at 31 March 2015, Hardy’s 75 per cent share of
the interest awarded is approximately US$45.6 million. On 2 August 2013 the Government of India filed an appeal, against the arbitration
award, with the High Court Delhi, and the Company subsequently filed an execution petition before the High Court Delhi. Five hearings
have been scheduled and adjourned and the next hearing is scheduled in July 2015.

The Company believes that the unanimous international tribunal award is well reasoned and, based upon external legal advice, that the
award may not be subject to appeal in the Indian courts as per the India Arbitration and Conciliation Act 1996.

Impairment of block D3
On 23 December 2014, Management Committee of Block D3 approved a proposal from the operator of the D3 block, in which the Group
holds 10 per cent interest, for the relinquishment of the block. The proposal set out that as per the GOI Notification O-22013/27/2012-ONG-
D-V dated 10 November 2014, access restrictions have been imposed by the GOI and the Operator recommended the relinquishment of
the block with immediate effect under clause 3.1 (a), and (e) and 3.2, of the referenced Government Policy.

The relinquishment of the block has released Hardy from any further work programme liability including any further financial liability
related to unfinished Minimum Work Programme penalties. US$22,097,640 of the Company’s Intangible Assets, which are attributable
to the D3 block, have been written off in the current financial year.

17. Inventories

Drilling and production stores and spares

2015
US$

2014
US$

1,164,988

1,689,947

1,164,988

1,689,947

An amount of US$524,959 (2014: US$334,555) has been recognised as an expense in the period relating to an impairment in the
carrying value of inventory.

18. Trade and other receivables

Other receivables
Prepayments

2015
US$

822,309
7,291

829,600

2014
US$

746,811
168,458

915,269

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2015

19. Short-term investments

HSBC US$ Liquidity Fund Class-A
HSBC £ Liquidity Fund Class-A

2015
US$

2014
US$

17,763,242
3

20,652,379
1

17,763,245

20,652,380

The above investments are in liquid funds which can be converted into cash at short notice. The book value of these investments
approximates to their fair values. The fair value is determined based on quoted market prices and is considered to be a level 1 valuation
under IFRS 13.

Interest income will increase or decrease by US$177,632 (2014: US$206,524) for every 1 per cent change in interest rates.

20. Share capital

Authorised Ordinary Shares
At 1 April 2014

At 31 March 2015

Allotted, issued and fully paid Ordinary Shares
At 1 January 2013
Restricted shares issued during the period

At 1 April 2014
Restricted shares issued during the period

At 31 March 2015

Number US$0.01
Ordinary Shares

US$

200,000,000

2,000,000

200,000,000

2,000,000

73,032,706
115,710

73,148,416
182,926

73,331,342

730,327
1,157

731,484
1,830

733,314

Ordinary Shares issued have equal voting and other rights with no guarantee to dividend or other payments.

Included within the Ordinary Shares are 510,978 restricted shares in issue (2014: 328,052 restricted shares) with a value of US$779,153
(2014: US$694,823). The shares have been issued to certain Directors and will unconditionally vest three years from the date of issue
provided the individual is still a Director of Hardy. During the period of restriction, while Directors are eligible for voting rights and
dividend, they are not allowed to dispose these shares.

21. Reserves
Hardy holds the following reserves, in addition to share capital and retained earnings:

Share premium account
The share premium account is the additional amount over and above the nominal share capital that is received for shares issued less
any share issue costs.

Share option reserve
The share option reserve represents the fair value of share options issued to Directors and employees.

22. Provision for decommissioning

At 1 January 2013
Change in decommissioning estimate

At 1 April 2014

Change in decommissioning estimate

At 31 March 2015

US$

5,152,050
360,644

5,512,694

131,784

5,644,478

The provision has been made by estimating the decommissioning cost at the current prices using existing technology. Decommissioning of
PY-3 is expected to be incurred between 2020 and 2025.

An amount of Rs. 266,216,197 (US$4,285,515) (2014: Rs. 244,740,699 (US$4,083,776)) has been deposited with the State Bank of India for
site restoration obligations. This amount has been treated as a non-current asset as this deposit has end use restriction for site restoration.

Hardy Oil and Gas plc Annual Report and Accounts FY2015

23. Trade and other payables

Trade payables
Other payables
Accruals

2015
US$

2014
US$

3,892,977
–
1,148,805

4,115,631
123,162
745,362

5,041,782

4,984,155

Trade and other payables are unsecured and payable on demand.

24. Financial risk management
Hardy finances its operations through a mixture of equity and retained earnings. Finance requirements are reviewed by the Board when
funds are required for acquisition, exploration and development of projects.

Hardy’s policy is to maintain a strong financial position to sustain future development of the business. There were no changes to the
Group’s capital management approach during the year.

Hardy’s treasury functions are responsible for managing fund requirements and investments which include banking, cash flow
management, interest and foreign exchange exposure to ensure adequate liquidity at all times to meet cash requirements.

Hardy’s principal financial instruments are cash, deposits and short-term investments and these instruments are only for the purpose
of meeting its requirement for operations.

Hardy’s main financial risks are foreign currency risk, liquidity risk, interest rate risk, commodity price risk and credit risks. Set out below
are policies that are used to manage such risks:

Foreign currency risk
The Group reports in US dollars and the majority of its business is conducted in US dollars. All revenues from oil sales are received in
US dollars and the majority of costs except a portion of expenses for overhead are incurred in US dollars. For currency exposure other
than US dollars, a portion of the cash is kept on deposit in other currencies to meet its payments as required. No forward exchange
contracts were entered into during the period.

Liquidity risk
The Group currently has surplus cash which has been placed in deposits and short-term investments which can be converted into cash
at short notice, ensuring sufficient liquidity to meet the Group’s expenditure requirements. Hardy has no outstanding loan obligations at
period end dates.

Interest rate risk
Surplus funds are placed in deposits and short-term investments at fixed or floating rates. Hardy’s policy is to place deposits only with
well established banks or financial institutions that offer competitive interest rates.

Commodity price risks
The Group’s share of production of crude oil from PY-3 field is sold to the Government of India’s nominee Chennai Petroleum
Corporation Limited. The sale price is arrived at based on an average price of Brent crude for the 30 days period commencing 15 days
before and ending 15 days after the delivery of crude oil. No commodity price hedging contracts have been entered into by the Group.

Credit risk
All Hardy’s sales are to Chennai Petroleum Corporation Limited, a state oil company in India. As it is the Government of India nominee
for the purchase of crude oil, the credit risk is considered negligible.

Where the Group is the operator of, or is the largest owner in, a field it recovers a percentage of the costs incurred from its joint
arrangement partners in accordance with the levels of participating interests. Partners may either be Indian state owned companies or
private enterprises. Cash calls on partners are usually made in advance of incurring field expenditure which, along with the assessed
credit standing of the partners, is considered to reduce any credit risk to a negligible level.

24. Financial risk management continued
Deposits and other money market instruments, as a general rule, are placed with banks and financial institutions that have ratings of not
less than AA or equivalent, which are verified before placing the deposits. Cash surpluses are also invested in short-term investments in
certain liquid funds. These funds are primarily invested in terms deposits and graded commercial papers of not less than AA or equivalent.

The Board will continue to assess the strategies for managing credit risk and is satisfied with the existing policies for sale of crude oil
to Chennai Petroleum Corporation Limited. At the period end, the Group did not have any bad debt risk. The maximum financial risk
exposure relating to the financial assets is the carrying value of such financial assets as on the period end date.

Capital management
The objective of the Group’s capital management is to ensure that there is sufficient liquidity within the Group to carry out the
committed work programme requirements of all its production sharing contracts. The Group monitors the long-term cash flow
requirements of the business in order to assess the requirement for changes to the capital structure to meet that objective and to
maintain flexibility. The Group considers its capital to consist of share capital only.

The Board manages the structure of its capital and makes necessary adjustments to accommodate the changes in the economic
conditions. To maintain or adjust the capital structure, the Board may issue new shares for cash. No significant changes were made in
the objectives, policies or processes during the year ended 31 March 2015.

Maturity of non-current financial liabilities
The maturity of non-current financial liabilities, which consist of the decommissioning provision as at 31 March 2015 and 31 March 2014
are as follows:

In more than two years but not more than five years

In more than five years

2015
US$

–

2014
US$

–

5,644,478

5,512,694

The Group does not have any fixed maturity or interest bearing financial liabilities as at 31 March 2015 or 31 March 2014.

Interest rate risk profile of financial assets
The interest rate risk profile of the financial assets of the Group as at 31 March 2015 is as follows:

2015

US dollars
Pound sterling
Indian Rupees
Cash and cash equivalents

2014

US dollars
Pound sterling
Indian Rupees
Cash and cash equivalents

Fixed rate
financial assets
US$

Floating rate
Financial assets
US$

1,855,500
–
–
1,855,500

948,909
157
–
949,066

Fixed rate
Financial assets
US$

Floating rate
Financial assets
US$

1,855,500
–
746,941
2,602,441

749,085
195
–
749,280

Financial assets –
no interest
is earned
US$

176,903
112,425
173,203
462,531

Financial assets –
no interest
is earned
US$

96,777
438,000
118,176
652,953

Total
US$

2,981,312
112,582
173,203
3,267,097

Total
US$

2,701,362
438,195
865,117
4,004,674

An amount of Rs. 266,216,197 (US$4,285,515) (2014: Rs. 244,740,699 (US$4,083,776)) deposited with the State Bank of India for site
restoration obligation is treated as a non-current asset. The interest rate of this deposit is based on the highest rate of interest as
applicable for the period paid by the State Bank of India.

Interest income will increase or decrease by US$28,046 (2014: US$33,517) for every 1 per cent change in interest rates.

Hardy Oil and Gas plc Annual Report and Accounts FY201524. Financial risk management continued
Currency exposures
The currency exposures of the monetary assets denominated in currencies other than US dollars of the Group as at 31 March 2015
are as follows:

2015

US$

2014

US$

Indian rupees
US$

Pound sterling
US$

Total
US$

4,458,718

112,582

4,571,300

Indian rupees
US$

Pound sterling
US$

Total
US$

4,948,893

438,196

5,387,089

An amount of US$158,583 (2014: US$455,960) was recognised as foreign exchange loss on account of exchange rate fluctuations on
bank balances and investments made in currencies other than US dollars.

Exchange gains will increase by US$46,170 (2014: US$54,410) for every 1 per cent appreciation of Indian rupee and sterling and loss
of US$45,256 (2014: US$53,332) for 1 per cent depreciation of Indian rupee and sterling.

25. Financial instruments
Book values and fair values of Hardy’s financial assets and liabilities are as follows:

Financial assets

Financial assets at fair value through profit or loss

Short-term investments
Financial assets – loans and receivables
Cash and short-term deposits
Trade and other receivables
Site restoration deposit

Financial liabilities

Financial liabilities measured at amortised cost

Accounts payable

Book value
2015
US$

Fair value
2015
US$

Book value
2014
US$

Fair value
2014
US$

17,763,245

20,652,380

3,267,097
829,600
4,285,515

4,004,674
915,269
4,083,776

26,145,457

29,656,099

Book value
2015
US$

Fair value
2015
US$

Book value
2014
US$

Fair value
2014
US$

(5,041,782)

(4,984,155)

All of the above financial assets and liabilities are current at the period end dates.

26. Other financial commitments under operating leases
The Group entities have entered into commercial leases for land and building and office equipment. These leases have an average life
of one to five years and there are no restrictions placed on the lessee by entering into these leases. The minimum future lease payments
for the non-cancellable operating leases are as follows:

Land and buildings:
One year
Two to five years
After five years
Other:
One year
Two to five years
After five years

2015
US$

2014
US$

28,989
–
–

4,117
–
–

118,188
30,048
–

10,242
4,580
–

27. Contingent liabilities
Liquidated damages
The Group has minimum work commitments in associated with various exploration licences granted by sovereign authorities through joint
arrangements. A number of these commitments have not been fulfilled and as a consequence the Group is liable to pay liquidated damages.
When a liquidated damage payment is probable a provision is created based on management’s best judgement. In some instances there
may be a high degree of uncertainty. In such instances an additional contingent liability is recognised. Currently a contingent liability
estimated at US$1.7 million associated with unfinished minimum work programme liquidated damages. Management do not expect
this to be resolved in the next 12 months.

Litigation
In the normal course of business the Group may be involved in legal disputes which may give rise to claims. Provision is made in the
financial statements for all claims where a cash outflow is considered probable. No separate disclosure is made of the detail of claims
as to do so could seriously prejudice the position of the Group.

Others
In addition, the Parent Company guarantees the Group’s obligation under various PSC’s to the Government of India. The Guarantees
are deemed to have negligible fair value and are therefore accounted for as contingent liabilities.

28. Related party transactions
The aggregate remuneration of Directors and the key management personnel, including its subsidiary undertaking, of the Group
is as follows:

Short-term employee benefits
Share-based payments

2015
US$

2014
US$

915,810
333,244

1,121,541
425,634

1,249,054

1,547,175

Key management personnel include the Directors and the Chief Executive Officer of the Group as set out in the overview of the Board of
Directors in the business review. Further information about the remuneration of individual Directors is provided in the Director’s
Remuneration Report which forms part of the Group’s 2015 Annual Report.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Parent Company Statement of Changes in Equity
For the year ended 31 March 2015

Share
capital
US$

Share
premium
US$

Shares to be
issued
US$

Retained
earnings
US$

Total
US$

At 1 January 2013

730,327

120,611,951

4,598,745

5,527,928

131,468,951

Total comprehensive loss for the period
Share-based payment
Adjustment of lapsed vested options
Restricted shares issued

–
–
–
1,157

–
–
–
166,180

–
939,120
(1,835,262)
–

(1,948,409)
–
378,534
–

(1,948,409)
939,120
(1,456,728)
167,337

At 1 April 2014

731,484

120,778,131

3,702,603

3,958,053

129,170,271

Total comprehensive loss for the year
Share-based payment
Share-based payment – Forex adjustment
Adjustment of lapsed vested options
Restricted shares issued

–
–
–
–
1,830

–
–
–
–
82,500

–
355,904
(389,441)
–
–

(1,031,743)
–

–
–

(1,031,743)
355,904
(389,441)
–
84,330

At 31 March 2015

733,314

120,860,631

3,669,066

2,926,310

128,189,321

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationParent Company Statement of Financial Position
As at 31 March 2015

Assets
Non-current assets
Property, plant and equipment
Investments

Total non-current assets
Current assets
Trade and other receivables
Short-term investments
Cash and cash equivalents

Total current assets

Total assets

Equity and liabilities
Equity attributable to the owners
Equity
Called-up share capital
Share premium
Shares to be issued
Retained earnings

Total equity
Non-current liabilities
Provision for deferred tax

Current liabilities
Trade and other payables

Total current liabilities

Total liabilities

Total equity and liabilities

Approved and authorised for issue by the Board of Directors on 10 June 2015.

Notes

31 March
2015
US$

31 March
2014
US$

9
10

35,085
111,252,574

56,307
109,153,382

111,287,659

109,209,689

11
12
16

11,409
17,763,245
258,507

223,270
20,652,380
513,745

18,033,161

21,389,395

129,320,820

130,599,084

733,314
120,860,631
3,669,066
2,926,310

731,484
120,778,131
3,702,603
3,958,053

128,189,321

129,170,271

959,934

1,255,319

171,565

173,494

1,131,499

1,428,813

129,320,820

130,599,084

Hardy Oil and Gas plc Annual Report and Accounts FY2015Parent Company Statement of Cash Flows
For the year ended 31 March 2015

Operating activities

Cash flow (used in) operating activities

Net cash (used in) operating activities
Investing activities
Purchase of other property, plant and equipment
Short-term investments

Net cash (used in) from investing activities
Financing activities
Interest and investment income
Inter corporate loan

Net cash (used in) from financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year

Cash and cash equivalent at the end of the year

Year ending
31 March
2015
US$

Fifteen months
ending
31 March
2014
US$

Notes

(2,179,161)

(2,617,303)

(2,179,161)

(2,617,303)

(17,316)
2,889,135

(1,015)
5,380,427

2,871,819

5,379,412

1,128,016
(2,075,912)

1,424,902
(3,944,331)

(947,896)

(2,519,429)

(255,238)
513,745

258,507

242,680
271,065

513,745

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationNotes to the Parent Company Financial Statements
For the year ended 31 March 2015

1. Accounting policies
The Company follows the accounting policies of the Group.

2. Revenue

Overhead recovery
Management fees from subsidiary

2015
US$

–
–

–

2014
US$

–
–

–

The Directors do not consider there to be more than one class of business or geographic segment for the purposes of reporting.
The Company operates in one geographical area, the United Kingdom and the Company’s activity is one class of business as holding
company for the Group.

3. Statement of comprehensive income
The Company has taken advantage of the exemption provided under section 3 of the Isle of Man Companies Act 1982 not to publish its
statement of comprehensive income and related notes. The Company’s loss for the year was US$1,031,743 (2014: US$1,948,409).

4. Reconciliation of operating loss to operating cash flows

Operating loss
Depreciation
Share-based payments

Decrease in trade and other receivables
(Increase) in trade and other payables

Cash flow (used in) operating activities

5. Staff costs

Wages and salaries
Social security costs
Share based payments

2015
US$

2014
US$

(2,455,145)
38,540
27,512

(3,911,113)
41,089
1,052,768

(2,389,093)

(2,817,256)

211,860
(1,928)

246,851
(46,898)

(2,179,161)

(2,617,303)

2015
US$

805,126
197,094
(56,817)

2014
US$

1,014,512
148,049
425,954

945,403

1,588,515

Staff costs include Executive Directors’ salaries, fees, benefits and share-based payments. The Company has no pension commitments
as at the year end dates.

The weighted average monthly number of employees, including Executive Directors and individuals employed by the Company,
are as follows:

Management and administration

6. Share-based payments
Share-based payments are disclosed in note 9 to the consolidated financial statements.

2015

2014

7. Audit fees
Audit fees payable to the Company’s auditors for the audit of the Parent Company financial statements for the year ended 31 March
2015 is US$10,000 (2014: US$10,000).

Hardy Oil and Gas plc Annual Report and Accounts FY20158. Interest and investment income

Bank interest
Interest on inter-corporate loan
Dividend

9. Property, plant and equipment

Cost
At 1 January 2013
Additions
Deletion
At 1 April 2014
Additions
Deletion
At 31 March 2015

Depreciation
At 1 January 2013
Charge for the period
Deletion

At 1 April 2014
Charge for the year
Deletion
At 31 March 2015

Net book value at 31 March 2015
Net book value at 31 March 2014

10. Investments

Carrying value at 1 January 2013

Additional investment during the year
Carrying value at 1 April 2014

Additional investment during the year
Carrying value at 31 March 2015

2015
US$

–
1,117,150
10,866

2014
US$

8,387
1,400,810
15,705

1,128,016

1,424,902

Total US$

213,777
1,015
–
214,792
17,318
–
232,110

117,396
41,089
–

158,485
38,540
–
197,025

35,085
56,307

Shares in
subsidiary
US$

Loan to
subsidiary
US$

5,950,211
(1,403,038)

100,661,878
3,944,331

4,547,173

23,280
4,570,453

104,606,209
2,075,912

106,682,121

Shares in subsidiary represent the investment made as at 31 March 2015 in Hardy Exploration & Production (India) Inc., the wholly
owned subsidiary of Hardy Oil and Gas plc. Full details of this subsidiary are given in note 1(e) of the consolidated financial statements.

Loan to subsidiary at 31 March 2015 consists of US$106,682,121 to Hardy Exploration & Production (India) Inc. This loan is long term
and is repayable on commercial production of the ongoing exploration projects. Interest on these loans is LIBOR plus 1 per cent

11. Trade and other receivables

Other receivables

Prepayments and accrued income

Prepaid expenses – share-based payments

2015
US$

4,663

6,746

–

11,409

2014
US$

41,834

14,203

167,233

223,270

12. Short-term investments

HSBC US$ Liquidity Fund Class-A

HSBC £ Liquidity fund class-A

2015
US$

2014
US$

17,763,242

20,652,379

17,763,245

20,652,380

The above investments are in liquid funds which can be converted into cash at short notice. Fair value of these investments
approximates book values as at 31 March 2015 and 31 March 2014.

13. Share capital

Authorised Ordinary Shares
At 1 January 2013

At 1 April 2014

At 31 March 2015

Allotted, issued and fully paid Ordinary Shares
At 1 January 2013

Restricted shares issued

At 1 April 2014

Restricted shares issued

At 31 March 2015

Number US$0.01
Ordinary shares
“000”

200,000

US$

2,000,000

73,032,706

730,327

115,710

1,157

73,148,416

731,484

182,926

1,830

73,331,342

733,314

Ordinary Shares issued have equal voting and other rights with no guarantee to dividend or other payments.

14. Deferred taxation
Deferred tax analysis:

Differences between accumulated depreciation and capital allowances
Other temporary differences
Group relief availed

Deferred tax (liability)

15. Trade and other payables

Trade payables
Accruals

2015
US$

2014
US$

56,579
1,288,610
(2,305,122)

47,465
1,117,594
(2,420,378)

(959,933)

(1,255,319)

2015
US$

68,151
103,414

171,565

2014
US$

32,734
140,760

173,494

Hardy Oil and Gas plc Annual Report and Accounts FY2015
16. Financial risk management
The Company follows the risk management policy stipulated in note 24 to the consolidated financial statements.

Interest rate risk profile of financial assets
The interest rate risk profile of the financial assets of the Company as at 31 March 2015 is as follows:

2015

US dollars
Pound sterling

Cash and cash equivalents

Fixed rate
financial assets
US$

Floating rate
financial asset
US$

Financial asset no
interest is earned
US$

–
–

–

–
155

155

152,699
105,653

258,352

The interest rate risk profile of the financial assets of the Company as at 31 March 2014 is as follows:

2014

US dollars
Pound sterling

Cash and cash equivalents

Fixed rate
financial assets
US$

Floating rate
financial asset
US$

Financial asset no
interest is earned
US$

–
–

–

–
195

195

83,460
430,090

513,550

Total
US$

152,699
105,808

258,507

Total
US$

83,460
430,285

513,745

Financial asset include cash and deposits and the floating interest rates are based on the base rate of the relevant central bank.

Currency exposures
The currency exposures of the monetary assets denominated in currencies other than US dollars of the Company are as follows:

US dollars

Pound sterling
in equivalent US$

2015

2014

105,808

430,283

Foreign exchange loss recognised on account of exchange rate for the year ended 31 March 2015 is US$36,162 (2014: Gain US$59,104)

17. Financial instruments
Book values and fair values of the Company’s financial assets and liabilities as follows:

Financial assets

Primary financial instruments

Short-term investments
Cash and short-term deposits
Trade and other receivables

Book value
2015
US$

Fair Value
2015
US$

Book value
2014
US$

Fair Value
2014
US$

17,763,245
258,507
11,409

20,652,380
513,745
223,270

18,033,161

21,389,395

All of the above financial assets are current and unimpaired as at 31 March 2015.

Financial liabilities

Primary financial instruments

Accounts payable

Book value
2015
US$

Fair Value
2015
US$

Book value
2014
US$

Fair Value
2014
US$

(171,565)

(173,494)

All of the above financial liabilities are current as at 31 March 2015.

18. Other financial commitments under operating leases
The Company has entered into commercial leases for land and building and office equipment. These leases have an average life of one
to five years and there are no restrictions placed on the lessee by entering into these leases. The minimum future lease payments for the
non-cancellable operating leases are as follows:

Land and buildings
One year

Two to five years

2015
US$

2014
US$

15,041

–

44,898

17,259

19. Related party transactions
a) The Company’s wholly owned subsidiary is Hardy Exploration & Production (India) Inc. The following table provides the details of

balances outstanding with subsidiary companies at year end dates:

Amount owned from subsidiary undertakings

2015
US$

2014
US$

106,682,121

104,606,209

b) The following table provides the details of the transactions with subsidiary companies all of which were carried out at an arm’s

length basis:

Inter company interest income

2015
US$

2014
US$

1,117,150

1,400,810

Hardy Oil and Gas plc Annual Report and Accounts FY2015Reserves and Resources

Due to limited drilling activity in 2012 and the uncertainty surrounding the recommencement of production in the PY-3 asset, the
Company has taken the decision to postpone the updating of a competent person’s report until further data is acquired. The estimates
provided in the Company’s 2011 CPR are provided below.

Reserves (Proven Plus Probable)
Net PY-3 oil production from 31 December 2010 to 31 December 2012 was 129 mmbl.

RESERVES (Proven + Probable)1,3

PY-32

Total reserves (Proven + Probable)

Producing

Oil

mmbbl

31 December 2010

Gross

15.1

Net4

2.1

1 The GCA has used the Petroleum Resources Management System published by the Society of Petroleum Engineers, World Petroleum Council, American Association

of Petroleum Geologists and Society of Petroleum Evaluation Engineers in March 2007 (SPE PRMS) as the basis for its classification and categorisation of hydrocarbon volumes.
2 On 19 April 2007, the PY-3 joint venture management committee had approved gross expected ultimate 2P oil Reserves of 44.4 mmbbl. As of 31 December 2010 the field

had produced 24.1 mmbbl giving 2P oil Reserves of 20.3 mmbbl, about 5 mmbbl higher than the 2P estimate by GCA.

3 The Company has filed the GCA Competent Persons Report (March 2011) with the Directorate General of Hydrocarbons, of the Ministry of Petroleum and Natural Gas, of

the Government of India (DGH).

4 Net entitlement reserves are reserves based on Hardy’s entitlement of cost oil plus a share of profit oil.

Contingent Resources (2c)
Net 2C gas Contingent Resources are BCF.

GS-01

CY-OS/22, 3

GS-01

Total Contingent Resources1 (2C)

B1 (Dhirubhai 33)

Ganesha-1

B1 (Dhirubhai 33)

Gas

Oil

Gas

Oil

bcf

mmbbl

bcf

mmbbl

31 December 2010

Gross

83.0

130.0

1.9

213.0

1.9

Net

8.3

97.5

0.2

105.8

0.19

1 GCA has used the Petroleum Resources Management System published by the Society of Petroleum Engineers, World Petroleum Council, American Association of Petroleum

Geologists and Society of Petroleum Evaluation Engineers in March 2007 (SPE PRMS) as the basis for its classification and categorisation of hydrocarbon volumes.

2 With respect to Ganesha-1 (CY-OS/2) non-associated natural gas discovery, in 2010 the Group formally commenced arbitration proceedings pursuant to dispute resolution

provisions of the governing PSC regarding a licence extension request.
In the event of a commercial development of a discovery, ONGC has the option to back-into the CY-OS/2 licence at an interest of 30 per cent.

Prospective Resources
Net Best Estimate Risked Prospective Resources are 494 BCF

Risked Prospective Resources (Best Estimate) 1, 2

CY-OS/23, 4

GS-01

Total Risked Prospective Resources

(Best Estimate)1, 2

Prospects

Gas

bcf

31 December 2010

Gross

113

142

255

Net

1 Aggregated risked Prospective Resources have been derived by Hardy and are not aggregated or provided as risked volumes by GCA.
2 The GCA has used the Petroleum Resources Management System published by the Society of Petroleum Engineers, World Petroleum Council, American Association

of Petroleum Geologists and Society of Petroleum Evaluation Engineers in March 2007 (SPE PRMS) as the basis for its classification and categorisation of hydrocarbon
volumes.

3 With respect to Ganesha-1 (CY-OS/2) non-associated natural gas discovery, in 2010 the Group formally commenced arbitration proceedings pursuant to dispute resolution

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional Information

Asset Description

Block CY-OS 90/1 (PY-3): Oil Field (HEPI 18 per cent interest – Operator)
The PY-3 field is located off the east coast of India, 80 km south of Pondicherry in water depths between 40 m and 450 m. The Cauvery
Basin was developed in the late Jurassic/early Cretaceous period and straddles the present-day east coast of India. The licence, which
covers 81 km2, produces high quality light crude oil (49° API).

Block GS-OSN-2000/1 (GS-01): Appraisal (HEPI 10 per cent interest)
In 2011, the GS-01 joint venture secured the GOI’s approval for a DOC proposal for the Dhirubhai 33 discovery (GS01-B1, drilled in
2007) which flow-tested at a rate of 18.6 mmscfd gas with 415 bbld of condensate through a 56/64 inch choke at flowing tubing head
pressure of 1,346 psi. The GS-01 licence is located in the Gujarat-Saurashtra offshore basin off the west coast of India, northwest of the
prolific Bombay High oil field, with water depths varying between 80 m and 150 m. The retained discovery area covers 600 km2.

Block CY-OS/2: Appraisal (HEPI 75 per cent interest – Operator)
Hardy is the operator of the CY-OS/2 exploration block and holds a 75 per cent participating interest1, through its wholly owned
subsidiary Hardy Exploration & Production (India) Inc and Gas Authority of India Limited (GAIL) holds the remaining 25 per cent
participating interest. The block is located in the northern part of the Cauvery Basin immediately offshore from Pondicherry, India and
covers approximately 859 km2. The licence comprises of two retained areas with the Ganesha-1 natural gas discovery located in the
northern area, which comprises an area of approximately 300 km2.

Ganesha-1 – The natural gas discovery Ganesha-1, announced in January 2007, was drilled to a depth of 4,089 m, encountering
a sandstone reservoir within the Cretaceous section. The well flow tested at a peak rate of 10.7 mmscfd. The Company published a
competent person report, prepared by Gaffney, Cline & Associates, dated March 2011, which estimates gross 2C Contingent
Resources of approximately 130 BCF.

A brief summary of the Hon’ble Tribunal’s award is provided below;

Dispute – Hardy along with GAIL and Oil & Natural Gas Corporation (ONGC) are a party and operator to a Production Sharing Contract
(PSC) for the CY-OS/2 block. Hardy holds 75 per cent participating interest in the block. Hardy and GAIL declared a gas discovery on
8 January 2007 which discovery qualified as Non Associated Natural Gas (NANG) under the terms of the PSC. The Government of
India, Ministry of Petroleum and Natural Gas (MOPNG) however, stated that the discovery being oil and the commerciality of the block
not having been declared within 24 months from the date of the notification of the discovery, the block stood relinquished. Hardy had
disputed the characterisation of the discovery as oil and the consequential relinquishment.

Hon’ble Tribunal – This dispute was referred to Arbitration under the PSC to a Tribunal consisting of 3 Arbitrators who were former
Chief Justices of India. The Hon’ble Tribunal passed the award on 2 February 2013 at Kuala Lumpur, Malaysia.

Award summary – The Hon’ble tribunal has awarded and directed as follows:
a) The Ganesha-1 discovery made by Hardy and GAIL is NANG;
b) The order of relinquishment by the MOPNG was illegal, being on the erroneous impression that the discovery was oil;
c) That the parties shall be immediately relegated to the position in which they stood prior to the order of relinquishment and the block

shall be restored to Hardy and GAIL;

d) Hardy shall be entitled to a period of three years from the date on which the block is restored to it, to carry out further appraisal;
e) MOPNG shall pay to Hardy and GAIL interest at the simple rate of 9 per cent per annum on the amount of Rs. 5.0 billion spent by them

on the block, from the date of relinquishment till the date of the award (as at 31 December 2013 – US$22.2 million net to Hardy).

f) From the date of award interest will accrue at a rate of 18 per cent per annum on the amount of Rs. 5.0 billion until such time as the

block is restored to the parties (as at 31 March 2015 – US$45.6 million net to Hardy).

In the event of a declaration of commerciality, the Government of India’s nominee is entitled to assume a 30 per cent participating interest in the block. As a result Hardy’s
participating interest would be 52.5 per cent.

Block KG-DWN-2003/1 (D3): Exploration (HEPI 10 per cent interest)
As previously announced on 23 December 2014, the D3 block was relinquished by the Joint Venture. This decision was taken after
careful consideration of overall prospectivety of the block, access restrictions to over a third of the license area, GOI natural gas pricing
policy and potential liquidated damages due to unfulfilled minimum work programme.

Situated in the Krishna Godavari Basin, a prolific petroleum province on the East coast of India, the D3 exploration licence
encompassed an area of 3,288 km2, in water depths of 400 m to 2,200 m, and is located approximately 45 km offshore. The D3 block
was operated by Reliance while BP and Hardy held participating interests of 30 per cent and 10 per cent respectively. Four consecutive
gas discoveries have been made via the Dhirubhai 39, 41, 44 and 52 (KGV-D3-A1, B1, R1 and W1) exploration wells. The joint venture
had acquired approximately 3,250 km2 of 3D seismic data over the block.

Hardy Oil and Gas plc Annual Report and Accounts FY2015Definitions and Glossary of Terms

%:
$:
tCO2e:
tCO2e/FTE:
2D/3D:
2P:
AGM:
AIM:
AOGO:
API°:
bbl:
bbld:
bcf:
Board:
BP:
the Code:
the Company:
Contingent Resources:

CNG:
CPR:
CY-0S/2:
D3:
D9:
DOC:
DGH:
Dhirubhai 33:
Dhirubhai 39:
Dhirubhai 41:
Dhirubhai 44:
Dhirubhai 52:
ExSop:
FFDP:
FRC
FY:
GAIL:
Ganesha:
GCA:
GDP:
GOI:
the Group:
GS-01:
Hardy:
HC:
HDY:
HEPI:
HSE:
IFRS:
IPO:
ISA:
JA:
KG Basin:
km:
km2:

percent
United States dollars
Tonnes of carbon dioxide equivalent
Tonnes of carbon dioxide equivalent for full time equivalent
Two dimensional/three dimensional
Proven plus probable
Annual General Meeting
Alternative Investment Market of the LSE
Association of oil and gas operators
American Petroleum Institute gravity
barrel
barrel per day
billion cubic feet
The Board of Directors of Hardy Oil and Gas plc
BP plc
Hardy’s Code of Business Conduct
Hardy Oil and Gas plc
Those quantities of petroleum estimates, as of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are not currently considered to be
commercially recoverable due to one or more contingencies
Compressed natural gas
Competent persons report
Offshore exploration licence CY-0S/2 located on the east coast of India
Offshore Licence KG-DWN-2003/1 awarded in NELP V
Offshore Licence KG-DWN-2000/1 awarded in NELP III
declaration of commerciality
Directorate General of Hydrocarbons
Gas discovery on GS-01-B1 well
Gas discovery on KGV-D3-A1 well
Gas discovery on KGV-D3-B1 well
Gas discovery on KGV-D3-R1 well
Gas discovery on KGV-D3-W1 announced on 31 August 2010
a structured option plan
Full field development plan
Financial Reporting Council
Financial year ended 31 March
Gas Authority of India Limited
Gas discovery on Fan-A1 well located in CY-OS/2
Gaffney, Cline & Associates Ltd
Gross Domestic Product
Government of India
The Company and its subsidiaries
Offshore Licence GS-OSN-2000/1 awarded under NELP II
Hardy Oil and Gas plc
High Court
LSE trading symbol for the Company
Hardy Exploration & Production (India) Inc.
Health, safety and environment
International Financial Reporting Standards
Initial public offering
International Standards on Auditing
Joint Arrangement
Krishna Godavari sedimentary basin comprising an area on the south east India continental shelf
Kilometre
Kilometre squared

Hardy Oil and Gas plc Annual Report and Accounts FY2015Strategic ReportGovernanceFinancial StatementsAdditional InformationDefinitions and Glossary of Terms continued

KPI:
LSE:
LNG:
LTI:
m:
Management Committee:

MC:
mmscfd:
mmscmd:
mmbbl:
mmbtu
MOPNG:
MOD:
MWP:
NANG:
NCV:
NELP:
OC:
ONGC:
OPEC:
Operating Committee:

Ordinary Share:
Prospective Resources:

PSC:
psi:
PY-3:
Reliance:
Rs.:
scf:
scfd:
TRI:
UK:
The UK Code:
UMWP:
US:
US$:
WAEP:

Key performance indicator
London Stock Exchange plc
Liquefied natural gas
Long-term incentives
Metre
As per India PSCs the Management Committee comprises representatives of each participating interest
holder, DGH and the Ministry of Petroleum and Natural Gas of India
Management Committee
Million standard cubic feet per day
Million standard cubic metres per day
Million stock tank barrels per day
Million British thermal units
Ministry of Petroleum and Natural Gas
Ministry of Defence
minimum work programme
non-associated natural gas
Net calorific value
New Exploration Licensing Policy of the Ministry of Petroleum and Natural Gas of India
Operating Committee
Oil and Natural Gas Corporation Limited
Organization of the Petroleum Expanding Countries Percent
As per India PSCs the Operating Committee comprises representatives of the various participating
interest holders in the licence
The Ordinary Share of US$0.01 each in the capital of the Company
Those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from
undiscovered accumulations
Production sharing contract
Pounds per square inch
Offshore Licence CY-OS-90/1
Reliance Industries Limited
Indian rupee
Standard cubic feet
Standard cubic feet per day
Total recordable injuries
United Kingdom
UK Corporate Governance code 2014
Unfinished minimum work programme
United States of America
United States dollars
Weighted average exercise price

Hardy Oil and Gas plc Annual Report and Accounts FY2015Company Information
Directors and Advisors

Hardy Oil and Gas plc
16 North Silver Street
Aberdeen AB10 1RL
Tel: +44 (0) 1224 612900
Fax: +44 (0) 1224 633995
Email: ir@hardyoil.com
Website: www.hardyoil.com

Board of Directors
Alasdair Locke (Chairman)
Ian MacKenzie (Chief Executive Officer)
Peter Milne (Senior Non-Executive)
Pradip Shah (Non-Executive)

Executive Officer
Richard Galvin (Treasurer & Corporate Affairs Executive)

Hardy Exploration & Production (India) Inc.
5th Floor, Westminister Building
108, Dr Radhakrishnan Salai
Chennai, India, 600 004
Phone: +91 44 284 71990
Fax: +91 44 284 71064
Email: info@hardyoil.co.in

Directors of HEPI
Ian MacKenzie (President and Chief Executive Officer)
Richard Galvin (Treasurer)
T.K. Ananth Kumar (Non-Executive Director)

Executive Officers
Sankalpa Mitra (Senior Vice President Production of HEPI)
Satya Sai (Vice President Geoscience of HEPI)

Auditors
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London, EC4Y 8EH

Broker
Arden Partners plc
125 Old Broad Street
London, EC2N 1AR

Financial PR
Tavistock Communications
131 Finsbury Pavement
London, EC2A 1NT

Company Secretary
Richard Vanderplank LLB
Registered Office
Fort Anne
Douglas, Isle of Man, IM1 5PD

Principal Bankers
HSBC Holdings Plc
8 Canada Square
London, E14 5HQ

Barclays Bank Plc
54 Lombard Street
London, EC3P 3AH

UK Solicitors
Wragge Lawrence Graham & Co
4 More London Riverside
London, SE1 2AU

Pinsent Masons LLP
30 Crown Place
Earl Street
London EC2A 4ES

Isle of Man Legal Advisor
Cains Advocates Limited
Fort Anne
Douglas, Isle of Man, IM1 5PD

Registrars
Cains Fiduciaries Limited
Fort Anne
Douglas, Isle of Man, IM1 5PD

CREST Agent
Computershare Investor Services (Channel Islands) Limited
Ordnance House
31 Pier Road, St. Helier
Jersey, JE4 8PW

Hardy Oil and Gas plc
16 North Silver Street
Aberdeen AB10 1RL
www.hardyoil.com

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