Hardy Oil & Gas PLC Annual Report 2018

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FY2018 Annual Report · Hardy Oil & Gas PLC

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Hardy Oil and Gas plc

Annual Report and Accounts
FY2018

Contents

Strategic Report

Financial Statements

Additional Information

Reserve and Resources .............................. 83
Asset Description ........................................ 84
Definitions and Glossary of Terms .............. 85
Company Information ................................. 87

Contents ................................................... IFC
Strategic Report Divider page .................... 02
Summary FY2018 ....................................... 04
Business Model ........................................... 06
Chairman’s Statement ................................. 08
Chief Executive Officer’s Review ............... 10
Market Overview ......................................... 12
Operations ................................................... 14
Financial Review .......................................... 18
Key Performance Indicators ....................... 20
Principal Risks and Uncertainties ............... 21
Corporate Responsibility Summary ............ 24

Governance

Governance Divider page ........................... 26
Board of Directors ....................................... 28
Management Committee ........................... 29
Governance Report ..................................... 30
Audit Committee Report ............................. 34
Directors’ Remuneration Report ................. 37
Nomination Committee Report ................... 47
Directors’ Report ......................................... 48

Financial Statements Divider page ............. 50
Independent Auditor’s Report ..................... 52
Consolidated Statement
of Comprehensive Income ......................... 56
Consolidated Statement
of Changes in Equity.................................... 57
Consolidated Statement
of Financial Position .................................... 58
Consolidated Statement of Cash Flows ..... 59
Notes to the Consolidated
Financial Statements ................................... 60
Parent Company Statement
of Changes in Equity.................................... 75
Parent Company Statement
of Financial Position .................................... 76
Parent Company Statement
of Cash Flows .............................................. 77
Notes to the Parent Company
Financial Statements ................................... 78

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

Our 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

www.hardyoil.com

Please visit our website
for more information:
www.hardyoil.com

Our key objectives this year

The enforcement of the
CY OS/2 award

Realise production from
our asset portfolio

Returning value
to shareholders

An arbitration tribunal has ordered the GOI to
reinstate the CY-OS/2 exploration licence to
Hardy and pay certain compensation. India's
Supreme Court is hearing an appeal by the
GOI. Hardy has filed an execution petition
in the Delhi HC and initiated confirmation
proceedings in the US and UK.

The PY-3 RFFDP has been unanimously
recommended by the operating committee
along with an extension application which is
being reviewed by MOPNG. The RFFDP is
projected to realise oil production of up to 7,000
bbl per day and recover 12 million bbls of oil.

Hardy has in place clearly defined strategies
to achieve our key objectives. The successful
implementation of these strategies is expected
to deliver new resources to facilitate the
expansion of the Company’s upstream
portfolio and return value to shareholders.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018

Strategic Report

Pondicherry, India

Hardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

This section of the report details the
progress of the Company throughout
the year and where we are with the
ongoing litigation with the Union of India

Summary FY2018 ........................................ 04
Business Model ............................................ 06
Chairman’s Statement .................................. 08
Chief Executive Officer’s Review ................. 10
Market Overview ........................................... 12
Operations ..................................................... 14
Financial Review ........................................... 18
Key Performance Indicators ......................... 20
Principal Risks and Uncertainties ................ 21
Corporate Responsibility Summary............. 24

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Strategic ReportGovernanceFinancial StatementsAdditional Information
04

Summary FY2018

Hardy Oil and Gas plc (LSE: HDY), the
oil and gas exploration and production
company focused in India, reports final
results for the year ended 31 March 2018

Summary

CY-OS/2

PY-3

GS-01

Progress was made in our PY-3 oil field
asset wherein we were able to establish
a consensus regarding a development plan
for the field. This achievement facilitated the
submission of an extension application for the
PY-3 field Production Sharing Contract by up
to 10 years.

Cash and short-term investments
at 30 Sept 2018

$9.2 million

Total comprehensive loss ($ million)

4.7

FY18

FY17

FY16

4.7

9.2

16.8

The Government of India’s (GOI) appeal
of the CY-OS/2 international arbitration award,
in favour of Hardy (the Award), continued.
The Award entitles Hardy to further time to
appraise a natural gas discovery located within
the CY-OS/2 block and to compensation.
On 1 May 2018 the Supreme Court of India
two-member bench referred the matter to a
larger bench. We remain resolved to see off
all legal challenges put forward by the GOI,
whether in India or in other jurisdictions in
which we elect to execute or confirm this
unanimous international arbitration award.

Financial

Total comprehensive loss of $4.7 million
for FY2018 compared to a loss of $9.2 million
for FY2017. The loss is attributable primarily
to general and administrative expenditure
which included a significant increase in
legal expenses. In FY2017 the Group
wrote down $3.0 million of property, plant
and equipment associated with PY-3 and
$4.5 million of deferred tax assets and
reversed the decommissioning provision by
$0.8 million. Cash and short-term investments
at 31 March 2018 amounted to $9.2 million;
Hardy has no debt.

Read the full Financial Review
on pages 18 to 19

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportHardy Oil and Gas plc Annual Report and Accounts 2018 FY2018

www.hardyoil.com

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Outlook

CY-OS/2

The GOI Supreme Court hearings are expected
to recommence in August of this year and
may continue into 2019. We will continue legal
process to enforce the Award in the US and
the UK.

PY-3

GS-01

A Revised Full Field Development Plan
(RFFDP) was unanimously agreed among
the PY-3 partners. The RFFDP is currently
under review by the Directorate General of
Hydrocarbons and we will start the tendering
process to recommence production once we
have secured the MC approval for the RFFDP
and commensurate budgets and subsequent
confirmation of the GOI sanctioning of an
extension to the PY-3 PSC.

If we can conclude the acquisition process,
we will either need to explore alternative
development plans or trust that the GOI’s
policy to allow free market pricing will
be realised.

The Group’s primary objective remains the
enforcement of the CY-OS/2 Award, which will
deliver new cash resources to expand our portfolio
within or outside India. Having secured unanimous
approval from the PY-3 uJV partners, we will
be aiming to secure Management Committee
approval of the PY-3 RFFDP, the regularisation
of past and present budgets and the receipt
of an extension of the PY-3 PSC. Achieving
this will create a clear path to realising the
recommencement of production from PY-3.

Business Model

The assets in the Group’s portfolio are, to varying degrees, involved in litigation
of disputes. As a result, the Group’s activities, in the short-term, are not
necessarily focused on those described below. It remains the Group’s
long-term objective to undertake activities commensurate with the business
model described herein

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Obtaining
exploration
rights
(1–3 years)

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1. 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 Open Acreage Licensing Policy (OALP)/
Hydrocarbon Exploration Licensing Policy (HELP), which are
competitive closed bid processes held periodicaly.

(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)

2. 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.

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Appraisal
(2–5 years)

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3. 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. Markets to monetise the
discovered hydrocarbons are also identified at this time.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

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

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Return
profits to
shareholders

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Production
optimisation and
enhanced recovery

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HARDY FOCUS
5. Monitor production and performance, identify
viable enhanced recovery techniques
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.

HARDY FOCUS
4. Finalise optimal development plan, implement plan and
commence production
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.

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Development
(3–10 years)

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Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information08

Chairman’s Statement

During the year ended 31 March 2018 (FY2018)
we spent considerable time and resources
disputing the Government of India’s (GOI) Special
Leave Petition (SLP) filed in the Supreme Court of
India (SC), wherein they are disputing a previous
Delhi High Court judgment that Indian courts
do not have jurisdiction to hear an appeal of the
CY-OS/2 arbitration award (the Award). The Award
entitles Hardy Exploration & Production (India) Inc
(HEPI) to further time to appraise a natural gas
discovery located within the CY-OS/2 block and
to compensation for being deprived of the benefit
of our investment in the block. On 1 May 2018
the SC two-member bench referred the matter to
a larger bench. We are clearly disappointed with
this action as it results in further delay. We remain
resolved to see off all legal challenges put forward
by the GOI, whether in India or in other jurisdictions
in which we elect to execute or confirm this
unanimous international arbitration award.

We are delighted with the progress made in
our PY-3 oil field asset, wherein we were able to
establish a consensus regarding a development
plan for the field. This achievement facilitated the
submission of an extension application for the
PY-3 field Production Sharing Contract by up
to 10 years.

We have in place clear plans for all
our assets. Our foremost objective,
the enforcement of the CY-OS/2
Award, will deliver new resources
to the Group

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

Governance
The Board composition remained constant
throughout the year. Further details of the
Board’s activities this year can be found in the
Corporate Governance section of this report.
The Group’s near-term principal risks remain
the timing or execution of planned activities
may not commence as forecast; the possible
relinquishment of appraisal acreage; liabilities
related to ongoing disputes; and costs associated
with noted disputes.

In accordance with provision C.2.2 of the 2016
UK Code, the Directors have assessed the
prospects of the Group over a longer period than
the 12 months required for the “Going Concern”
statement. The Board conducted this review for
a period of three years to 31 March 2021.

Management has demonstrated its commitment
to achieve our objectives, notwithstanding the
actions being adopted by the GOI regarding the
appeal of the CY-OS/2 Award, and those of the
uJV partners of PY-3. Management’s continued
resilience under these challenging circumstances
is to be commended.

Objectives and outlook
Our foremost objective, the enforcement of the
CY-OS/2 Award, will deliver new resources to
the Group, allowing us to expand our portfolio of
upstream oil and gas assets and resume activity
consistent with our business model of being a
full cycle oil and gas producer. Our other near-
term priorities remain the recommencement of
production from the PY-3 oil field, enforcing our
rights to recovery amounts due from uJV partners
and disputing various claims against HEPI.

Alasdair Locke
Chairman
7 June 2018

Strategy
The Group’s long-term strategy is to be an active
participant in the upstream oil and gas industry,
realise value from our current India focused portfolio
and pursue new opportunities as they arise. The
successful conclusion to the enforcement of the
CY-OS/2 Award process would provide Hardy
with significant funds to add new upstream assets.
Securing Management Committee (MC) approval
for the PY-3 Revised Full Field Development Plan
(RFFDP) and GOI sanctioning of an extension of
the production sharing contract (PSC) will facilitate
activity to recommence production. We have clear
plans in place for the other assets in our portfolio.
The Group’s short-term strategic objectives are
focused on achieving positive outcomes from
various legal and dispute resolution processes.
Our strategies to mitigate negative outcomes have
been formulated with input and guidance from
various legal experts and advisors.

Market overview
Due to strong global demand, commodity
pricing levels have risen to their highest since
2014. Since January 2017, the beginning of a
crude oil production cut agreement among certain
countries within and outside the Organization of
the Petroleum Exporting Countries (OPEC), the
EIA estimates that global petroleum inventories
have declined at an average rate of more than
0.5 million barrels per day (b/d) and, looking
forward, US and Iran tensions may also contribute
to declines in global production. Industry costs
have stabilised but remain much lower than in
2014. We anticipate some upward pressure on
the cost of upstream services and equipment,
should oil prices remain above $70 per barrel.
India is enjoying a period of robust growth and
continues to rely on the import of oil and gas to
meet its energy requirements. Prime Minister
Modi’s objective to increase domestic production
and improve energy security has resulted in
more proactive measures being taken by the
GOI, including new licensing auction rounds
for discovered small fields (DSF) and an open
acreage licensing policy (OALP).

As at 31 March 2018, the Group had $9.2 million of
cash and short-term investments with no secured
debt. The Group has sufficient resources to pursue
our primary objective to enforce the CY-OS/2
Award. The Group maintains robust internal control
and risk management systems appropriate for a
company of our size and resources.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information10

Chief Executive Officer’s Review

In FY2018 we were successful in
establishing a consensus among the
parties to the PY-3 unincorporated
Joint Venture (uJV) regarding the
future development of the PY-3 field

Introduction
In FY2018 we were disappointed with the progress
of CY-OS/2 litigation as the GOI’s Special Leave
Petition (SLP) before the Supreme Court of India
(SC) was affected by continual adjournments and
delays. After having the matter listed 41 times over
17 months, at considerable cost, the SC bench
decided that it could not decide the matter and
referred the SLP to a larger SC bench. We are fully
committed to seeing through the enforcement of
the CY-OS/2 Award which will provide a significant
capital infusion and allow us to recommence
appraisal of the Ganesha natural gas discovery
within the CY-OS/2 block.

In FY2018 we were successful in establishing
a consensus among the parties to the PY-3
unincorporated Joint Venture (uJV) regarding
the future development of the PY-3 field. This
achievement facilitated our ability to submit
an extension application in accordance with
the GOI extension policy. We continued to fulfil
our obligations as Operator of the PY-3 uJV,
including the development of a Revised Full Field
Development Plan (RFFDP), protecting the uJV
interests against unfounded third-party claims and
other compliance requirements. Notwithstanding
our efforts, the non-operating partners continued
to deny any liabilities for the costs that HEPI has
and continues to incur in fulfilling obligations of the
operator and, as a result, arbitration was initiated.
The arbitration process is expected to conclude by
the end of the calendar year.

Implementing our strategy
Enforcement of the CY-OS/2 Award is our
primary focus. Successful implementation of
the CY-OS/2 Award will create a robust platform for
Hardy to rebuild our portfolio of upstream assets.
The recommencement of production from the
PY-3 field, considering current economic
conditions, remains viable under the PY-3
Operating Committee’s recommended RFFDP,
which is currently under review by the Directorate
General of Hydrocarbons (the technical advisory
arm of the Ministry of Petroleum and Natural Gas).

Operations
On 1 May 2018, the SC bench, comprising
Hon’able R Agrawal and A Sapre, referred the
GOI’s SLP to a larger SC bench. The SLP is
challenging a Delhi HC judgement that the Indian
courts do not have jurisdiction to hear an appeal
of the CY-OS/2 international arbitration as the seat
of arbitration was Malaysia. We are disappointed
with the duration and conclusion of the SC but
remain resolved to challenge the GOI’s appeal to
a larger SC bench. The SC hearings are expected
to recommence in August of this year and may
continue into 2019.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

We continue to believe that:

• The arbitration award, issued by a tribunal,

comprising three former Chief Justices of India,
was unanimous and well-reasoned.

• The dispute resolution articles of the Production
Sharing Contract (PSC) clearly state that an
arbitration award is to be final and binding
on all parties.

In our view, therefore, the GOI’s appeal breaks the
sanctity of the PSC. However, should the Supreme
Court overrule the HC ruling then the merits of the
award will be heard in an Indian High Court. India
is a signatory to the United Nations Convention
on the Recognition and Enforcement of Foreign
Arbitral Awards 1958 (New York Convention). This
allows entities/nation states the right to enforce
foreign arbitral awards in any jurisdiction which is
a signatory to the New York Convention. Statute
of limitation constraints prompted Hardy to initiate
legal proceedings (award confirmation) in the USA
to preserve our rights to enforce the CY-OS/2
Award. In FY2017 we also initiated enforcement of
our legal rights in the UK. Our preference remains
to conclude the process within the framework
of India’s judicial system, which would result in
restoration of the block, enabling Hardy to continue
with an appraisal programme.

The resumption of production from our PY-3 asset
remains a priority. We made good progress in this
regard as an RFFDP was unanimously agreed
among the PY-3 partners and, as a result, we
were able to submit an extension application to
the GOI in accordance with its policy. The RFFDP
provides for recommencing production from an
existing well prior to December 2019; drilling one
development well in the first half of 2020; and tie-in
to the PY-1 infrastructure to export produced gas.
The RFFDP is currently under review by the DGH
and we will commence the tendering process
once we have secured MC approval for the RFFDP
and commensurate budgets and subsequent
confirmation of the GOI sanctioning of an extension
to the PY-3 PSC.

Our plan to acquire a further interest in, and
operatorship of, the GS-01 asset remains in place.
The acquisition process is primarily dependent on
the settlement of liquidated damages relating to
an Unfinished Minimum Work Programme. The
GOI current gas pricing policy stipulates a price
of $3.1 per mmbtu, which does not support the
proposed development plan for Dhirubhai 33. If we
can conclude the acquisition process, we will either
need to explore alternative development plans
or trust that the GOI’s policy to allow free market
pricing needs to be realised.

Health, Safety and Environment (HSE)
As an offshore operator, the Group is committed
to excellent health and safety practices which
are at the forefront of all our activities. Although all
offshore activities were suspended in 2012, our
intention to initiate activities in the future means that
we will continue our commitment to maintain high
HSE standards throughout the organisation.

Financial
The Group is reporting a total comprehensive loss
of $4.7 million for the year ended 31 March 2018
(FY2018) compared to a loss of $9.2 million for the
year ended 31 March 2017 (FY2017). The loss is
attributable primarily to general and administrative
expenditure, which included a significant increase
in legal expenses of over $2.3 million. In FY2017
the Group wrote down $3.0 million of property,
plant and equipment associated with PY-3 and
$4.5 million of deferred tax asset and reversed the
decommissioning provision by $0.8 million.

Conservation of cash resources is paramount
for the Group. Total general and administrative
expenditure increased from $2.6 million in
FY2017 to $5.2 million in FY2018. The increase
is attributable to legal expenditures, which we
project will continue through FY2019 but will fall
significantly in FY20 as ongoing litigation matters
are concluded. The Group projects administrative
expenses for FY2019 to be around $4.5 million.

Cash used in operating activities amounted to
$5.4 million for the year ended 31 March 2018
compared to a cash outflow of $3.2 million for
the year ended 31 March 2017. The Group’s
capital expenditure was marginal and investment
income at $0.4 million, with cash and short-term
investments of $9.2 million as at 31 March 2018
and no debt.

Outlook
The Group’s primary objective remains the
enforcement of the CY-OS/2 Award, which
will deliver new cash resources to expand our
portfolio within or outside India. Having secured
unanimous approval from the PY-3 uJV partners,
we will be aiming to secure Management
Committee approval of the PY-3 RFFDP, the
regularisation of past and present budgets and
the receipt of an extension of the PY-3 PSC.
Achieving this will create a clear path to realising the
recommencement of production from PY-3.

Ian MacKenzie
Chief Executive Officer
7 June 2018

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018

Streategic Report

Market Overview

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

The IFC estimated that global growth was
3.8 per cent which was the fastest since 2011.
Assuming financial conditions remain positive,
the IFC expects, global growth to remain robust in
2018 and 2019. It is expected that the Euro area
economies are set to narrow excess capacity with
support from accommodative monetary policy,
and expansionary fiscal policy will drive the US
economy above full employment. Aggregate
growth in emerging market and developing
economies is projected to firm further, with
continued strong growth in emerging Asia and
Europe and a modest upswing in commodity
exports after three years of weak performance.

Global growth is projected to soften beyond the
next couple of years. Once output gaps close,
most advanced economies are poised to return
to potential growth rates well below pre-crisis
averages, held back by aging populations and
lacklustre productivity. Downside concerns
include a possibly sharp tightening of financial
conditions, waning popular support for global
economic integration, growing trade tensions
and risks of a shift toward protectionist policies,
and geopolitical strains.

Commodity pricing including crude oil and LNG
prices have risen to their highest levels since
2014. Since January 2017, the beginning of a
crude oil production cut agreement among certain
countries within and outside the Organization of
the Petroleum Exporting Countries (OPEC), the
EIA estimate that global petroleum inventories
have declined at an average rate of more than
0.5 million1 barrels per day (b/d). OPEC countries
produced at the organisation’s lowest levels
since April 2015 and below the agreed-upon
production reductions. Oil prices may have also
risen due to the expectation that the reinstitution
of US sanctions on Iran may contribute to
declines in the country’s crude oil production.
Further, strong global oil demand growth has
added to upward price pressures. EIA estimates
that global oil consumption in the first quarter of
2018 was 2 per cent higher than it was in the first
quarter of 2017. Backwardation (when near-term
prices are higher than longer-dated prices) also
increased in April and reached the highest levels
since 2014, indicating high demand for immediate
oil deliveries. The increase in the backwardation
of crude oil prices suggests there is an incentive
for holders of oil in physical storage to sell on
spot markets.

1 IMF https://www.eia.gov/outlooks/steo/marketreview/

crude.php - 8 May 2018.

India
In India, the economy is recovering from temporary
disruptions from the November 2016 currency
exchange initiative and the July 2017 rollout of the
new Goods and Services Tax. Growth rebounded
strongly to 7.2 per cent in the third quarter of
FY2018, up from 6.1 per cent in the first half of the
fiscal year. CPI inflation in FY2018 is estimated at
3.6 per cent, close to the midpoint of the target
band (4 per cent ±2 per cent), reflecting low food
price inflation in the first half of the year.

India’s GDP growth, projected at 6.7 per cent in
FY2018, is projected to recover to 7.4 per cent in
FY2019, making India one of the region’s fastest-
growing economies. The recovery is expected
to be underpinned by a rebound from transitory
shocks as well as robust private consumption.
Medium-term headline CPI inflation is forecast to
remain within but closer to the upper bound of the
Reserve Bank of India’s inflation-targeting band
(4 per cent ±2 percent). Medium-term growth
prospects remain positive, benefiting from key
structural reforms, including the landmark national
Goods and Services Tax reform. The current
account deficit in FY2018 is expected to widen
somewhat but should remain modest, financed
by robust foreign direct investment inflows.

Turning to energy consumption, BP’s Energy
Outlook 2018 projected India’s energy demand
through to 2040 will grow by 165 per cent, nearly
three times the overall non-OECD growth of
61 per cent and it is expected that India will
outpace each of the BRIC countries: China, Brazil,
and Russia. India’s share of global demand is
anticipated to rise to 11 per cent in 2040, from
5 per cent in 2016, accounting for the second
largest share of the BRIC countries. Through the
same period demand for oil and gas is anticipated
to grow by 129 per cent and 185 per cent
respectively. By 2040, oil production is projected
to decline by 24 per cent and domestic natural
gas production will increase by 99 per cent. As a
result, oil imports will rise by 175 per cent and may
account for 65 per cent of the increase in energy
imports, followed by gas (+291%).

According to PNGRB – Vision 2030 Natural Gas
Infrastructure, India’s demand for natural gas is
expected to grow by about 19 per cent per annum
(from 370 mmscmd in 2016 to 516 mmscmd in
FY2023) to meet the ever increasing requirements
of the power, fertiliser and other industries.
The Compressed Natural Gas (CNG) and city gas
sector are also projected to see a quantum growth
in natural gas use. The GOI’s New Domestic

Hardy Oil and Gas plc Annual Report and Accounts FY2018

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Oil Imports

80%

Population

1.3 billion

Energy Consumption CAGR

GDP growth per annum

4.2%

6.7%

Natural Gas Guidelines, benchmarked domestic
natural gas prices to market prices of net
exporting countries. As a result, prices are much
lower than the cost of replacement fuels in India
and up to three times lower than LNG prices
in Asia. The current notified price is $3.1 per
mmbtu based on the net calorific value (NCV)
of the sales gas.

Under the leadership of Prime Minister
Narendra Modi and the Bharatiya Janata Party,
India’s administration has introduced several
proactive and effective policy changes. Hardy
has previously observed that the DGH and
MOPNG are make substantial improvements
in accessibility, accountability, and timeliness,
leading to facilitating constructive solutions to
industry issues. Notwithstanding the positive
steps being implemented, improvements in
many aspects of oversight and regulation of
the country may need improvement to achieve
the country’s stated ambitions. Transparency
International ranked India 81 out of 180 countries
noting that India had one of the highest bribery
rates of all the countries surveyed, where nearly
seven in 10 people, who had accessed public
services, had paid a bribe2. Taxation authorities
and the judiciary have also come under scrutiny
for overreach and ineffectiveness respectively.
The upstream industry continues to be subjected
to retrospective claims for indirect tax demands.
The phased adoption of GST has created
instances of double taxation burdens or absence
of offset credits. It has been reported3 that the
India legal system has more than 22 million legal
cases pending, 6 million of which have been
stuck in the courts for five years or longer. India
has 14 judges per million people compared with
107 in America. HEPI has experienced first-hand
exceptionally protracted and expensive judicial
resolutions due, in part, to the under resourced
and inefficient judicial system. India’s decision
to terminate all bilateral investment treaties is
a noted concern. The GOI ‘s has published a
model treaty which an investor to first exhaust
all judicial and administrative remedies prior to
initiating an arbitration claim. This is generally
seen to dilute the remedies and protections for
foreign direct investors.

2 PEOPLE AND CORRUPTION: ASIA PACIFIC –

GLOBAL CORRUPTION BAROMETER, Transparency
International, March 2017.

3 Justice in India: Dropping the scales - Economist -

May 2016.

Operations

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

Chennai

Ganesha-1
well

CY-OS/2

ARIYALUR-PONDICHERRY
SUB-BASIN

Pondicherry

OIL FIELD

GAS FIELD

Hardy Operator of
Blocks CY-OS/2 and PY-3

PY-1 FIELD

CY-OS/2

PY-3 FIELD

TRANQUEBAR
SUB-BASIN

30 km

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

Health, Safety and Environment
The Group is committed to excellent health and
safety practices which are at the forefront of all
our activities. Although all offshore activities are
currently suspended, maintaining high HSE
standards throughout the organisation remains
core to all our undertakings. The Group’s HSE
policy document is regularly reviewed and
amended as appropriate.

Block CY-OS/2:
Appraisal (Hardy 75 per cent interest – Operator)
HEPI is the Operator of the CY-OS/2 block
which is located offshore India’s East Coast and
encompasses a natural gas discovery, Ganesha.
In 2009 HEPI was informed that the GOI had
deemed the block relinquished, citing expiration of
time to appraise the Ganesha discovery. Since this
time HEPI has relied upon the contractual rights
provided under a Production Sharing Contract. In
accordance with that contract, a tribunal issued
an order concluding that the GOI action was illegal
and required the GOI to reinstate the block. The
GOI has subsequently been attempting to have the
award overturned by the India courts. The GOI’s
request for the Indian courts to hear an appeal of
the tribunal award has been frustrated by the Delhi
HC Division Bench 27 July 2016 judgment which
concluded that India did not have jurisdiction to
hear the GOI appeal. The GOI had appealed this
decision to the Supreme Court (SC) of India, which
was ongoing throughout FY2018.

GOI Appeal
The GOI Special Leave Petition was listed before
the SC bench, comprising Hon’able Judges
Rajesh Kumar Agrawal and Abhay Manohar
Sapre, 41 times over a 17-month period. Following
this protracted and costly process, on 1 May 2018
the India SC bench took the decision not to pass
judgment and instead referred the matter to a
larger SC bench. An extract from the judgment is
provided below:

Prior to the 1 May 2018 order, on 14 March 2018,
the SC bench had issued a Stay Order prohibiting
HEPI from executing the arbitration award.
The order stated that “…as the matter had been
substantially heard and is likely to be decided
very soon...” they deemed it appropriate to stay
the enforcement of the award. Notwithstanding
the assertion articulated in the 14 March order,
the matter was not decided. It is understood
that a new bench may be constituted later in the
year, however it is unclear how long this process
will take.

The table below summarises the extraordinary
actions HEPI has undertaken in India to enforce
its contractual rights provided to it under the
GOI’s PSC:

From the Judgment of THE SUPREME COURT
OF INDIA, CIVIL APPELLATE JURISDICTION,
CIVIL APPERAL NO. 4628 OF 2018

“In our opinion, though, the question regarding
the “seat” and “venue” for holding arbitration
proceedings by the arbitrators arising under the
Arbitration Agreement/International Commercial
Arbitration Agreement is primarily required to be
decided keeping in view the terms of the arbitration
agreement itself, but having regard to the law
laid down by this Court in several decisions by
the Benches of variable strength as detailed
above, and further taking into consideration the
aforementioned submissions urged by the learned
counsel for the parties and also keeping in view the
issues involved in the appeal, which frequently arise
in International Commercial Arbitration matters, we
are of the considered view that this is a fit case to
exercise our power under Order VI Rule 2 of the
Supreme Court 12 Rules, 2013 and refer this case
(appeal) to be dealt with by the larger Bench of this
Court for its hearing.”

Date

Description

01 2009

GOI via DGH issues notice of relinquishment.

05 2010 – 03
2013

The Tribunal of an arbitration process, initiated by the
CY-OS/2 Joint Venture, determined that the relinquishment
was illegal and issued an order for the GOI to reinstate the
block and awarded compensation for denial of investment.

07 2013 – 03
2015

A GOI appeal, in the HC of Delhi (single judge), against
the arbitration award dismissed the appeal based on the
withdrawal of the GOI.

08 2015 – 01
2016

A GOI application, in the HC of Delhi (single judge), seeking
for a review of the HC’s 03 2015 dismissal.

02–06 2016

10 2016 – 04
2018

08 2018 –
present

* Hardy estimate.

A GOI appeal, to the HC of Delhi (two-member bench),
against the arbitration award was dismissed based on the
bench’s judgment that the Seat of arbitration was Malaysia
and as a result Indian courts did not have jurisdiction to
hear an appeal of the merits of the arbitration Award.

A GOI appeal, to the SC of India (two-member bench), of
the HC judgment passed in favour of HEPI in July 2016.
Substantial arguments heard on 17 occasions. On 14
March 2018 the bench issued a Stay order restricting HEPI
from enforcing the award. On 1 May the bench issued an
order referring the matter to a larger SC bench.

As per the SC order of 1 May 2018, the GOI appeal has
been referred to a larger SC bench and the Hon’ble the
Chief Justice of India has been requested to constitute the
appropriate Bench for hearing and disposal of this appeal.

Listings #

Duration
(days)

1,035

738

169

159

570

12*

365*

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information16

Operations continued

Contingent asset
As at 31 March 2018, Hardy’s 75 per cent share
of the compensation awarded by the Hon’ble
Arbitration Tribunal amounted to approximately
$78.2 million.

Background
Hardy is the operator of the CY-OS/2 exploration
block and holds a 75 per cent participating interest.
The block is in the northern part of the Cauvery
Basin immediately offshore from Pondicherry,
India and covers approximately 859 km2.
The Ganesha-1 discovery well was drilled to a
depth of 4,089 m and on testing the well flowed
natural gas at a peak rate of 10.7 mmscfd.

Award summary
Relinquishment by the Ministry of Petroleum and
Natural Gas (MOPNG) of the GOI was illegal;
the unincorporated Joint Venture (uJV) 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; the uJV shall be paid compensation
calculated at the simple rate of 9 per cent per
annum on the amount of Rs. 5.0 billion from the
date of relinquishment till the date of the award;
interest will then accrue at a rate of 18 per cent per
annum on the amount of Rs. 5.0 billion until the
block is restored to the uJV.

Enforcement
HEPI has previously filed an execution petition with
the Delhi HC and this has run in parallel with the
GOI’s appeal. The Delhi HC execution petition has
been continually adjourned due to the ongoing GOI
appeal in the SC. It is expected that the execution
hearings will progress should GOI’s appeal in the
SC be dismissed.

In late July 2017, the Group initiated enforcement
proceedings in the UK’s High Court of Justice.
HEPI had previously initiated Confirmation
proceedings in the Federal Court of Washington
DC, United States of America. These actions have
been initiated to maintain HEPI’s right to enforce
all or a part of the Award in the US and the UK.
The Confirmation proceedings in the Federal Court
of Washington DC have been due since November
2017. To date there has been no indication when
the Federal Court will pass judgment. In July
2017, HEPI initiated Enforcement Proceeding in
the London Commercial High Court of Justice.
The GOI is currently contesting that order in the
UK. HEPI initiated Enforcement Proceedings in
HEPI’s primary objective remains to conclude the
appeal and enforcement process within the Indian
judicial system.

FY2019 Objectives
We will continue to seek the restoration of the
CY OS/2 block to the joint venture in a timely
manner. The SC deferment of judgment to a larger
bench means that the appeal and enforcement
process in India is likely to continue through 2018.
HEPI believes that it has a strong position as the
unanimous international award, passed by three
former Chief Justices of India, is well reasoned.
Hardy intends to 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.

Block CY-OS 90/1 (PY-3):
Oil Field (Hardy 18 per cent interest – Operator)
Operations
The PY-3 field was shut-in in July 2011. Since
then Hardy has been working diligently to establish
a consensus amongst stakeholders regarding
the optimal development of the field with an
objective to recommence production at the
earliest opportunity.

PY-3’s Production Sharing Contract (PSC) is due
to expire in December 2019 and it is eligible for
an extension of up to 10 years. On 29 December
2017, HEPI submitted an extension application,
in accordance with the GOI PSC Extension
Policy No. O-19025/10/2005-ONG-D-V (Part-II)
dated 28 March 2016. The application included,
among other requirements, a Revised Full Field
Development Plan (RFFDP) that has been
unanimously approved by the uJV partners and
has been recommended to the Management
Committee, which includes the GOI. The RFFDP
programme envisions;

• Contracting a floating production, storage and

offloading vessel or equivalent;

• Recommencing production from an existing

well prior to December 2019;

• Drilling one development well in the first half

of 2020; and

• A tie-in to the PY-1 infrastructure to export

produced gas.

After considerable deliberation and debate, the
PY-3 Operating Committee agreed that drilling
in the prospective north-east area of the field
will be reviewed further once production has
recommenced. The RFFDP is currently under
review by the Director General of Hydrocarbons
(DGH). Once the DGH review is complete it is
expected that a Management Committee meeting
will be convened to discuss the adoption of the
RFFDP, to approve the budget for FY2019, and
to recommend the GOI award an extension of the
PSC in accordance with the above noted policy.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

FY2019 Objective
The sequence of events for FY2019 is to:

• Secure MC approval of RFFDP and budgets,
and of a request to GOI for extension of PSC;

• Obtain confirmation of GOI sanctioning of

extension;

• Initiate tendering process;
• Obtain unanimous consent from uJV partners
to award contracts (if required, secure MC
approval of revised estimates); and

• Collect cash-calls from all uJV partners prior to

entering into contracts with vendors.

It is expected that offshore activity could
commence within 9 to 12 months of the
sanctioning of the RFFDP by the Management
Committee. The development plans under
consideration would require funding of more than
the Group’s current cash resources.

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 licence covers
81 km2 and produces high quality light crude oil.
The field has produced over 24.8 mmbbl and
was shut-in in July 2011 due to the expiry of the
production facilities’ marine classification and
absence of approval to extend the contract.

Samson Maritime Limited (Samson) has previously
secured an award, amounting to $5.0 million,
against HEPI for offshore services provided in
the PY-3 field during 2011 and 2012. The full
amount of the award is included in current liabilities.
Samson has subsequently filed an execution
petition with the Madras High Court and secured
an attachment order on HEPI’s Indian based bank
accounts. HEPI has implemented measures to
allow it to continue to settle its liabilities in India and
is seeking partial relief from the attachment order.
The order issued by the Madras High Court was
broadly worded and, as a result, the State Bank
of India (SBI) and HEPI have sought clarification
regarding the status of the PY-3 site restoration
fund account (SRF). It is the SBI and HEPI’s view
that this account is a special scheme between the
PY-3 uJV and the GOI and is not legally attachable.
Samson, SBI and HEPI have made their filings and
the matter is under consideration by the Madras
High Court.

In March 2017, Hardy initiated arbitration with
the uJV partners to collect outstanding amounts
associated with expenditures incurred by HEPI
in fulfilling its responsibilities as operator of PY-3,
including the amounts due to Samson. The uJV
partners have made several counter claims for
substantial damages they attribute to alleged gross
negligence and wilful misconduct. In addition,
ONGC is claiming reimbursement of cess and
royalty paid since commencement of production
that was in excess of their participating interest.
The ONGC claim states that HEPI, as operator,
was negligent in not collecting the amounts from
TPL and HOEC. We believe that all counter claims
are baseless and without merit. The dispute
resolution process is expected to conclude
by the end of 2018.

Block GS-OSN-2000/1 (GS-01):
Appraisal (Hardy 10 per cent interest)
Operations
The matter of possible liquidated damages
associated with the unfinished minimum work
programme (UMWP), which has been under
consideration since 2009, continued to be
deliberated by the GOI and the operator. It is our
understanding that this is a common matter for
NELP I to NELP VII licences starting from 2005 to
2016, including the Group’s D9 licence which was
relinquished in 2012. HEPI and other operators
have been working with industry associations to
develop a policy to facilitate a resolution. The GS-
01 uJV has conveyed to the GOI that this matter
needs to be closed out prior to the progression
of further activity on the block. The Group has
previously provided for $0.3 million of liquidated
damages, which is HEPI’s share of the Operator’s
estimate.

Objective
Finalise the quantum of liquidated damages
outstanding prior to concluding discussions with
our partner to acquire its participating interest and
the Operatorship of the block. Following this, a
priority will be to revisit a proposed FDP taking into
consideration the prevailing commodity pricing and
cost environment.

Background
In 2011, the GS-01 joint venture secured the GOI’s
agreement for the declaration of commerciality
(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 in the Gujarat-Saurashtra offshore basin
off the west coast of India, north west of the prolific
Bombay High oil field, with water depths varying
between 80 m and 150 m. The retained discovery
area covers 600 km2.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information18

Financial Review

In the year ended 31 March 2018, the Group recorded a total
comprehensive loss of US$4.7 million and at year end had total
cash and short-term investments of US$9.2 million with no debt

Summary statement

Comprehensive income

Financial position

Statement of cash flows

Administrative expense $m

Non-current assets $m

Cash flow (used in) operating activities $m

(5.2)

FY2018

FY2017

FY2016

56.2

(5.4)

(2.6)

(4.0)

(5.2)

FY2018

FY2017

FY2016

56.2

55.9

63.0

FY2018

FY2017

FY2016

(5.4)

(3.2)

(3.7)

Interest and investment income $m

Current assets $m

Capital expenditure $m

0.5

FY2018

FY2017

FY2016

0.0

Taxation $m

0.0

FY2018

0.0

FY2017

FY2016

14.6

(0.3)

0.5

0.4

FY2018

FY2017

FY2016

14.6

19.3

FY2018

FY2017

21.8

FY2016

0.0

(0.3)

(0.4)

Non-current liabilities $m

Financing activity $m

3.9

FY2018

FY2017

FY2016

(4.5)

(5.2)

0.5

3.9

4.5

FY2018

FY2017

FY2016

5.2

0.5

0.4

0.3

Total comprehensive loss $m

Current liabilities $m

Cash and short-term investments $m

(4.7)

FY2018

FY2017

FY2016

(4.7)

(9.2)

9.1

FY2018

FY2017

FY2016

(16.8)

9.2

9.1

8.1

7.8

FY2018

FY2017

FY2016

9.2

14.5

17.6

Key of change

Increased

Remained stable

Decreased

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

Statement of cash flow
Cash flow (used in) operating activities
Cash used in operating activities of $(5.2) million
comprised primarily administrative costs with the
balance of $(0.3) million relating to working capital.

Capital expenditure
The Company did not incur any material capital
expenditures in the year. A $0.3 million outflow is
associated with the rolling up of interest accrued on
a deposit committed to the site restoration of the
PY-3 field.

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

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

Statement of financial position
Non-current assets
Non-current assets primarily represent successful
or work-in-progress exploration expenditure.
This includes an intangible asset of $51.1 million
attributable to CY-OS/2 and an Indian Rupee
denominated site restoration deposit of $5.1 million
relating to PY-3. The Company regularly reviews
the underlying assumptions used to support the
carrying value of the assets.

Contingent asset
The CY-OS/2 Arbitration Award, in favour of HEPI,
also entitles HEPI to compensation of $78.2 million
as at the balance sheet date in addition to the
reinstatement of the block. The compensation is
likely to be subject to tax.

Current assets
The Group’s cash and short-term investments
reduced by $5.3 million to $9.2 million. This is
primarily due to the payment of administrative
expenses. Trade and other receivables of
$4.7million represents amounts due to be
recovered from joint arrangements operated by
HEPI regarding PY-3 and CY-OS/2.

Non-current liabilities
The Group’s non-current liabilities represent a
provision for the decommissioning of the PY-3
field. The provision has been estimated based on
observed long-term industry cost trends. Having
considered prevailing rates for offshore services,
the provision was reduced by $0.6 million.

Current liabilities
Trade and other accounts payable comprises
amounts due to vendors and other provisions
associated with various joint arrangements,
including the award of $4.9 million due to
Samson plus interest accruing thereon.

Statement of comprehensive income
Production cost
Ongoing PY-3 cost of $0.3 million, the write-back
of $0.6 million decommissioning provision and
write-off of $0.3 million of inventory.

Administrative expense
The Group incurred a significant increase in
administrative expenses almost entirely due to an
increase in legal fees. Legal fees and other dispute
related expenditure amounted to $2.9 million.
HEPI’s legal fees were significantly compounded
by the fact that the matter in the SC of India was
listed 41 times over 17 months. Excluding legal
costs, administrative expenditure was $2.3 million,
an increase of $0.3 million from FY2017. The
increase is attributed to an increase in provision
for bad or doubtful debt, the appreciation of GBP
against the dollar and other general inflation.

To date HEPI has incurred $3.5 million in legal
expenditures to dispute the GOI appeal of the CY-
OS/2 Award. Due to the extraordinarily protracted
process in India’s judicial system, HEPI has initiated
enforcement of the award in the US and the UK.
The confirmation process in both jurisdictions has
resulted in additional legal expenditures. HEPI
was also involved in two arbitrations with Aban
Offshore, and the PY-3 uJV partners.

Interest and investment income
The Group realised interest income of $0.5 million
and incurred no finance costs.

Taxation
No current tax is payable for the year ended
31 March 2018. Having consideration for the
outstanding sanctioning of the OC approved
RFFDP and extension of the PY-3 PSC, the
projected tax payable in the future that may be
offset by the Group’s carried forward loss amount
was not recognised in the year. The Group
previously provided for the full write-down of the
deferred tax asset of $4.5 million in FY2017.

Total comprehensive loss
The Group’s decrease in total comprehensive
loss is attributable to absence of write-downs in
FY2018 as compared to the previous years.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information20

Key Performance Indicators

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

The Board periodically reviews the KPIs of the Group, considering 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 Group’s ongoing efforts to achieve the reinstatement of the CY- OS/2 exploration block, the
importance of a positive cash position and our underlying commitment to ensuring safe operations. A summary is provided
in the table below:

Financial
Definition

Relevance

Progress

FY2019 outlook/target

Key activity

Enforcement of the CY-OS/2 Award

Enforcement of the CY-OS/2
Award which provides for
the reinstatement of the
exploration licence and
payment of compensation.

Reinstatement of the
exploration block will permit
the appraisal of the Ganesha
discovery.

Progress – Initial GOI appeal
dismissed in Delhi High Court.
GOI appealed to Supreme
Court of lndia.

Compensation of
approximately $78 million
to significantly improve the
Group’s financial position.

Initiation of confirmation of
award in Washington DC,
USA.

Conclusion of the GOI
Supreme Court appeal
and progress enforcement
proceedings in India.
Confirmation of award
in the US.

Preparation and delivery
of robust representations
in Indian and US courts.

Control of overhead cash flow

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 Group.

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

Maintain current levels.

Close monitoring of all
expenditures and recovery
of uJV partner recharges.

Operational
Definition

Relevance

Progress

FY2019 outlook/target

Key activity

Government sanctioning of PY-3 FFDP and extension of PSC

Management Committee (MC)
approval of an FFDP, including
all technical aspects of the
implementation plan and
required capital and operating
budgets. GOI sanctioning of
PSC extension.

Approval of an FFDP will
provide a tangible milestone
for creating value and mitigate
ongoing or pending disputes
between stakeholders.
Extension of PSC will permit
future value creation activity.

Operating Committee
unanimously recommended
an FFDP in conjunction with
an extension application of
the PSC.

MC approval of FFDP
and GOI sanctioning of
PSC extension.

Satisfy PY-3 partner and GOI
requirements to progress
adoption of FFDP, extension
of PSC and secure MC
budget approval prior to
tending process.

Resolution of litigation

The Company is involved
in a number of litigation
proceedings initiated by third
parties and the Company.
Where reasonably feasible
the Company may seek the
conclusion of disputes in a
timely manner.

Total recordable injuries (TRIs)

Litigation proceedings heavily
detract management from
focusing on value creation
activities. Mitigation of costs
and liabilities.

Several disputed matters
have been progressed or
resolved.

Timely resolution or avoidance
of matters largely dependent
on PY-3 results.

Where practical, approach
counterparts to reach
mutually equitable
conclusion to proceedings.

TRIs include fatalities, lost
time injuries, cases restricted
for work, cases of substitute
work due to injury and
medical treatment cases by
medical professionals. It does
not include any first aid injury.

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

Absence of field activity and
diligent onshore procedures
have maintained no
recordable injuries.

No TRIs.

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

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

Principal Risks and Uncertainties

As an oil and gas exploration and production
group 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

Board
The Group has a systematic approach to risk
identification and risk 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, proactively
mitigate. The risk register is part of a dynamic
database in which new risks may be 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
in 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
FY2019 and established clear policies and
responsibilities to mitigate their possible negative
impact on the business, a summary of which is
provided below:

• The materialisation of contingent liabilities or
unprovided for claims by third parties and
government authorities.

To a certain extent, the materialisation of the
instances listed above can be mitigated by
the reduction of overhead and pursuing legal
avenues to protect the Group’s assets. Further,
most liabilities of a material nature are limited to
the wholly owned subsidiary Hardy Exploration
& Production (India) Inc and the Group’s cash
and short-term investments are held within
Hardy Oil and Gas plc.

The Directors have determined that the
three-year period to March 2021 is an
appropriate period over which to provide its
Viability Statement. This covers the period
when the Group hopes to have an RFFDP
and PSC extension approved as well as clarity
regarding its holdings in CY-OS/2 and GS-01.
The PY-3 development is an asset that may
require additional funding during this period.
In making our assessment, the Directors have
considered the Group’s current cash position,
that no capital is committed, and they have
not considered the receipt of the CY-OS/2
Contingent Asset of $78.2 million.

Viability Statement
In accordance with the provision of section
C.2.2 of the 2016 revision of the UK Code,
the Directors have assessed the viability of
the Group over a three-year period to March
2021, considering the Group’s current position
and the potential impact of the principal risks
documented in this report. Based on this
assessment, the Directors have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities as
they fall due over the period to March 2021.

In making this statement, the Directors have
considered the resilience of the Group, its
current position, the principal risks facing the
business in severe but reasonable scenarios
and the effectiveness of any mitigating actions.
This assessment has considered the potential
impacts of these risks on the business model,
future performance, solvency and liquidity over
the period.

The assessment highlighted that the cash flow
position in the latter half of the three-year period
is projected to fall to a level wherein a funding
deficit is likely to arise in certain circumstances.

These circumstances could include:

• Cash outflow in respect of current

liabilities (including Samson) without
commensurate recovery of debts due
from uJV partners; and

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information22

Principal Risks and Uncertainties

Principal risks areas
The Group constantly monitors the Group’s risk
exposures and reports to the Audit Committee and
the Board on a regular basis. The Audit Committee
receives and reviews these reports and focuses
on ensuring that the effective systems of internal
financial and non-financial controls including the
management of risk are maintained. The results of
this work are reported to the Board which in turn
performs its own review and assessment.

Key risk areas
The risks around our existing business are set out
in more detail on page 23 but the key risk areas
can be identified as being associated with the
following:

Strategic
Making sure we apply the appropriate strategies
in certain situations and ensuring we deliver on
strategic objectives.

Operational
Successfully developing oil and gas through
our production and development assets.

Financial
Prudent financial management seeks to
mitigate the impact of market fluctuations.

Risk management framework

Board

Audit
Committee

Risk Owners

Risk management procedure

Identify

Report

Measure

Monitor

Manage

Risk scale

h
g
H

t
c
a
p
m

w
o
L

Low

Likelihood

High

Board
The Board is responsible for setting the Group's
risk appetite and acceptable risk tolerance and
putting in place a framework for risk management.

Risk Owners
The risks are separated into strategic, operational
and financial categories. Senior management are
assigned responsibility for the identified risks within
the three categories.

Audit Committee
The Audit Committee oversees the framework
for risk management and ensures it is
operating effectively.

Identify
The Group has adopted a risk management
process which provides for a “bottom-up”
approach to the identification and assessment of
risks and uncertainties.

Measure
Management quantify potential value at risk and
prescribe a probability of realisation.

Manage
Mitigation strategies (if possible) are formulate
and individuals are assigned responsibility for the
implementation of such strategies.

Monitor
Management monitor developments in the
underlying assumptions and actives associated
with identified risks and uncertainties. The Board
is provided with a status update at each meeting.
Material developments or changes to identified
risks and uncertainties are reported to the Board
on an ad hoc basis.

Reporting
The Board is provided with a comprehensive
report at least twice yearly. The Board’s overall
assessment of risk and uncertainties comprises
of Management’s input and input from all Non-
Executive Directors.

1 Asset portfolio exclusively in one

geopolitical region

6 Securing approval for further development
of PY-3 including extension of the PSC

2 Prolonged delay in enforcement of

7 PY-3 HSE – status of PY-3 wells

CY- OS/2 Award

3 Arbitration and Litigation – the Group is involved
in a number of disputes with service providers,
uJV partners and Indian tax authorities

4 Cost of litigation

5 Liquidated damages started (LD), unfinished

Minimum Work Programme (MWP)

8 Contractual dispute with uJV partners

9 Enforcement of arbitration award

10 Regulatory and political environment in India

11 Taxation and third-party claims

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Reportwww.hardyoil.com

Key of change

Increased risk

Decreased risk

Remained stable

Risk or uncertainty

Mitigation

Change

Strategic

1. Asset portfolio exclusively
in one geopolitical region

2. Prolonged delay in
enforcement of
CY-OS/2 Award
Financial

3. Arbitration and litigation – the
Group is involved in a number
of disputes with service
providers, uJV partners and
Indian tax authorities

4. Cost of litigation

5. Liquidated damages started
(LD), unfinished Minimum Work
Programme (UMWP)
Operational

6. Securing approval for further
development of PY-3 including
extension of the PSC

7. PY-3 HSE – status of
PY-3 wells

In the short term the Group’s strategy is predominantly influenced by ongoing arbitration
and litigation and the outcomes of such. The Group seeks to mitigate risks inherent with
such litigious matters, however duration is out of the control of the Group and the risk of an
adverse outcome cannot be fully mitigated. It is the Group’s intention to rebuild a portfolio
of upstream oil and gas assets upon positive conclusion of the CY-OS/2 dispute and the
securing of an extension to the PY-3 PSC and approved RFFDP.

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. Further additions to the Group’s portfolio may be considered once tangible progress is
made in our existing portfolio.

Secure high quality and reputable legal counsel. Management of stakeholder expectation. Preserve
and action the right to enforce in other jurisdictions.

Volatility in international crude oil prices and India’s natural gas administered pricing policy
may adversely affect some of the Group’s prospects and projected results from future
operations. Other major financial risks facing the Group could be: financing constraints
for further appraisal and development; cost overruns; and adverse results from ongoing
or pending arbitration and litigation.

The Group has secured high quality, reputable professional advisors and legal counsel in India and other
jurisdictions. Proactive and constructive engagement with uJV partners. Sanctioning of a PY-3 RFFDP
may mitigate several outstanding or pending disputes.

Budget for litigation remains high. Effective management and monitoring of advisory costs. Explore
timely resolution of disputes that are not material and/or strategic in nature.

Monitor through media and dialogue with operator, prepare for possible dispute. Engagement with
industry lobby groups to facilitate formulation of industry wide resolution. A provision has been made
based on management’s assessment of a reasonable outcome.

Offshore exploration and production activities by their nature involve significant risks. Hardy
is the operator of two blocks. However, currently there are no committed plans to undertake
offshore operations. The role of operator of an asset introduces additional responsibilities and
commensurate potential liabilities.

Comply with all criteria outlined in the GOI’s extension policy. Communicate with partners to address
individual interests and agendas. Mitigate expenditures prior to budget approvals.

Four subsea wells were securely shut-in in March 2012. The shut-in of wells has been longer than
expected and, in the absence of an extension of the PSC, full abandonment of the PY-3 field may need
to be initiated.

8. Contractual dispute with
uJV partners

Maintain communication with senior members of uJV partners. In April 2017, Hardy initiated the dispute
resolution procedures provided for under the PY-3 joint operating agreement by instigating binding
arbitration proceedings. PY-3 uJV partners have filed counter claims.

9. Enforcement of
arbitration award

Compliance

Samson Maritime Limited has secured an award against HEPI on PY-3 which is enforceable in India.
Samson has frozen India bank accounts of HEPI. This has resulted in some business disruption and
the Company is seeking various legal remedies. Processes and procedures are in place to mitigate the
impact of enforcement proceedings. The financial institution which maintains the PY-3 Site Restoration
Fund (SRF) has erroneously interpreted a court order securing against various assets of Hardy to include
the uJV’s SRF. All related parties are seeking clarification from the commensurate judicial authority.

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.

10. Regulatory and political
environment in India

Ensure full compliance with all laws, regulations and provision of contracts. Develop sustainable
relationships with government and communities. Actively collaborate with industry groups to formulate
and communicate interests to government authorities.

11. 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 FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information24

Corporate Responsibility Summary

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 behaviour 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.

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
does not tolerate retaliation against an individual
reporting in good faith.

HSE
The Company is committed to excellent health
and safety practices which are at the forefront
of all our activities. Although all offshore activities
are currently suspended, maintaining high HSE
standards throughout the organisation remains
core to all our undertakings.

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 able to
assemble and maintain 100 per cent local staffing
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 to 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.

Greenhouse gas (GHG) emissions
The Group’s total GHG emissions for the period 1
April 2017 to 31 March 2018 have been calculated
as 139 tCO2e which equates to 10.7 tC02e/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 plc’s operational control.

This work is partially based on the country-
specific CO2 emission factors developed by the
International Energy Agency, © OECD/IEA 2017,
but the resulting work has been prepared by Hardy
Oil and Gas and Carbon Smart and does not
necessarily reflect the views of the International
Energy Agency.

Total GHG emissions and the intensity metric
for the reporting period 1 April 2017 to 31 March
2018. Department for Environment Food & Rural
Affairs (2013) Environmental Reporting Guidelines:
Including mandatory GHG emissions reporting
guidance.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic Report
www.hardyoil.com

Our CSR Dashboard

Our HSE Policy

Avoid harm to all personnel involved in
or exposed by its operations

Prevent damages to property and loss
of assets due to accidents

Minimise adverse effects of its
operations on the environment

Respect the interests of neighbours
and the surroundings

We have been fortunate to
develop and achieve 100 per cent
local staffing of our India-based
professionals and staff

Diversity

Employees*

Board

UK – 5

India – 13

Male – 17

Female – 1

UK – 3

India – 1

* Including Non-Executive Directors.

Our Greenhouse gas emissions

Reporting period

FY2018

FY2017

Scope 1
emissions
tCO2e

Scope 2
emissions
tCO2e

Total carbon
footprint
tCO2e

Intensity
metric tCO2e/
FTE

120

125

139

136

10.7

9.0

Total GHG emissions and the intensity metric for the reporting period 01 April 2016 to 31 March 2017. Department for Environment Food & Rural Affairs (2013).
Environmental Reporting Guidelines: Including mandatory GHG emissions reporting guidance.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018

Governance

Trivandrum, India

Hardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

This section of the report details how
the Company is run and reports on
the various sections of governance

Board of Directors ......................................... 28
Management Committee ............................ 29
Governance Report ...................................... 30
Audit Committee Report............................... 34
Directors’ Remuneration Report .................. 37
Nomination Committee Report .................... 47
Directors’ Report ........................................... 48

e
c
n
a
n
r
e
v
o
G

Strategic ReportGovernanceFinancial StatementsAdditional Information28

Governance

Board of Directors

Alasdair Locke
(aged 64)
Non-Executive Chairman

Ian MacKenzie
(aged 61)
Chief Executive Officer

Peter Milne
(aged 64)
Senior Non-Executive Director

Pradip Shah
(aged 65)
Non-Executive Director

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

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

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

Terms of appointment
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.

External appointments
• Member of the Audit Committee
of the University of Aberdeen.

Committee membership

A R N S

Background and experience
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
University. 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).

External appointments
• Chairman of Argenta Holdings plc
• Chairman of Motor Fuel Group
• Chairman of First Property

Group plc

• Non-Executive Director of other

companies.

Committee membership

N S R

Background and experience
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, and a past External
Examiner in the RGU Oil & Gas
MSc course.

External appointments
None.

Committee membership

Background and experience
Mr Shah runs IndAsia, a corporate
finance and investment advisory
company. He is a gold-medallist
Chartered Accountant, Management
Accountant and MBA from Harvard,
who helped establish Housing
Development Finance Corporation,
the first retail housing finance
company in India; CRISIL, the first
and largest credit rating agency in
India; the Indocean Fund, a pioneer
private equity fund, in partnership with
affiliates of Soros Fund Management
and Chase Capital Partners; the
AMP-IndAsia India Fund, in joint
venture with AMP of Australia;
Universal Trustees; and Grow-Trees.
com, a social enterprise. He was
appointed by government of India
on the Justice Easwar, serves on
the Appointments Board and on the
Banks Board Bureau; has served on
several expert committees of state
and central governments, was a
director on the Regional Board of the
Reserve Bank of India, and is currently
chairman of Kansai Nerolac, Sonata
Software, Grindwell Norton and
director of BASF India, Pfizer India,
Tata Investment, Godrej & Boyce
and sits on the governing boards of
some non-profit organisations and
chambers of commerce.

External appointments
• Founder and chairman of IndAsia

Fund Advisors,

• Chairman of Kansai Nerolac
• Chairman of Grindwell Norton Ltd
• Chairman of Sonata Software
and a director of BASF (India)
• Chairman of Godrej & Boyce
• Chairman of Pfizer and Tata
Investment Corporation.

Committee membership

R A N

Hardy Oil and Gas plc Annual Report and Accounts FY2018Management Committee

www.hardyoil.com

T.K. Ananth Kumar
Non-Executive Director of HEPI

Richard Galvin
Treasurer and Corporate
Affairs Executive

Sankalpa Mitra
Senior Vice President
Production of HEPI

CH. V. Satya Sai
Vice President Geoscience
of HEPI

Terms of appointment
Mr Galvin joined Hardy in 2005 and
was appointed Treasurer in 2011 and
appointed to HEPI’s Board in 2013.

Terms of appointment
Mr Mitra joined HEPI in 2006
and was appointed senior vice
president in 2014.

Terms of appointment
Mr Satya Sai joined HEPI in 2006
and was appointed vice president
in 2014.

Background and experience
Mr Galvin has over 20 years of
commercial and corporate finance
experience in the upstream oil and
gas industry. He 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. He
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.

Background and experience
Mr Mitra has over 30 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 of special
projects and has been heading
the operations team as general
manager- PY-3 since 2010.
He holds a BE (Mechanical)
from Calcutta University.

Background and experience
Mr Satya Sai has over 30 years of
Geological and Geophysical (G&G)
experience in the oil and gas industry.
He previously worked at ONGC for
over 21 years, holding a position of
superintending geophysicist prior to
leaving. He holds a Master’s 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.

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

Background and experience
Mr Ananth 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 Navratna
company and India’s second largest
exploration and production state
enterprise. Mr Ananth Kumar is a
qualified chartered accountant, a
member of the Institute of Chartered
Accountants of India and has a
bachelor’s degree in commerce from
Osmania University, India. Mr Ananth
Kumar’s recent achievements
include leading the GOI’s 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.

Committee key

A Audit Committee

R Remuneration Committee

N Nomination Committee

S Risk Sub-Committee

Chairman of Committee

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201830

Governance Report

Summary of the Board’s work in the period
For the year ended 31 March 2018, the Board
considered all relevant matters within its remit with
focus on the following key issues:

• Strategy and management with a focus
on the optimisation of the Group’s Indian
focused portfolio

• Financial management
• Regulatory compliance
• Environment, health and safety
• Stakeholder relations.

Attendance

Member

Alasdair Locke (Chairman)

Ian MacKenzie

Peter Milne

Pradip Shah

Meetings attended

6 of 6

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 Code.

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, when necessary, to consider matters
which require decisions outside the scheduled
meetings. During the year ended 31 March 2018,
the Board met on six occasions. 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 disposals, material
contracts, major capital expenditure projects
and budgets

• Capital structure, debt and equity financing, and

other related matters

• Risk management and internal controls

(supported by the Audit and Risk Committees);

• 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 Management Committee.
Certain other matters are delegated to the Board
Committees, namely the Audit, Remuneration and
Nomination Committees.

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 April 2016
(the UK Code). The UK Code is publicly available
on the Financial Reporting Council’s website
at www.frc.org.uk.

Introduction
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.
This Corporate Governance Report describes
the way the Group has applied the main principles
of governance set out in the UK Code throughout
the year.

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 year ended 31 March
2018. Disclosures below include matters where
Hardy has not fully complied with the provision of
the UK Code during the reporting period.

Leadership
The Company is headed by a 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.

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

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

Training
The Chairman reviews the 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.

Board performance and evaluation
Hardy undertakes an internal appraisal of the
Board’s performance on an annual basis. This
process comprises a confidential questionnaire
submitted by each Director. The questionnaire
provides members with a platform to comment
on the effectiveness of the Board and performance
of each Director. The Senior Independent
Non-Executive Director is responsible for
overseeing the reporting of the review. Overall,
it was felt that the Board was functioning well.

Non-Executive Directors
The Non-Executive Directors have a broad
range of business and commercial experience.
They have a 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.
The Non-Executive Directors periodically meet
without the Executive present. They are also
kept aware of current issues affecting the Group
via informal discussions and ad hoc updates
from the Chairman and Chief Executive Officer.
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 the
Chief Executive Officer or where such contact is
considered inappropriate. 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
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 the Audit, Remuneration
and Nomination Committees. The memberships,
roles and activities of these Committees are
detailed in separate reports: the Audit Committee
on pages 34 to 36, the Remuneration Committee
on pages 37 to 46, and the Nomination Committee
on page 47. 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.

Other governance matters
The Directors are aware that independent
professional advice is available to each Director
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 a Non-Executive
Chairman, Chief Executive Officer and two
Non-Executive Directors. Biographical details of
the Board members are set out on page 28 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 13 September 2017,
shareholders re-elected Pradip Shah as
Non-Executive Director and Ian MacKenzie
as Executive Director.

Independence
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. 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 Mr Shah to be independent of
management because the Chief Executive Officer
was appointed in 2012 with whom Mr Shah
has had no previous professional interaction.
Notwithstanding Mr 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.

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
needs to complement the Group’s leadership
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.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201832

Governance Report
continued

Viability Statement
The Financial Reporting Council (FRC) has revised
the UK Code to include a Viability Statement and
the Company’s full statement can be found on
page 21 of the Strategic Report.

Internal controls
The Board of Directors reviews the effectiveness
of the Group’s system of internal controls in line
with the requirements 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 Group’s
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 to consider internal and
external risks, including operational, compliance,
financial and strategic risks, which 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. 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.

Re-election
Alasdair Locke and Pradip Shah will stand for
re-election at the Company’s 2018 Annual
General Meeting. A 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 22 to 23. The Board has
delegated to the Audit Committee oversight of the
relationship with the Company’s auditor, as outlined
in the Audit Committee report on pages 34 to 36.

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 22 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. The Directors, having
made due and careful enquiry, believe the Group
and the Company have adequate working capital
to execute their operations and could 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 12 months from
the date of approval of these financial statements.
As a result, the Directors have continued to adopt
the going concern basis of accounting in preparing
the annual financial statements in accordance
with Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting (2014).

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, which are issued by government
authorities 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 made a significant
discovery of hydrocarbons we undertake
appraisal programmes, which may include the
drilling of wells and further geotechnical analysis
to determine the size and quality of the discovery.
Once the appraisal programme confirms that
the development of a discovery is commercially
viable, we begin work on a development plan. This
maps out how we will release the production of the
discovered hydrocarbon to achieve the ultimate
objective to generate revenue and cash flow.
Beyond this, further value may be created through
the implementation of enhanced production
strategies to optimise the value of recoverable
hydrocarbons from existing producing fields.

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 37 to 41
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. All
Directors are kept aware of changes to major
shareholdings in the Company and are available to
meet with shareholders who have specific interests
or concerns. The Group issues its Annual Report
promptly to individual shareholders and 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 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. 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.

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

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.

At the Company’s 2017 Annual General Meeting seven resolutions were presented. Below is a summary of the voting results:

# Description

Type

For

Against

Withheld

Total

Votes for %

1 Adopt annual accounts for year ended 31 March 2017 Ordinary

34,979,661

2a To receive and consider the Report on Remuneration

Ordinary

34,978,429

–

1,232

2b To received and consider the Remuneration Policy

Ordinary

34,772,970

206,691

3 To re-elect Pradip Shah as a Director of the Company.

Ordinary

30,677,273

4,302,388

4 To re-elect Ian MacKenzie as a Director of the Company. Ordinary

34,978,429

5 Re-appointment of Crowe Clark Whitehill LLP as auditor Ordinary

34,971,411

6* Disapplication 5 per cent of issued share capital

Special

34,978,279

7* Authority to make market purchases of Ordinary Shares Special

34,970,429

Total shares issued

Total instructed

1,232

8,000

1,382

9,232

73,764,035

34,979,661

Non-compliance with the UK Code
The Company did not comply with the UK Code in the following matters during the year ended 31 March 2018:

–

34,979,661

250

34,979,661

–

34,979,661

100.00

99.41

87.70

100.00

99.98

100.00

99.97

Code provision

Subject matter

Discussion

Non-Executive
Directors meeting
independence
requirements

Pradip Shah has served
on the Board for more than
nine years

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

The Company is a small cap upstream oil and gas company with a modest resource base. The Board has put in place a mandate to optimise the allocation of
the Company’s limited resources to support medium-term strategic objectives. As the Company evolves, the Board is committed to enhancing the Company’s
corporate governance policies and practices deemed appropriate considering the size, maturity and complexity of the organisation.

Alasdair Locke
Chairman
7 June 2018

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201834

Audit Committee Report

Consideration and review of six-month
interim statement and results for the
12 months ended 31 March 2018
• The Audit Committee monitored the current

business and geopolitical environment in India
while considering the appropriateness of the
Group’s statements.

• The Audit Committee met with the external

auditor as part of both the six-month
interim statement 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.

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.

• The Audit Committee approved the scope

of the work to be undertaken by the external
auditor for the interim review and year-end
statutory audit.

• The Audit Committee considered and adopted
where appropriate requirements provided for in
the 2016 UK Code, the 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 and
Board meetings 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 both the
Board’s assessment of risk with risk factors
originating from and identified by the Group’s
senior management.

Governance
The Audit Committee comprises two Non-
Executive Directors and oversees the Group’s
financial reporting and internal control procedures
as well as providing a formal reporting link with
the external auditor. 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 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
auditor were invited as appropriate. The external
auditor has unrestricted access to the Audit
Committee Chairman.

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 three times in the 12 months
ended 31 March 2018 and the attendance of
members at the Audit Committee meetings held in
the current reporting period was as follows:

Main 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 accounting policies, significant
financial reporting issues and relevant
disclosures in financial reports

• Overseeing that an effective system of internal
control and risk 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 making recommendations
to the Board

• Overseeing the Board’s relationship with the
external auditor and, where appropriate, the
selection of new external auditor

• Approving non-audit services provided by the

external auditor and ensuring the independence
and objectivity of the external auditor is
safeguarded when appointing them to conduct
non-audit services; and

• Ensuring compliance with legal requirements,

accounting standards and the UKLA Listing and
Disclosure and Transparency Rules.

Committee member

Meetings attended

Peter Milne (Chairman)

Pradip Shah

3 of 3

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.

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Review of the effectiveness of the Audit Committee
• During the year, the Board completed a review of its effectiveness, which included an assessment of the Audit Committee. The review was coordinated by the
Treasurer with oversight by the Senior Non-Executive Director. As a result, the Audit Committee was adjudged 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, its current activities, the

relative simplicity of the systems and the close involvement of senior management. Following the Committee’s review, it was recommended to the Board that
an internal audit function is not appropriate at this time.

Financial reporting
The Committee monitored the integrity of the Group’s financial statements and reviewed the significant financial reporting issues and accounting policies and
disclosures therein. The Committee met with the external auditor 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 FY2018 accounts.

Significant issues considered in relation to the financial statements
The primary areas of judgement considered by the Audit Committee in relation to the FY2018 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 in note 14 on page 69.

Legal matters
The Group is currently involved in several disputes with third parties,
uJV partners, and taxation authorities which may result in material cash
inflows and outflows. In the event of adverse findings, these could result in
material movements in working capital.

Management has provided assessments of the merits of such claims and
counter claims and made appropriate provisions for likely outcomes.

PY-3 field
The PY-3 field has been shut-in since July 2011 and had been fully written-
down previously. In FY2018 the uJV unanimously agreed to apply for
the extension of the PY-3 PSC which included, among other things, a
recommended RFFDP. The RFFDP is currently under review by the GOI
representative DGH. Sanctioning of the RFFDP by the MC and subsequent
confirmation of the extension of the PSC will allow for the full tendering of
services and equipment in respect of the recommencement of production.
Management has considered the prevailing circumstances and recommended
maintaining the full write-down of the asset at the current time.

Provisions for decommissioning costs
Estimates of the cost of future decommissioning and restoration of the PY-3
field are based on current technical and legal requirements, and cost levels,
while estimates of when decommissioning will occur depend on assumptions
made regarding the economic life of fields. Having considered the prevailing
cost environment and projected timing of abandonment, management
provided for the write-back of the decommissioning provision by $0.5 million.

The Audit Committee reviewed and considered the external legal advice
obtained by management concerning: the enforcement of the CY-OS/2
Award in favour of Hardy; the Delhi High Court’s ruling against the GOI appeal;
and subsequent ongoing GOI appeal to the SC of India. The Committee
considered possible implications of HEPI enforcement actions outside
India and challenged management assumptions in regard to implications
to continue to operate effectively in India. The Committee concurred with
management’s assessment that the CY-OS/2 intangible asset of $51.1 million
continued to be recognised and that the disclosures concerning the dispute
are fair and balanced.

The Committee reviewed, with management and its professional advisors,
the status of various disputed matters and their likely outcomes as well
as the Samson Maritime litigation outcome and subsequent enforcement
action in India. The Committee challenged management’s assessment and
assumptions regarding certainty of recovery of long outstanding debts due
from uJV partners and the legal status and attachability of the site restoration
fund. The Committee requested robust stress tests of cash flow implications
from expected outcomes and these outcomes have been considered in
assessing the Group’s ongoing viability. The Committee is satisfied that
sufficient provisions or contingent liabilities have been recognised in the
financial statements where necessary.

The Committee reviewed the progress made by management in securing
unanimous approval from the uJV partners to recommend an RFFDP and
apply for an extension of the PSC. The Committee considered the ongoing
GOI review of the RFFDP and extension request, other GOI policies (tax,
levies, and other policies) and the prevailing commodity price and cost
environment.

The Committee is satisfied that management’s conclusion that the PY-3 asset
remained impaired and the maintenance of full write-down of the assets is
appropriate at the balance sheet date. The Committee will review the situation
in FY2019 when the outcome of the RFFDP and extension application is
known.

The Committee discussed with management the estimation process and the
basis for the principal assumptions underlying the cost estimates, noting the
reasons for any major changes in estimates as compared with the previous
year. The Committee was satisfied that the approach applied was fair and
reasonable. Further information on decommissioning provisions is provided in
note 20 on page 70.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
36

Audit Committee Report
continued

Viability Statement
A principal requirement of UK Code is to include
a Viability Statement requiring the Board to state
whether it has a reasonable expectation that the
Company will be able to continue in operation and
meet its liabilities. In making this statement, the
Directors are expected to look forward significantly
longer than 12 months. The Company’s Viability
Statement can be found on page 21 of the
Strategic Report. The Committee has reviewed
and concurred with the basis on which the Viability
Statement has been prepared and the testing
of possible outcomes of ongoing litigation and
conditions and the mitigating actions disclosed
in the statement.

External auditor
The Company’s external auditor is Crowe Clark
Whitehill LLP. Authorisation of non-audit services
provided to the Group is a matter reserved for the
Audit Committee. In the year ended 31 March
2018 Crowe Clark Whitehill LLP did not provide
any non-audit related services to the Company.
Crowe Clark Whitehill LLP undertook a review of
the Group’s Interim Statement and Accounts for
the six months ended 30 September 2017.

The external auditor has 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 auditor confirmed to the Audit
Committee during the year their independence
from the Company. In accordance with
professional standards, the partner responsible
for the audit is changed every five years. The
current auditor, Crowe Clark Whitehill LLP, was
first appointed by the Company in 1999 and the
current partner rotated onto the engagement for
the September 2017 interim review. 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 auditor.
Based on 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 auditor at the Company’s
2018 Annual General Meeting.

Peter Milne
Chairman of the Audit Committee
7 June 2018

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018Directors’ Remuneration Report

www.hardyoil.com

The 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
the Executive Director 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.

The Remuneration Committee met three times
in the 12 months ended 31 March 2018 and all
Committee members served in office throughout
the year. The attendance of members at the
Remuneration Committee meetings was
as follows:

Committee member

Pradip Shah (Chairman)

Alasdair Locke

Peter Milne

Number of
meetings attended

3 of 3

Committee evaluation
The performance of the Remuneration
Committee was evaluated as part of the Board
evaluation which was completed in April 2018.
The review was coordinated by the Senior
Non-Executive Director and the Treasurer.
As a result, the Remuneration Committee
was operating effectively.

The Remuneration Committee’s Report for the 12
months ended 31 March 2018 comprises
two sections:

• An annual statement providing a summary

of the Committee’s activities in the 12 months
ended 31 March 2018 and its intentions
going forward

• A copy of the Directors’ remuneration policy
which was put to an advisory shareholder
resolution at the 2017 Annual General Meeting.

On behalf of the Board, I would like to thank
shareholders for their continued support.
Should any shareholder wish to contact me
about the Company’s executive and non-executive
remuneration policy, please email me
at ir@hardyoil.com.

Pradip Shah
Chairman of the Remuneration Committee
7 June 2018

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 2018 and how shareholders voted
at the 2017 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 42 to 46.

The Remuneration Committee – governance
The Company’s Remuneration Committee
comprises 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.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201838

Directors’ Remuneration Report
continued

Committee advisors
No remuneration advisors were retained by the Remuneration Committee during the year ended 31 March 2018. 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.

Executive
The Chief Executive Officer’s base salary increased by 5 per cent to £275,625. The base salary is below industry average.

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

Single total figure of remuneration for each Director (audited)
Set out below are the emoluments of the Directors for the years indicated (US$):

Executive

Fixed

Long-term

Name of Director

Salaries/fees

Benefits

Bonuses

LTI vesting

Ian MacKenzie1 2

FY2018

FY2017

FY2016

(a)

390,267

365,227

376,968

(b)

3,697

3,262

2,911

(c)

–

(d)

–

Pension
contribution

(e)

–

32,103

Other

Total

(f)

–

393,964

368,489

411,982

Non-Executive

Fixed

Long-term

Name of Director

Salaries/fees

Benefits

Bonuses

Share awards

Pension
contribution

Other

Total

Alasdair Locke

Peter Milne

Pradip Shah

FY2018

FY2017

FY2016

FY2018

FY2017

FY2016

FY2018

FY2017

FY2016

(a)

120,315

117,394

176,354

80,210

78,263

91,652

66,842

65,219

75,189

1 Ian MacKenzie’s benefits included life and medical insurance.
2 Ian MacKenzie elected to take his pension entitlement “in kind”.

(b)

–

(c)

–

(d)

–

40,959

–

21,370

–

17,808

(e)

–

(f)

–

120,315

117,394

217,313

80,210

78,263

113,022

66,842

65,219

92,997

Long-term incentive plans
Unapproved Share options
The Committee did not recommend an award under this scheme in FY2018. The last award provided under this scheme was on 11 April 2014 when 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 10 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. If the Performance Condition is not satisfied by the fifth anniversary of the date of grant, the options shall lapse. Options are to
vest immediately upon the occurrence of a Rule 8 Event under the unapproved share option scheme (relating to change of control etc).

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

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018
www.hardyoil.com

Directors’ share options
Set out below is certain information pertaining to share options granted to Directors who held office at 31 March 2018:

As at
31 March
2017

250,000

Granted
during
FY2017

–

Ian MacKenzie1

Total

Forfeited
during
FY2017

As at
31 March
2018

Date
of grant

Vested at
end of FY2018

Expiry date

Exercise price
per share
(£)

250,000

11–Apr–14

–

10–Apr–24

0.65

250,000

1 Mr MacKenzie’s options awarded in 2014 are subject to the conditions outlined above.

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 2018

500%

450%

400%

350%

300%

250%

200%

150%

100%

50%

-50%

-100%

-150%

Jun 2005

Jun 2006

Jun 2007

Jun 2008

Jun 2009

Jun 2010

Jun 2011

Jun 2012

Jun 2013

Jun 2014

Jun 2015

HDN LN Equity

ASX Index

F3OILG Index

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201840

Directors’ Remuneration Report
continued

Chief Executive Officer’s remuneration

Total remuneration ($)

Months of service

Total remuneration ($/mth)

Annual bonus (%)1

Option vesting

FY2016

411,982

34,332

Nil

FY2017

368,489

30,707

Nil

FY2018

393,964

32,780

Nil

1 The Chief Executive Officer was entitled to a bonus of nil to 100 per cent of annual salary equivalent. No bonus has been awarded by the Board.

On 27 March 2018, the market price of an Ordinary Share of Hardy was £0.1425 per share. The highest and lowest market price of an Ordinary Share of Hardy
during the year ended 31 March 2018 was £0.28 and £0.12 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 2017 and
financial year 31 March 2018 compared to that of the average for all employees of the Group.

Salary

Benefits

Bonus

Chief Executive Officer

Average employees

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

Relative 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.

FY2017

FY2018

1.1

1.2

(18)

Shareholder voting at the last Annual General Meeting
At last year’s Annual General Meeting, held on 13 September 2017, the Company’s Remuneration Report received the following votes from shareholders:

Report

Policy

Total number of votes

% of votes cast

Total number of votes

% of votes cast

For

34,978,429

Against

1,232

34,772,970

206,691

Votes withheld

Total issued
share capital
instructed

34,979,661

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Directors’ interests in the share capital of the Company
The Directors who held office at 31 March 2018 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

Position

Alasdair Locke

Peter Milne

Ian MacKenzie

Pradip Shah

Non-Executive Chairman

Senior Non-Executive Director

Chief Executive Officer

Non-Executive Director

As at
31 March
2018

1,198,153

319,595

352,969

835,690

As at
31 March
2017

1,198,153

319,595

352,969

835,690

Other than as 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
7 June 2018

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
42

Directors’ Remuneration Report
continued

Directors’ Remuneration Policy
In this section, we set out our remuneration
policy, how it supports our strategy, how
the Committee intends to operate it, the
selection of performance metrics and why
we believe they support our strategy and
are appropriately stretching, and other
relevant information about the Directors’
service agreements. The effective date of
the policy is 13 September 2017, which
is the date shareholder approval is being
sought for the revised policy at the AGM.

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 base salary, annual bonus, taxable
benefits, pension contributions 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 Director,
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.

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.

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
£40,000 to reflect 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 Director may receive additional fees
to compensate for more time spent than would
reasonably be expected in the execution of their
roles and responsibilities.

Non-Executive Directors may receive a restricted
shares award up to an equivalent of 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 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 if 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.

Remuneration 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.

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Non-executive
A one-time restricted share award may 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
circumstances, 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 the Executive Director’s
service contract, the Committee will consider 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
(a structured option plan) 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.

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.

Remuneration potential

900

800

700

600

500

400

300

200

100

179.0

110.0

23.0

276.0

55.0
23.0

276.0

23.0

276.0

Threshold

Expected

Maximum

Salary

Pension & Benefits

Bonus

LTI

Service agreement
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 Director is subject to termination by no
greater than 12 months’ notice 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 consider 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.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
44

Directors’ Remuneration Report
continued

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
• Retention risk; and
• Base salary of other individuals undertaking similar roles in companies of comparable size and complexity.

Increases to the current Executive Director salary, presented in the “Application of policy in FY2018” 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 FY2018 1

Executive Director base salary £275,625 (may be reviewed annually by the Committee effective 1 January).

Pension and benefits

Purpose and link to strategy

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

Operation

Opportunity

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 considering local market practice in the country where the executive is based. Additional benefits may be
provided, as appropriate.

Framework for recovery

None.

Application of policy in FY2018 1

No change.

1 Not part of the policy report.

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Incentives

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 objectives:
• 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.

Opportunity

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

Annual long-term share or option award – the maximum face value for an annual award of option or share-based
Long-term Incentives (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 FY20181

Award will be based on the Board’s 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.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
46

Directors’ Remuneration Report
continued

NON-EXECUTIVE DIRECTOR

Purpose and link to strategy

Operation

Opportunity

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
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.

Framework for recovery

None.

Application of policy in FY20181

1 Not part of the policy report.

Current Non-Executive Director fees:
Basic annual Non-Executive fee
Additional fees
Chairman of the Board
Chairman of the Audit Committee
Other fees to remain at the same level as FY2017.

£50,000

£40,000
£10,000

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:

Non-Executive Director

Alasdair Locke

Peter Milne

Pradip Shah

Year of appointment

Number of
years completed

Date of current
engagement letter

2012

1999

12 January 2012

29 February 2012

2 June 2005

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018Nomination Committee Report

www.hardyoil.com

Management resources
The Committee members relied upon regular
contact with the Executive to fuIfil their
ongoing 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
The Committee recommended membership of
Board Committees remains unchanged. A copy of
the Committee’s terms of reference can be found
on the Company’s website www.hardyoil.com.

Committee evaluation
The performance of the Nomination Committee
was evaluated as part of the Board evaluation,
which was completed in April 2018. The review
was coordinated by the Senior Non-Executive
Director with the assistance of management. The
review showed that the Nomination Committee
was adjudged to be operating effectively.

UK Code compliance
The Committee has noted shareholder feedback
regarding independence of non-executives.

Independence
Mr 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, 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, in particular, valuable advice as to the
business and political environment in India.

The Committee has 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 act 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 to current circumstances, there is
no immediate plan to change the composition of
the Board. The Board is diverse in respect of skills,
experience and cultural background.

Alasdair Locke
Chairman of the Nomination Committee
7 June 2018

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
organisation’s strategic objectives.

The Hardy Board comprises four members
including three Non-Executive Directors and one
Executive Director. 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.

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:

• Reviewing the structure, size and composition of
the Board and making 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
• Making recommendations to the Board
regarding membership of the Audit and
Remuneration Committees in consultation with
the Chairman of each Committee.

Committee membership
The Nomination Committee currently comprises
three Non-Executive Directors with Alasdair Locke
as Chairman of the Committee. The Nomination
Committee met three times in the 12 months
ended 31 March 2018. The membership and
attendance of members at Committee meetings
held are provided below:

Committee member

Meetings attended

Alasdair Locke (Chairman)

Peter Milne

Pradip Shah

3 of 3

Committee activities
The principal activities of the Committee during
the year ended 31 March 2018 and after year end
were:

Board composition
The structure, size and composition of the Board
were assessed. It was agreed that the current
composition of the Board is adequate and
provides the appropriate balance of experience
and expertise to effectively fulfil its obligations to
stakeholders.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201848

Directors’ Report

The Directors of Hardy Oil and Gas plc present their Annual Report together with the audited financial statements for the year ended 31 March 2018. These will
be presented to the shareholders at the Annual General Meeting scheduled to be held on 12 September 2018.

Business review and future developments
Hardy is an international upstream oil and gas company holding exploration and production rights 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 year ended 31 March 2018 and plans for the year ended 31 March 2019 can be found in the Strategic Report section on
pages 4 to 24 of the Annual Report, which are incorporated herein by reference.

Directors
The Directors that served in office throughout the year ended 31 March 2018 were:

Board member

Alasdair Locke

Ian MacKenzie

Peter Milne

Pradip Shah

Position

Committee member

Non-Executive Chairman

Remuneration, Nomination (Chairman), Risk

Chief Executive Officer Executive Director

Risk (Chairman)

Non-Executive Director

Audit (Chairman), Remuneration, Nomination, Risk

Remuneration (Chairman), Audit, Nomination

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 US$4,736,187 for the year ended 31 March 2018 compared to a comprehensive loss of US$9,182,354 for
the year ended 31 March 2017. The Directors do not recommend the payment of a dividend.

Election and re-election of Directors
At the next Annual General Meeting of the Company, to be held on 12 September 2018, Alasdair Locke and Pradip Shah will offer themselves for re-election as
Directors of HOGL. Biographical details for Mr Locke and Mr Shah are set out on page 28. 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 six years. Pradip Shah
chairs the Company’s Remuneration Committee and is a member of the Audit and Nomination Committees. Mr Shah has served as a Non-Executive Director for
more than 18 years.

The Board of Directors believes that the contributions 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 18 to the consolidated financial statements. Disclosures with
respect to share options are provided in note 8 to the consolidated financial statements and in the Directors’ Remuneration Report.

At 31 March 2018 and at the date of this report, there were 73,764,035 Ordinary Shares of Hardy issued and fully paid. Major interests in share capital of the
Company, more than 3 per cent1, as of the date of this report are as follows:

Richard Griffiths and controlled undertaking

Aberforth Partners LLP

Universities Superannuation Scheme Limited

Robert Quested

Henderson Global Investors

NFU Mutual Insurance Society Limited

Yogeshwar Sharma

John Grahame Whateley

Legal & General Group Plc (L&G)

21,931,218

9,784,830

9,243,931

8,574,354

3,277,403

2,713,479

2,662,438

2,438,169

2,245,667

29.73%

13.27%

12.53%

11.62%

4.44%

3.68%

3.61%

3.31%

3.04%

1 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 a Regulatory News Service (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 25.

GovernanceHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Diversity
The disclosures concerning Director, management and employee gender diversity as required by law are included in the Strategic Report on page 25.

Annual General Meeting
The Company’s next Annual General Meeting will be held at Hardy Oil and Gas plc, 16 North Silver Street, Aberdeen AB10 1RL, Scotland on 12 September
2018 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 year ended 31 March
2018, 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.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the Isle of Man governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ responsibility statement pursuant to disclosure and Transparency Rule 4.1.12
The Directors confirm that, to the best of their knowledge:

• 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

• 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 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.

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

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 22 to the 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.

The Directors, having made due and careful enquiry, believe 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 12 months from the date of approval of these financial statements. As a result, the Directors have
continued to adopt the going concern basis of accounting in preparing the annual financial statements.

Events after 31 March 2018
There have not been any material events that have occurred since 31 March 2018 to the date of this report.

Approved by the Board of Directors.

Alasdair Locke
Chairman
7 June 2018

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018Hardy Oil and Gas plc Annual Report and Accounts FY2018

Financial Statements

Trivandrum, India

Hardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

This section of the report details the
financial position of the Company
and reports on the financial record
throughout the year

Independent Auditor’s Report ...................... 52
Consolidated Statement
of Comprehensive Income .......................... 56
Consolidated Statement
of Changes in Equity ..................................... 57
Consolidated Statement
of Financial Position ...................................... 58
Consolidated Statement of Cash Flows ...... 59
Notes to the Consolidated
Financial Statements .................................... 60
Parent Company Statement
of Changes in Equity ...................................... 75
Parent Company Statement
of Financial Position ...................................... 76
Parent Company Statement of
Cash Flows .................................................... 77
Notes to the Parent Company
Financial Statements .................................... 78

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Independent auditor’s report
to the shareholders of Hardy Oil and Gas plc

Opinion
We have audited the financial statements of Hardy Oil and Gas plc for the year ended 31 March 2018 which 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 Statement of Changes in Equity and notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

• Give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2018 and of the Group’s loss for the year then ended;
• Of the Group have been properly prepared in accordance with IFRSs as adopted by the European Union;
• Of the Parent Company have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the

provisions of the Isle of Man Companies Acts 1931 to 2004; and

• Have been prepared in accordance with the requirements of the Isle of Man Companies Acts 1931 to 2004.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.

Who we are reporting to
The report is made solely to the Company’s members, as a body, in accordance with the terms of our engagement letter dated 11 April 2018. 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 audit 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.

Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK) require us to report to you whether we
have anything material to add or draw attention to:

• The disclosures in the Annual Report set out on page 21 to 23 that describe the principal risks and explain how they are being managed or mitigated;
• The Directors’ confirmation set out on page 21 in the Annual Report that they have carried out a robust assessment of the principal risks facing the Group,

including those that would threaten its business model, future performance, solvency or liquidity;

• The Directors’ statement set out on page 60 in the financial statements about whether the Directors considered it appropriate to adopt the going concern

basis of accounting in preparing the financial statements and the Directors’ identification of any material uncertainties to the Group and the Parent Company’s
ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements;

• Whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent

with our knowledge obtained in the audit; or

• The Directors’ explanation set out on page 21 in the Annual Report as to how they have assessed the prospects of the Group, over what period they have

done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.

Overview of our audit approach

Risks of material misstatement

• Status of the legal dispute in respect of CY-OS2;
• Provisions and contingent liabilities; and
• Estimation of the future liability in respect of the decommissioning liability.

Changes in our risk assessment – areas where
our assessment of the risk has increased since
the prior year

The carrying value of PY-3 intangible asset and deferred tax asset is an area of decreased risk as the
assets were impaired in the previous year.

Audit scope

Materiality

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.

Overall Group materiality of $700,000 which represents 1% of the Group’s total assets.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

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.

Based on our professional judgement, we determined overall materiality for the financial statements as a whole to be $700,000 (2017: $700,000), based on a
percentage of the Group’s total assets and net assets.

We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance
materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area
having regard to the internal control environment.

Where considered appropriate, performance materiality may be reduced to a lower level, such as for related party transactions and Directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of $20,000 (2017: $20,000). Errors below that threshold would also be reported
to it if, in our opinion as auditor, disclosure was required on qualitative grounds.

An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the Group’s business and is risk based.

In order to address the audit risks identified during our planning procedures, we performed a full-scope audit of the financial statements of the Parent Company
and the US Group entity, with accounting records in Chennai, India. The operations that were subject to these audit procedures made up 100% of consolidated
results and financial position.

The audit team, including the Responsible Individual, undertook the audit work at the central operating location in Chennai, India.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period
and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those 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. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.

This is not a complete list of all risks identified by our audit.

Key audit matter

How the scope of our audit addressed the key audit matter

Status of the legal dispute in respect
of CY-OS/2
The carrying value of the field at 31 March
2018 is $51.1 million. As outlined within the
‘Critical Accounting Estimates and Judgements
section’, whilst the Group has been awarded
costs and interest after arbitration, the dispute
with the Government of India remains ongoing.

If the block is relinquished it would be an
indication of impairment as per the criteria of
IFRS 6: Exploration for and Evaluation of Mineral
Resources and a test would subsequently be
required which could have a material impact
on the Group. We considered the risk that an
impairment test should have been performed
and the asset written down as relinquished.

Our audit work included, but was not restricted to:

• Reviewing the arbitration award, made in the Group’s favour, in February 2013, and considering the legal
advice received by the Group in respect of the enforcement of the award, both within and outside India.
• Obtaining, from a source independent of the Group, the judgment received at the Delhi High Court in July

2016 dismissing the Government of India’s appeal.

• Discussing the matter directly with the Group’s legal advisors.

We reviewed the disclosure made concerning this matter to ensure that it is consistent with our understanding
of the current legal position.

Further details of this matter are disclosed in notes 2 and 14 to the financial statements to which we draw
the reader’s attention.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201854

Independent auditor’s report continued
to the shareholders of Hardy Oil and Gas plc

Key audit matter

How the scope of our audit addressed the key audit matter

Provisions and contingent liabilities
There are a number of threatened and actual
legal, regulatory and tax cases against the
Group. There is a high level of judgement
required in estimating the level of provisioning
required.

Estimation of the future liability in respect
of decommissioning
The carrying value of the decommissioning
provision, relating to the PY-3 field, is $3.9m,
which has been revised downward from the
previous year by $0.6m to reflect reductions in
the cost estimates. We considered the risk that
the assumptions were not appropriate in current
market conditions and that the liability was
materially misstated.

Our audit work included, but was not restricted to:

• Obtaining management’s assessment of the likely outcome of ongoing disputes.
• Reviewing Board minutes and legal invoices for evidence of additional legal disputes of which we were

not previously made aware.

• Reviewing the legal advice received and discussing matters directly with Hardy’s legal and

professional advisors.

Based on the evidence obtained, while noting the inherent uncertainty with such legal, regulatory and tax
matters, we determined the level of provisioning at 31 March 2018 to be appropriate.

We validated the completeness and appropriateness of the related disclosures through assessing that the
disclosure of the uncertainties in notes 2 and 25 of the financial statements was sufficient.

We reviewed the underlying economic models challenging the key assumptions made by management.
This included:

• Comparison of rig day rate assumptions to available market data;
• Considering the appropriateness of the assumptions concerning the timing and discounting of the cash

flows; and

• Performing of scenario analysis of the various underlying assumptions.

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 page 35.

Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial
statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements
or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as
uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

• Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and financial statements taken as a whole is

fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy,
is materially inconsistent with our knowledge obtained in the audit; or

• Audit Committee reporting – the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit

Committee; or

• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement required under the Listing Rules relating to
the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Isle of Man Companies Acts 1931 to 2004 requires us to report to you if,
in our opinion:

• Adequate accounting records have not been kept by the Parent Company; or
• The financial statements of the Parent Company are not in agreement with the accounting records; or
• We have not received all the information and explanations we require for our audit; or
• If information required by law regarding Directors’ remuneration and other transactions is not disclosed.

Responsibilities of the Directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 49, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these financial statements.

We are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused
by fraud or error. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements of the financial statements may not be
detected, even though the audit is properly planned and performed in accordance with ISAs (UK). Our audit approach is a risk-based approach and is explained
more fully in the “An overview of the scope of our audit” section of our audit report.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Section 15 of the Isle of Man Companies Acts 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.

Leo Malkin
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London

7 June 2018

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
Hardy Oil and Gas plc Annual Report and Accounts FY2018

Financial Statements

Consolidated Statement of Comprehensive Income
For the year ended 31 March 2018

Continuing operations

Revenue

Cost of sales

Production costs

Impairment of Block CY-OS-90/1 (PY-3)

Gross profit/(loss)

Administrative expenses

Operating loss

Interest and investment income

Loss before taxation

Taxation

Loss after taxation

Total other comprehensive income

Year ending
31 March
2018
US$

Year ending
31 March
2017
US$

Notes

–

21,679

–

21,679

(5,241,983)

(5,220,304)

484,117

(4,736,187)

–

(4,736,187)

–

514,525

(3,026,688)

(2,512,163)

(2,614,386)

(5,126,549)

429,857

(4,696,692)

(4,485,662)

(9,182,354)

–

Total comprehensive loss for the year attributable to owners of the parent

(4,736,187)

(9,182,354)

Loss per share

Basic & diluted

(0.06)

(0.12)

Hardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

Consolidated Statement of Changes in Equity
For the year ended 31 March 2018

Share
capital
US$

Share
premium
US$

Shares
option
reserve
US$

Retained
earnings/(loss)
US$

Total
US$

At 31 March 2016

737,641

120,936,441

1,854,349

(51,827,964)

71,700,467

Total comprehensive loss for the year

Share based payment

Adjustment of lapsed vested options

–

(9,182,354)

78,163

–

(1,168,024)

1,168,024

78,163

–

At 31 March 2017

737,641

120,936,441

764,488

(59,842,294)

62,596,276

Total comprehensive loss for the year

–

(4,736,187)

At 31 March 2018

737,641

120,936,441

764,488

(64,578,481)

57,860,089

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Consolidated Statement of Financial Position
As at 31 March 2018

Assets

Non-current assets

Property, plant and equipment

Intangible assets

Site restoration deposits

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

Total non-current liabilities

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 6 June 2018.

31 March
2018
US$

31 March
2017
US$

Notes

22,863

24,885

51,128,774

51,130,501

5,059,523

56,211,160

4,723,237

55,878,623

659,656

4,740,148

8,934,123

241,952

14,575,879

70,787,039

942,365

3,862,656

14,179,026

286,881

19,270,928

75,149,551

737,641

120,936,441

764,488

(64,578,481)

(59,842,294)

57,860,089

62,596,276

3,854,995

4,452,916

9,071,955

12,926,950

70,787,039

8,100,359

12,553,275

75,149,551

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018
Consolidated Statement of Cash Flows
For the year ended 31 March 2018

Operating activities

Cash flow (used in) operating activities

Tax (deducted)/refund

Net cash (used in) operating activities

Investing activities

Expenditure on other fixed assets

Site restoration deposit

Realised from short-term investments

Net cash from investing activities

Financing activities

Interest and investment income

Net cash from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

www.hardyoil.com

Year ending
31 March
2018
US$

Year ending
31 March
2017
US$

Notes

(5,428,470)

(3,240,252)

–

98,347

(5,428,470)

(3,141,905)

(9,193)

(336,286)

5,244,903

4,899,424

484,117

(44,929)

286,881

241,952

(6,328)

(412,039)

2,588,917

2,170,550

429,857

(541,498)

828,379

286,881

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
60

Notes to the Consolidated Financial Statements
For the year ended 31 March 2018

1. Accounting policies
The following accounting policies have been applied in the preparation of the 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 Directors’ Report.

These financial statements are for the year ending 31 March 2018.

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 reviewed the Group’s ongoing activities and, having regard to the Group’s existing working capital
position, the Directors are of the opinion that the Group has adequate resources to enable it to undertake its planned 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 (IFRS) 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 several standards and interpretations that are in issue but not yet effective. The Directors have
specifically considered IFRS 15 and IFRS 9. 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) Presentational currency
These financial statements are presented in US dollars. All financial information presented is rounded to the nearest US dollar, with some disclosures rounded
to the nearest million.

e) Basis of consolidation
The consolidated financial statements include the results of Hardy Oil and Gas plc and its subsidiary undertaking. The Group comprises the parent company,
Hardy Oil and Gas plc, and the wholly owned subsidiary Hardy Exploration & Production (India) Inc. (“HEPI”) 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.

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 and are held within intangible exploration assets and not depleted.

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.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018
www.hardyoil.com

1. Accounting policies continued
g) Oil and gas assets continued
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 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 is 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 within the depletion charge on oil and gas assets
in the Statement of Comprehensive Income and unwinding of the discount on the provision is included in 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 are carried out when indicators of impairment exist 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. 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.

i) Investments
Investments by the parent company in its subsidiaries are stated at cost less any impairment provisions.

j) 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.

k) 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.

l) Financial instruments
Financial assets and financial liabilities are initially 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 any necessary provisions for estimated
irrecoverable amounts. Trade payables are not interest bearing and their fair value is deemed to be their nominal value.

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

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201862

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

1. Accounting policies continued
n) 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.

Deferred 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.

o) 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 exchange rate. Exchange differences arising from transactions during the year and from the year-end
retranslation are reflected in the Statement of Comprehensive Income.

Rates of exchange were as follows:

US$ to £1

Indian Rupees to US$1

31 March
2018

1.40

64.89

31 March
2017

1.23

64.85

p) 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 considered. 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.

q) 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 are only
recognised in the year when the receipt becomes virtually certain.

2. Critical accounting estimates and judgements
The preparation of the Group’s financial statements requires the use of estimates and judgements that affect the carrying value of assets and liabilities at the
balance sheet date and the reported amounts of revenue and expenditure for the year. These estimates and judgements are made based on management’s
knowledge of the facts, taking into account historical experiences and expectations of future events that are believed to be reasonable under the particular
circumstances. By definition, the actual results will most likely differ from the estimates made. The estimates and assumptions that could have a significant
risk of causing a material adjustment to the carrying value of assets and liabilities within the next financial year are addressed below:

i) Intangible assets – exploration
Intangible assets comprise capitalised exploration expenditures associated with a natural gas discovery on the CY-OS/2 exploration licence. The GOI had notified
the Group of the relinquishment of the licence to which Hardy and the GOI entered arbitration to resolve the dispute. The arbitration tribunal ruled in favour of
HEPI and ordered the reinstatement of the licence. The GOI has subsequently appealed the award at several levels of the Indian judicial system. Full details are
disclosed in note 14 to these financial statements. This is regarded as a significant area of judgement and management having considered that the arbitration
tribunal has confirmed that the relinquishment was illegal, the appeal by the GOI was dismissed by the District Bench of the High Court of Delhi, and legal advice
maintains a legal right to the licence. As a result, it has been adjudged that there is no indication of impairment.

ii) Recoverability of receivables from PY-3 Joint Venture Partners
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. However, a number of these have not been paid, pertaining to the period from 2011 to 2017, and the
Group commenced arbitration against PY-3 partners in FY2017, seeking $8.36 million (plus interest). The Group has strong legal advice that its claim is valid and
it will continue to pursue this amount by all legal means. However, due to the length of time the amounts have been outstanding, prudent provision has been
made against the sums due totalling US$ 5.1 million (2017: US$ 4.8 million). There is always uncertainty associated with any arbitration process and the amount
recovered may therefore materially differ both from that claimed and from the amount recognised. This is regarded as a significant estimate and management
have considered the correspondence between the Group and the debtors, the standing of the individual organisations and legal advice.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

2. Critical accounting estimates and judgements continued
iii) Provisions
The Group records provisions where it considers it has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be
required to settle the obligation and a reliable estimate of the amount thereof can be made. The recording of provisions is an area which requires the exercise of
management’s judgement relating to the nature, timing and probability of the liability. The Group’s balance sheet includes provisions for liquidated damages on
minimum work programmes, Indian taxes and contractual disputes.

iv) 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 20.

v) Carrying value of Oil & Gas and exploration assets
Management has fully impaired the Group’s oil and gas assets due to ongoing uncertainty of likelihood of development and the availability of extension at
the end of the current Production Sharing Agreement in 2019. If a development was sanctioned the calculation of the recoverable amount would require the
estimation of future cash flows. Previously management’s key assumptions and estimates in the impairment models related to: commodity prices that are based
on forward commodity price estimates, fiscal structuring specific to individual assets, commercial reserves and the related cost profiles. Should a development
plan be approved by all the partners in the PY-3 field and the Government of India, we will review the economic model to determine the appropriate asset value. If
circumstances change, the total impairment recognised in FY2016 and FY2017 of $5.8m could be written back. Further details are contained in notes 13 and 14.

3. Segment analysis
The Group is organised into two business units: 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.

Revenue

Other income

Operating loss

Interest income

Interest income on inter-corporate loan

Impairment of investment in & loan to subsidiary

Interest expense on inter-corporate loan

Loss before taxation

Taxation

Loss for the period

Non-current assets

Current assets

Total segment assets

2018
US$

–

India

–

(3,637,805)

(1,582,499)

339,700

–

(2,288,570)

(5,586,675)

–

144,417

2,288,570

(5,586,675)

–

(4,736,187)

–

Inter-segment
eliminations

–

(2,288,570)

5,586,675

2,288,570

5,586,675

–

Total

–

(5,220,304)

484,117

–

(4,736,187)

–

(5,586,675)

(4,736,187)

5,586,675

(4,736,187)

56,201,774

5,354,740

61,556,514

9,386

9,221,139

9,230,525

–

56,211,160

14,575,879

70,787,039

–

(3,854,995)

(9,071,955)

(12,926,950)

–

9,193

12,942

Inter-corporate loan (net of impairment)

–

48,120,580

(48,120,580)

Non-current liabilities

Current liabilities

Total segment liabilities

Inter-corporate borrowings

Capital expenditure

Depreciation, depletion and amortisation

(3,854,995)

(8,885,544)

(12,740,539)

(115,827,839)

2,982

7,480

–

(186,411)

–

115,827,839

6,211

5,462

–

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201864

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

3. Segment analysis continued

Revenue

Other income

Operating loss

Interest income

Interest income on inter-corporate loan

Impairment of investment in & loan to subsidiary

Interest expense on inter-corporate loan

Loss before taxation

Taxation

Loss for the period

Non-current assets

Current assets

Total segment assets

Inter-corporate loan (net of impairment)

Non-current liabilities

Current liabilities

Total segment liabilities

Inter-corporate borrowings

Capital expenditure

Impairment of Block CY-OS-90/1 (PY-3)

Depreciation, depletion and amortisation

2017
US$

–

India

–

(3,488,958)

(1,637,591)

332,430

97,427

Inter-segment
eliminations

–

1,517,533

(1,517,533)

(65,873,695)

65,873,695

–

1,517,533

(65,896,326)

65,873,695

836,229

–

(65,060,097)

65,873,695

Total

–

(5,126,549)

429,857

–

(4,696,692)

(4,485,662)

(9,182,354)

55,878,623

19,270,928

75,149,551

(4,452,916)

(8,100,359)

(12,553,275)

–

6,328

(3,026,688)

(18,772)

(47,627,764)

–

8,636

14,411,253

14,419,889

47,627,764

–

(146,774)

–

109,748,349

2,330

–

(11,515)

–

(1,517,533)

(4,674,061)

(5,321,891)

(9,995,952)

55,869,987

4,859,675

60,729,662

–

(4,452,916)

(7,953,585)

(12,406,501)

(109,748,349)

3,998

(3,026,688)

(7,257)

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.

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

Production costs

Write down of inventories

Change in decommissioning estimate

Cost of sales

2018
US$

293,533

282,709

(597,921)

(21,679)

2017
US$

288,656

–

(803,181)

(514,525)

As the PY-3 asset has been fully impaired, the change in the value of the decommissioning provision has been recognised immediately in production costs.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

5. Operating loss
Operating loss is stated after charging:

Depreciation and amortisation

Operating lease costs – Land and buildings

External auditors’ remuneration

– Fees payable to the Group’s auditors for the audit of the Group’s annual accounts

– Audit related assurance services

Exchange loss/(gain)

2018
US$

12,942

159,142

75,205

11,234

15,423

2017
US$

18,772

151,228

75,385

10,610

(53,347)

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 or in the prior year.

6. Reconciliation of operating loss to operating cash flows

Operating loss

Impairment of Block PY-3

Depletion, amortisation and depreciation

Share based payment expense

Decrease in inventory

Increase in trade and other receivables

Increase/(decrease) in trade and other payables

Cash (used in) operating activities

7. Staff costs

Wages and salaries

Social security costs

Share based payments charge

2018
US$

(5,220,304)

–

12,942

–

2017
US$

(5,126,549)

3,026,688

18,772

78,163

(5,207,362)

(2,002,926)

282,709

(877,492)

373,675

–

(710,767)

(526,559)

(5,428,470)

(3,240,252)

2018
US$

1,032,506

186,564

–

2017
US$

960,332

188,077

78,163

1,219,070

1,226,572

Staff 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, employed by the Group is as follows:

Management and administration

Operations

The number of permanent employees of the Group as at 31 March 2018 is 13 (2017: 15).

2018

2017

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201866

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

8. 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 2017 and
2024 at prices of £0.65 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, subject to compounded share price growth. 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:

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

2018

2017

Number
of options

675,000

–

675,000

100,000

Weighted
average price

£1.70

–

£1.70

£7.69

Number
of options

1,715,000

–

1,040,000

675,000

100,000

Details of outstanding options at the end of the year with the weighted average exercise (WAEP) price are as follows:

2009

2013

2014

2015

Total

1 April 2017

Lapsed FY2018

31 March 2018

Number

100,000

50,000

275,000

250,000

675,000

WAEP

Number

WAEP

7.69

1.19

0.66

0.65

1.74

–

Number

100,000

50,000

275,000

250,000

675,000

Weighted
average price

£1.78

–

£1.80

£1.70

£7.69

WAEP

7.69

1.19

0.66

0.65

1.74

The weighted average contractual life of options outstanding is 4.82 years (2017: 5.82 years).

9. 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.
Directors’ emoluments are included within the remuneration of the key management personnel in note 26.

10. Interest and investment income

Bank interest

Other interest income

Dividend

2018
US$

339,198

502

144,417

484,117

2017
US$

312,320

20,110

97,427

429,857

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

2018
US$

2017
US$

–

2018
US$

–

4,485,662

2017
US$

–

(1,659,847)

(1,792,196)

75,409

1,584,438

–

2018
US$

(4,736,187)

(1,951,309)

291,462

75,409

1,584,438

–

1,641,911

4,635,947

4,485,662

2017
US$

(4,696,692)

(1,930,237)

2,614,561

(834,609)

4,635,947

4,485,662

11. Taxation
a) Analysis of taxation charge/(credit) for the year

Current tax charge

UK corporation tax

Foreign tax – India

Minimum alternate tax

Foreign tax – USA

Total current tax charge

Deferred tax charge

Taxation charge

Charge in respect of change in tax rates

Losses incurred during the year

Origination and reversal of temporary differences

De-recognition due to potential non-reversal of deferred tax asset

Deferred tax charge

b) Factors affecting tax charge for the year

Loss before taxation from continuing operations

Loss before taxation multiplied by the appropriate rate of tax in respective countries (2017: 41.2%)

Adjustment for expired carried forward losses

Others

De-recognition due to potential non-reversal of deferred tax asset

Total tax charge

Indian operations of the Group are subject to a tax rate of 41.2 per cent, which is higher than UK and US corporation 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, which is considered to be in India. 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.

No deferred tax asset has been recognised in FY2018.

Write-off of deferred tax asset in the previous year
The Group wrote off the deferred tax asset of US$4,485,662 during FY2017. This was in light of the fact that there was no Joint Venture partners agreed field
development plan for Block PY-3 as a result of which the Group was not expected to generate profits within a reasonable timeframe to be offset by unused tax
losses. Further, a portion of the losses carried forward in the Indian operations of the Group had expired in FY2017, resulting in a write off of the deferred tax asset.

12. Loss per share
Loss per share is calculated on a loss of US$4,736,187 for the year ended 31 March 2018 (2017: US$9,182,354) on a weighted average of 73,764,035 Ordinary
Shares for the year ended 31 March 2018 (2017: 73,764,035). No diluted loss per share is calculated.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201868

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

13. 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 April 2016

Additions

Disposals

At 31 March 2017

Additions

Disposals

At 31 March 2018

Depletion, depreciation and amortisation

At 1 April 2016

Charge for the year

Impairment of Block PY-3 asset

Disposals

At 31 March 2017

Charge for the year

Disposals

At 31 March 2018

Net book value at 31 March 2018

Net book value at 31 March 2017

14. Intangible assets

Costs and net book value

At 1 April 2016

Amortisation for the year

At 31 March 2017

Amortisation for the year

At 31 March 2018

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

Exploration expenditure – Block CY-OS/2

The exploration intangible asset is carried in the books at capitalised costs based on the following facts.

Oil and gas assets
US$

Other fixed assets
US$

Total
US$

35,465,279

1,780,170

37,245,449

–

6,328

–

6,328

–

35,465,279

1,786,498

37,251,777

–

9,193

–

9,193

–

35,465,279

1,795,691

37,260,970

32,438,591

1,744,568

34,183,159

–

17,045

3,026,688

–

17,045

3,026,688

–

35,465,279

1,761,613

37,226,892

–

11,215

–

11,215

–

35,465,279

1,772,828

37,238,107

–

Exploration
US$

51,128,272

–

51,128,272

–

51,128,272

22,863

24,885

Others
US$

3,956

(1,727)

2,229

(1,727)

502

22,863

24,885

Total
US$

51,132,228

(1,727)

51,130,501

(1,727)

51,128,774

US$

51,128,272

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018
www.hardyoil.com

14. Intangible assets continued
Legal proceedings concerning Block CY-OS/2
In March 2009, HEPI was informed by the Government of India that Block CY-OS/2, in which Hardy acts as Operator and holds a 75 per cent participating
interest, was relinquished as HEPI had failed to declare commerciality within the two years from the date of discovery which is applicable to an oil discovery.
HEPI 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 $0.2 million and compensation based on the
exploration expenditure incurred to date. The compensation awarded is calculated based on 9 per cent per annum charge on expenditure incurred until
the date of the award and 18 per cent per annum charge thereafter. As at 31 March 2018, HEPI’s 75 per cent share of the compensation awarded is
approximately $78.2 million.

On 2 August 2013, the Government of India filed an appeal, against the arbitration award, with the Delhi High Court. On 27 July 2016, the GOI’s second appeal
to the Delhi High Court was dismissed based on jurisdiction. The GOI subsequently filed a Special Leave Petition with the Supreme Court of India challenging
the Delhi HC ruling. The Special Leave Petition was listed before the SC bench, 41 times over a 17 month period. On 1 May 2018 the India SC bench took the
decision not to pass judgment and instead referred the matter to a larger SC bench. Hardy has previously filed an execution petition with the Delhi HC and this
has run in parallel with the GOI’s appeal although the matter has been continually adjourned due to the ongoing GOI appeal. It is expected that the execution
hearings will progress upon the conclusion of the review by a larger bench of the Supreme Court of India.

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.

In late July 2017, the Group initiated enforcement proceedings in the UK’s High Court of Justice. HEPI had previously initiated confirmation proceedings in the
Federal Court of Washington DC, United States of America. These actions have been initiated to maintain HEPI’s right to enforce all or a part of the Award in the
US and the UK. The confirmation proceedings in the Federal Court of DC have been due since November 2017. To date there has been no indication when the
Federal Court will pass judgment. HEPI’s primary objective remains to conclude the appeal and enforcement process within the Indian judicial system.

15. Inventories

Drilling and production stores and spares

An amount of US$282,709 (2017: Nil) was recognised as an expense relating to a write down in the carrying value of inventory.

16. Trade and other receivables

Amounts due from joint venture partners

Other receivables and prepayments

17. Short-term investments

HSBC US$ Liquidity Fund

HSBC £ Liquidity Fund

2018
US$

659,656

2017
US$

942,365

2018
US$

4,533,773

206,375

4,740,148

2017
US$

3,582,557

280,099

3,862,656

2018
US$

2017
US$

8,933,870

14,129,513

253

49,513

8,934,123

14,179,026

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 a level 1 valuation under IFRS 13.

Income will increase or decrease by US$89,341 (2017: US$141,790) for every one per cent change in interest rates.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201870

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

18. Share capital

Authorised Ordinary Shares

At 1 April 2017

At 31 March 2018

Allotted, issued and fully paid Ordinary Shares

At 1 April 2016

Restricted shares issued during the period

At 1 April 2017

Restricted shares issued during the period

At 31 March 2018

Number
$0.01
Ordinary
Shares

US$

200,000,000

2,000,000

73,764,035

737,641

–

73,764,035

737,641

–

73,764,035

737,641

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

No restricted shares were awarded in FY2018. Included within the Ordinary Shares are 432,693 restricted shares in issue. The restricted 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 dividends, they are not allowed to dispose of these shares.

19. 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.

20. Provision for decommissioning

At 1 April 2016

Change in decommissioning estimate

At 1 April 2017

Change in decommissioning estimate

At 31 March 2018

US$

5,256,097

(803,181)

4,452,916

(597,921)

3,854,995

A provision for the decommissioning of the PY-3 field has been made by estimating the cost of abandonment of existing wells and any required reclamation
of the area at current prices using existing technology. The projected costs comprise primarily the cost of a drillship to abandon the field’s existing wells; the
provision has been calculated using a drillship day-rate of US$143,000. The estimate is calculated based on decommissioning occurring after the end of the
current Production Sharing Contract in December 2019. These underlying assumptions are reviewed on a regular basis.

Having considered the fall in drillship rates, the Group has reduced the projected decommissioning cost by US$0.6m (2017: $0.8m). A 5 per cent change
in the underlying assumption for the drillship rate would result in an adjustment of approximately $0.14 million to the Decommissioning Provision.

An amount of Rs. 328,312,446 (US$5,059,523) (2017: Rs. 306,301,889 (US$4,723,237)) is on deposit with 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.

On an execution petition filed by Samson Maritime Limited, the Madras High Court allowed the freezing of the bank accounts of Hardy Exploration & Production
(India) Inc. State Bank of India has incorrectly frozen the deposit for site restoration obligations. This is being contested at the Madras High Court and the Group
is fairly confident of obtaining a favourable verdict.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

2018
US$

7,231,255

1,840,700

9,071,955

2017
US$

6,662,368

1,437,991

8,100,359

21. Trade and other payables

Trade payables

Accruals and other payables

Trade and other payables are unsecured.

22. 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 objective 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 to meet cash requirements.

Hardy’s principal financial instruments are cash, deposits, short-term investments, receivables and payables 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 and credit risk. 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 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. Further details are disclosed in note 17.

Credit risk
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. The Group is currently engaged in arbitration proceedings against partners in respect of unpaid cash calls;
further details are disclosed in note 2.

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 term 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. At the year end, credit risk existed in respect of
unpaid cash calls as disclosed in note 2. The maximum financial risk exposure relating to the financial assets is the carrying value of such financial assets as at the
year-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 to the objectives, policies or processes during the year
ended 31 March 2018.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201872

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

22. Financial risk management continued
Maturity of financial liabilities
The maturities of financial liabilities, which consist of trade and other payables and the decommissioning provision, as at 31 March 2018 and 31 March 2017 are
as follows:

Within one year

In more than one year but not more than two years

In more than two years but not more than five years

In more than five years

Included within current liabilities is an amount of $4.9m on which interest of 5 per cent per annum is charged until payment.

Interest rate risk profile of financial assets
The interest rate risk profile of the financial assets of the Group as at 31 March 2018 is as follows:

2018
US$

9,041,205

3,854,995

–

2017
US$

8,100,359

–

4,452,916

–

2018

US dollars

Pound sterling

Indian rupees

Short-term investments

Cash and cash equivalents

2017

US dollars

Pound sterling

Indian rupees

Short-term investments

Cash and cash equivalents

Fixed rate
financial
assets
US$

Floating rate
financial
assets
US$

Financial assets –
no interest
is earned
US$

–

8,324

–

8,934,123

8,942,542

32,682

195,701

5,150

–

233,533

Fixed rate
financial
assets
US$

Floating rate
financial
assets
US$

Financial assets –
no interest
is earned
US$

–

34,381

101

–

14,179,026

14,213,508

25,053

145,372

81,974

–

252,399

Total
US$

41,006

195,796

5,150

8,934,123

9,176,075

Total
US$

59,434

145,473

81,974

14,179,026

14,465,907

An amount of Rs. 328,312,446 (US$5,059,523) (2017: Rs. 306,301,889 (US$4,723,237)) deposited with 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$89,425 (2017: US$142,135) for every one per cent change in interest rates.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

22. 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 2018 are as follows:

2018

US$

2017

US$

Indian
rupees
US$

5,064,673

Indian
rupees
US$

Pound
sterling
US$

195,796

Pound
sterling
US$

Total
US$

5,260,469

Total
US$

4,805,211

145,471

4,950,681

An amount of US$74,140 was recognised as foreign exchange gain (2017: exchange gain of US$43,141) because of exchange rate fluctuations on bank
balances and investments made in currencies other than US dollars.

Exchange gains will increase by US$53,131 (2017: US$50,002) for every one per cent appreciation of Indian rupee and sterling and loss of US$52,079
(2017: US$49,012) for one per cent depreciation of Indian rupee and sterling.

23. 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 deposits

Financial liabilities

Financial liabilities measured at amortised cost

Accounts payable

Book value
2018
US$

8,934,123

241,952

4,740,148

5,059,523

Fair value
2018
US$

8,934,123

241,952

4,740,148

5,059,523

Book value
2017
US$

Fair value
2017
US$

14,179,026

286,881

3,862,656

4,723,237

286,881

3,862,656

4,723,237

18,975,746

23,051,800

Book value
2018
US$

9,071,955

Fair value
2018
US$

9,071,955

Book value
2017
US$

8,100,359

Fair value
2017
US$

8,100,359

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

24. 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

2018
US$

15,707

–

2017
US$

63,525

12,766

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201874

Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2018

25. Contingent liabilities
Liquidated damages
The Group has minimum work commitments associated with various exploration licences granted by sovereign authorities through joint arrangements. A number
of these commitments have not been fulfilled and consequently 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 exists estimated at $1.7 million associated with unfinished minimum work programme liquidated
damages. Management does not expect this to be resolved in the next 12 months.

Litigation and taxation
In the normal course of business, the Group may be involved in legal and tax 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.

26. 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

2018
US$

1,095,593

–

1,095,593

2017
US$

1,047,133

23,280

1,070,413

Key management personnel include the Directors and members of the Management Committee 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 Directors’ Remuneration Report which forms part of
the Group’s 2018 Annual Report.

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

Parent Company Statement of Changes in Equity
For the year ended 31 March 2018

Share
capital
US$

Share
premium
US$

Shares
to be
issued
US$

Retained
earnings
US$

Total
US$

At 1 April 2016

737,641

120,936,441

1,854,350

4,216,343

127,744,775

Total comprehensive loss for the year

Share based payment

Adjustment of lapsed vested options

–

(65,060,097)

(88,396)

–

(1,001,465)

1,001,465

(88,396)

–

At 31 March 2017

737,641

120,936,441

764,489

(59,842,289)

62,596,282

Total comprehensive loss for the year

–

(4,736,185)

At 31 March 2018

737,641

120,936,441

764,489

(64,578,474)

57,860,097

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY2018
76

Parent Company Statement of Financial Position
As at 31 March 2018

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

Current liabilities

Trade and other payables

Total liabilities

Total equity and liabilities

Approved and authorised for issue by the Board of Directors on 6 June 2018.

31 March
2018
US$

31 March
2017
US$

Notes

9,386

48,815,982

48,825,368

8,636

48,323,166

48,331,802

79,720

74,882

8,934,123

14,179,026

207,297

9,221,140

58,046,508

157,344

14,411,252

62,743,054

737,641

120,936,441

764,489

(64,578,474)

(59,842,289)

57,860,097

62,596,282

186,411

146,772

58,046,508

62,743,054

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018Parent Company Statement of Cash Flows
For the year ended 31 March 2018

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 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

www.hardyoil.com

Year ending
31 March
2018
US$

Notes

(1,542,237)

(6,212)

5,244,903

5,238,691

Year ending
31 March
2017
US$

(1,580,963)

(2,330)

2,558,915

2,556,585

2,432,988

1,614,961

(6,079,489)

(2,596,387)

(3,646,501)

(981,426)

49,953

157,344

207,297

24,196

133,148

157,344

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201878

Notes to the Parent Company Financial Statements
For the year ended 31 March 2018

1. Accounting policies
The Company follows the accounting policies of the Group as outlined on pages 60-62.

2. Revenue
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$ 4,736,185 (2017: US$65,060,097).

4. Reconciliation of operating loss to operating cash flows

Operating loss

Depreciation

Share based payments

Increase in trade and other receivables

Increase/(decrease) in trade and other payables

Cash flow (used in) operating activities

5. Staff costs

Wages and salaries

Social security costs

Share based payments

2018
US$

2017
US$

(1,582,500)

(1,637,590)

5,462

–

11,515

56,823

(1,577,038)

(1,569,252)

(4,838)

39,639

(1,341)

(10,370)

(1,542,237)

(1,580,963)

2018
US$

714,865

166,143

–

881,008

2017
US$

653,467

167,859

56,823

878,149

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 8 to the consolidated financial statements.

2018

2017

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 2018 is US$ 10,000
(2017: US$ 10,000 ).

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018www.hardyoil.com

2018
US$

2,288,570

144,417

2,432,987

2017
US$

1,517,533

97,428

1,614,961

Total
US$

194,577

2,330

–

196,907

6,212

–

203,119

176,756

11,515

–

188,271

5,462

–

193,733

9,386

8,636

Shares in
subsidiary
US$

Loan to
subsidiary
US$

4,593,733

107,151,962

–

2,596,387

(145,219)

–

(3,753,112)

(62,120,585)

695,402

–

47,627,764

6,079,490

(5,586,674)

695,402

48,120,580

8. Interest and investment income

Interest on inter corporate loan

Dividend

9. Property, plant and equipment

Cost

At 31 March 2016

Additions

Deletion

At 31 March 2017

Additions

Deletion

At 31 March 2018

Depreciation

At 31 March 2016

Charge for the year

Deletion

At 31 March 2017

Charge for the year

Deletion

At 31 March 2018

Net book value at 31 March 2018

Net book value at 31 March 2017

10. Investments

Carrying value at 31 March 2016

Additional investment during the year

Adjustment for share based payments (net)

Impairment of investment in subsidiary

Carrying value at 31 March 2017

Additional investment during the year

Impairment of investment in subsidiary

Carrying value at 31 March 2018

Shares in subsidiary represent the investment made as at 31 March 2018 in Hardy Exploration & Production (India) Inc. (“HEPI”), the wholly owned subsidiary of
Hardy Oil and Gas plc. Further details of this subsidiary are given in note 1(e) of the consolidated financial statements. During FY2017, HEPI had fully impaired in
investment in Block PY-3. Monetising the other assets of HEPI may entail additional investments and may also take more time. Considering these aspects, Hardy
Oil & Gas Plc continues to impair its investment and the loan collectible from HEPI to the extent of the net asset value of HEPI.

Loan to subsidiary at 31 March 2018 consists of US$ 115,827,839 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 percent.

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201880

Notes to the Parent Company Financial Statements continued
For the year ended 31 March 2018

11. Trade and other receivables

Other receivables

Prepayments and accrued income

12. Short-term investments

HSBC US$ Liquidity Fund

HSBC £ Liquidity Fund

2018
US$

11,180

68,540

79,720

2018
US$

2017
US$

6,094

68,788

74,882

2017
US$

8,907,081

14,129,513

27,042

49,513

8,934,123

14,179,026

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 2018 and 31 March 2017.

13. Share capital

Authorised Ordinary Shares

At 1 April 2016

At 31 March 2017

At 31 March 2018

Allotted, issued and fully paid Ordinary Shares

At 1 April 2016

Restricted shares issued

At 31 March 2017

Restricted shares issued

At 31 March 2018

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

14. Trade and other payables

Trade payables

Accruals

Number $0.01
Ordinary Shares
’000

200,000

US$

2,000,000

73,764,035

737,641

–

73,764,035

737,641

–

73,764,035

737,641

2018
US$

88,989

97,422

186,411

2017
US$

52,464

94,308

146,772

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018
www.hardyoil.com

15. Financial risk management
The Company follows the risk management policy stipulated in note 22 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 2018 is as follows:

2018

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$

–

20,956

186,246

207,202

The interest rate risk profile of the financial assets of the Company as at 31 March 2017 is as follows:

2017

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$

–

16,902

140,343

157,245

Total
US$

20,956

186,341

207,297

Total
US$

16,902

140,442

157,344

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$ of the Company are as follows:

US$

Pound sterling in equivalent US$

2018

186,588

2017

189,955

Foreign exchange gain recognised on account of exchange rate for the year ended 31 March 2018 is US$ 74,170 (2017: loss of US$ 25,008).

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

Financial assets

Financial assets at fair value through profit or loss

Loan to subsidiary

Short-term investments

Cash and short term deposits

Trade and other receivables

Book value
2018
US$

Fair value
2018
US$

48,120,580

8,934,123

207,297

79,720

207,297

79,720

Book value
2017
US$

47,627,764

14,179,026

157,344

74,882

Fair value
2017
US$

47,627,764

14,179,026

157,344

74,882

57,341,720

62,039,016

With the exception of loan to subsidiary, all of the above financial assets are current and unimpaired as at 31 March 2018. Please see note 10 for further details
in relation to the impairment of loan to subsidiary.

Financial liabilities

Financial liabilities measured at amortised cost

Accounts payable

All of the above financial liabilities are current as at 31 March 2018.

Book value
2018
US$

186,411

Fair value
2018
US$

186,411

Book value
2017
US$

146,774

Fair value
2017
US$

146,774

Strategic ReportGovernanceFinancial StatementsAdditional InformationHardy Oil and Gas plc Annual Report and Accounts FY201882

Notes to the Parent Company Financial Statements continued
For the year ended 31 March 2018

17. 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

2018
US$

15,707

–

2017
US$

33,210

12,766

18. 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 company at year end dates:

Amount owed from subsidiary undertaking

2018
US$

2017
US$

48,120,580

52,080,680

During FY2017, HEPI has fully impaired in investment in Block PY-3. Monetising the other assets of HEPI may entail additional investments and may also take
more time. Considering these aspects, Hardy Oil & Gas Plc has impaired its investment and the loan collectible from HEPI to the extent of the net asset value of
HEPI. Please see note 10 for further details in relation to the impairment of loan to subsidiary.

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

2018
US$

2017
US$

2,288,570

1,517,533

Financial StatementsHardy Oil and Gas plc Annual Report and Accounts FY2018Reserves and Resources

www.hardyoil.com

To comply with the GOI extension policy for Pre-NELP PSCs, in FY2018 the PY-3 uJV commissioned Gaffney Cline & Associates to undertake an audit of the
PY-3 uJV Resource estimates provided for in an PY-3 Operating Committee recommended Revised Full Field Development Plan in regard to the Group’s other
assets. The Group did not and does not plan to commission a competent person’s report until further data is acquired. The estimates provided in the Company’s
2011 CPR are provided below and PY-3 audited updated resources.

Contingent Resources (2C)
Net 2C gas Contingent Resources are bcf.

PY-34

GS-01

CY-OS/22, 3

GS-01

Total Contingent Resources1 (2C)

Suspended

Oil

mmbbl

B1 (Dhirubhai 33)

Ganesha-1

B1 (Dhirubhai 33)

Gas

Oil

Gas

Oil

bcf

mmbbl

bcf

mmbbl

31 December 2017

Gross

15.8

31 December 2010

83.0

130.0

1.9

213.0

17.7

Net

2.84

8.3

97.5

0.2

105.8

3.0

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 the 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.

3 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.
4 Net entitlement determined via participating interest of 18 per cent and not a true representation of economic entitlement which will not be materially different.

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 the 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.

4 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.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information
84

Asset Description

Block CY-OS90/1 (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) lnc, 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 km. The licence comprises 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 ONGC, is a party and operator to a PSC for the CY-OS/2 block. Hardy holds a 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 GOI, 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 three 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:

• The Ganesha-1 discovery made by HEPI and GAIL is NANG
• The order of relinquishment by the MOPNG was illegal, being on the erroneous impression that the discovery was oil
• 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

• 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
• 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)

• 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

• In the event of a declaration of commerciality, the GOI’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.

Hardy Oil and Gas plc Annual Report and Accounts FY2018Additional Informationwww.hardyoil.com

Definitions and Glossary of Terms

tCO2e:

tCO2e/FTE:

2D/3D:

2P:

AGM:

AIM:

AOGO:

API°:

Per cent

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

the CY-OS/2 Award:

CY-OS/2 international arbitration award as described on page 84

bbl:

bbld:

bcf:

Board:

the Code:

the Company:

Contingent Resources:

CNG:

CPR:

CY-OS/2:

D3:

D9:

DOC:

DGH:

Barrel

Barrel per day

Billion cubic feet

The Board of Directors of Hardy Oil and Gas 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-OS/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 of the Ministry of Petroleum and Natural Gas

Dhirubhai 33:

Gas discovery on GS01-B1 on page 84

ExSOP:

FDP:

FFDP:

FRC

FY:

GAIL:

Ganesha:

GCA:

GDP:

GOI:

the Group:

GS-01:

Hardy:

HC:

HDY:

HEPI:

HSE:

IFRS:

IPO:

IAS:

ISA:

A structured option plan

Field development 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 Accounting Standard

International Standards on Auditing

Hardy Oil and Gas plc Annual Report and Accounts FY2018Strategic ReportGovernanceFinancial StatementsAdditional Information86

Definitions and Glossary of Terms continued

JA:

KG Basin:

km:

km2:

KPI:

LSE:

LNG:

LTI:

Joint Arrangement

Krishna Godavari sedimentary basin comprising an area on the south east India continental shelf

Kilometre

Kilometre squared

Key performance indicator

London Stock Exchange plc

Liquefied natural gas

Long-term incentives

Metre

Management Committee:

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

MC:

mmscfd:

mmscmd:

mmbbl:

mmbtu

MOPNG:

MWP:

NANG:

NCV:

NELP:

OC:

ONGC:

OPEC:

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

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 Exporting Countries

Operating Committee:

As per India PSCs, the Operating Committee comprises representatives of the various participating interest holders
in the licence

Ordinary Share:

The Ordinary Share of US$0.01 each in the capital of the Company

Prospective Resources:

Those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from
undiscovered accumulations

PSC:

psi:

PY-3:

Reliance:

Rs.:

RNS:

scf:

scfd:

TRI:

UK:

Production sharing contract

Pounds per square inch

Offshore Licence CY-OS-90/1

Reliance Industries Limited

Indian rupee

Regulatory news service

Standard cubic feet

Standard cubic feet per day

Total recordable injuries

United Kingdom

The UK Code:

UK Corporate Governance Code 2014

UMWP:

uJV:

US:

US$:

WAEP:

Unfinished minimum work programme

Unincorporated joint venture

United States of America

United States dollars

Weighted average exercise price

Hardy Oil and Gas plc Annual Report and Accounts FY2018Additional Information
Hardy Oil and Gas plc Annual Report and Accounts FY2018

www.hardyoil.com

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Company 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, Westminster Building
108, Dr Radhakrishnan Salai
Chennai, India, 600 004
Phone: +91 44284 71990
Fax: +9144284 71064
Email: info@hardyoil.co.in

Directors of HEPI
Ian MacKenzie (President and
Chief Executive Officer)
Richard Galvin (Executive Director)
T.K Ananth Kumar (Non-Executive Director)

Executive Officers
Sankalpa Mitra (Senior Vice President
production of HEPI)
Satya Sai (Vice President Geoscience of HEPI)

Auditor
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
1 Cornhill
London EC3V 3ND

Company Secretary
Richard Vanderplank LLB
Registered office
First Names House
Victoria Road
Douglas, Isle of Man lM2 4DF

Principal bankers
HSBC Holdings plc
8 Canada Square
London E14 5HQ

Barclays Bank plc
The North Colonnade
Canary Wharf
London E14 4BB

UK solicitors
Wragge Lawrence Graham & Co
4 More London Riverside
London SE1 2AU

Brodies LLP
31-33 Union Grove
Aberdeen AB10 6SD

Dorsey & Whitney (Europe) LLP
199 Bishopsgate
London EC2M 3UT

Volterra Fietta LLP
8 Mortimer Street
Fitzroy Place
London W1T 3JJ

USA solicitors
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York 10004-1482
USA

Indian solicitors
J Sagar Associates
29 Bannari Amman Towers
2nd Floor, Block A
Dr Radhakrishnan Salai
Chennai, India, 600 004

Naik Naik & Co
116-8 Mittal Towers
Nairman Point
Mumbai, India, 400 021

Isle of Man legal advisor
Cains Advocates Limited
First Names House
Victoria Road
Douglas, Isle of Man IM2 4DF

Registrars
Cains Fiduciaries Limited
First Names House
Victoria Road
Douglas, Isle of Man IM2 4DF

CREST agent
Computershare Investor Services
(Channel Islands) Limited
Ordnance House
31 Pier Road
St. Helier, Jersey JE4 8PW

Design and Production
www.carrkamasa.co.uk

Printed by Park Communications on FSC® certified paper.
Park is an EMAS certified company and its Environmental Management
System is certified to ISO 14001.
100% of the inks used are vegetable oil based, 95% of press chemicals
are recycled for further use and, on average 99% of any waste associated
with this production will be recycled.
This document is printed on Arcoprint, sourced from well-managed,
responsible, FSC® certified forests. The pulp used in this product is
bleached using an elemental chlorine free (ECF) process.

Hardy Oil and Gas plc
16 North Silver Street
Aberdeen
AB10 1RL

Pondicherry, India