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FY 2016 results and operational update
09 Jun 16
Hardy has released its FY 2016 results and updates on its three assets in India. Enforcement of the arbitration award on CY-OS/2 is becoming an increasing focus for the company, with legal proceedings now being pursued in the USA alongside those in India. The award included cash compensation which now stands at US$52.9m net to Hardy and return of the CY-OS/2 block for a three year appraisal period. The cash in particular could provide Hardy with attractive optionality in an oil market where many peers are looking to sell assets. The processes to achieve production from Hardy’s PY-3 and GS-01 assets continue, and remain dependent on government decisions in order to move forward. In our view there is value there, but timing is uncertain. The results themselves confirm the cash pile at US$17.6m (ahead of our US$17.0m forecast), alongside a number of non-cash asset writedowns related to oil and gas prices and the Indian fiscal regime. The cash pile versus Hardy’s market cap means that all the potential upside from the CY-OS/2 arbitration and operations on all three assets are currently in largely for free, as is that to be had from the potential to build a position in other geographies. Given this, we have an Add recommendation.
26 Nov 15
Hardy has released its interim results for the year to March 2016. These report a cash holding of US$19.3m showing the company maintaining its strong financing position. Progress on its three Indian assets remains subject to various discussions with Indian government institutions and these continue to make measured progress. While the company’s focus remains squarely on progressing and extracting value from its Indian assets in our view the cash holding leaves Hardy well placed to take advantage of opportunities elsewhere that the current low oil price environment is increasingly likely to throw up. The shares are now trading at only a modest premium to the cash holding meaning the upside potential from the Indian portfolio and any potential actions elsewhere is in for free. We have an Add recommendation on the stock.
Full Year Results – Progress on PY-3
11 Jun 15
Hardy has released its FY 2015 results and provided an update on its assets in India. Progress has been made on the key PY-3 asset with agreement now reached between the JV partners on a development concept and commercial terms. Given full government approvals activities could commence in early 2016 with production by the middle of the year re-establishing revenues for Hardy. There has also been progress on GS-01 with general terms now agreed with block operator Reliance for Hardy to take up to 100% of the asset and progress development. Government approvals are still required here too. The cash pile has been well maintained standing at US$21.0m reflecting cost cuts put through and leaving the company with financial firepower. The statement also guides that management may consider deploying its resources in other geographies if the Indian assets do not progress on a reasonable timeframe – a pragmatic position given the company’s patience thus far. Overall it is good to see this progress and going forward more profound catalysts would be the commencement of development on PY-3 and subsequently GS-01.
Price fall overdone
11 Mar 15
The Hardy share price has fallen over the last three months on the relinquishment of D3 in December and the exclusion of the company from the FTSE All Share and Small Cap indices. D3 was an important asset but we feel at current levels that the price fall is overdone. As such we are upgrading from Neutral to Add based on our valuation of the assets, the US$22.9m cash pile that underpins the company plus the potential for positive news of progress on any of the three assets Hardy continues to hold.
Full Relinquishment of D3 Block
24 Dec 14
Hardy has announced that the D3 JV has relinquished the D3 block and Hardy will no longer have any interest in this asset. This highlights a change in focus for the company away from small interests in large assets (Hardy held 10% in D3 which had 6.7tcf of total resources) to larger interests and operatorship in smaller fields where the company can take control of work programmes. This applies to the company’s other three assets: PY-3, GS-01 and CY-OS/2. All of these have processes in train that should allow Hardy to progress development and appraisal and create value on the assets. We have adjusted our valuation to remove D3 and also our oil price deck (now using US$70/bbl for FY 2016 and US$80/bbl long-term). This reduces our FY 2016 forecasts on the oil price change and our total risked NAV from 201p/share to 77p/share largely on D3. We also note that the relinquishment of D3 should allow release of bank guarantees aiding financial flexibility on Hardy’s other three assets. We see potential for progress on the company’s remaining assets in the coming months particularly for resumption of production on PY-3 next year. Nevertheless we pull back our recommendation from Buy to Neutral on the removal of D3 from our valuation.
Interim results and operational update
27 Nov 14
Hardy has announced its H1 FY 2015 results and provided an operation updates for its assets in India. The company has made incremental progress with its partners to progress activities on PY-3 and GS-01 which could lead to development on both blocks and revenues in 2015. Though we have adjusted forecasts today based on pushing out PY-3 timelines we hope these will soon be further firmed up. The recent gas pricing announcement by the Indian government has meant continued uncertainty on D3 and we await confirmation of activity next year. The results themselves show good conservation of cash with US$22.9m on the balance sheet at the end of September covering overheads and providing the company with flexibility going forward as work programmes are firmed up. We have a Buy recommendation particularly in anticipation of further news on PY-3 and GS-01 in the coming weeks and months initially around partner approvals but latterly hopefully around development activities.
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