GCA GAFFNEY, CLINE & ASSOCIATES COMPETENT PERSON’S REPORT Prepared for HARDY OIL AND GAS PLC APRIL, 2010 The Americas Europe, Africa, FSU Asia Pacific and the Middle East 1360 Post Oak Blvd., Bentley Hall, Blacknest 80 Anson Road Suite 2500 Alton, Hampshire 31-01C IBM Towers Houston, Texas 77056 United Kingdom GU34 4PU Singapore 079907 Tel: +1 713 850 9955 Tel: +44 1420 525366 Tel: +65 225 6951 Fax: +1 713 850-9966 Fax: +44 1420 525367 Fax: +65 224 0842 email: [email protected] email: [email protected] email: [email protected] and at Caracas – Rio de Janeiro – Buenos Aires – Sydney www.gaffney-cline.com Hardy Oil and Gas plc. Copy No. E2291 GCA GAFFNEY, CLINE & ASSOCIATES Page No. INTRODUCTION ................................................................................................................................. 1 SUMMARY ............................................................................................................................................... 4 DISCUSSION .......................................................................................................................................... 13 1. INDIA ......................................................................................................................................... 13 1.1 Cauvery Basin ............................................................................................................ 13 1.1.1 PY-3 Field (Hardy NWI 18%)............................................................... 14 1.1.2 Block CY-OS/2 (Hardy NW1 75% Operator)................................. 21 1.2 Bombay Basin (sometimes Mumbai Offshore Basin) ....................................... 27 1.2.1 Block GS-01(Hardy NW1 10%) .......................................................... 28 1.3 Krishna Godavari Basin ........................................................................................... 38 1.3.1 Block D9 (Hardy NW1 10%) ............................................................... 38 1.3.2 Block D3 (Hardy NW1 10%) ............................................................... 46 1.3.2.1 Block D 3 Contingent Resources ...................................... 48 1.3.2.2 Block D 3 Prospective Resources ..................................... 50 1.4 Assam-Arakan Basin .............................................................................................. 53 1.4.1 AS-ONN-2000/1 (Hardy NWI 10%) ................................................ 53 2. ECONOMIC EVALUATION ................................................................................................ 58 2.1 Fiscal Systems ............................................................................................................ 58 2.2 Cost Assumptions .................................................................................................... 59 2.3 Oil Pricing ................................................................................................................... 59 3. QUALIFICATIONS ................................................................................................................. 60 4. BASIS OF OPINION ............................................................................................................... 61 Tables 0.1 Summary of Licence Areas ................................................................................................... 6 0.2 Summary of Estimated Gross and Net Entitlement Oil Reserves as at 31st December, 2009 .................................................................................................... 7 0.3 Summary of Hardy Reference Pre/Post-Tax Net Present Values as at 31st December, 2009 .................................................................................................... 7 0.4 PY-3 Gross Production and Cost Profiles ........................................................................ 8 0.5 Summary of Gross and Net Natural Gas Contingent Resources as at 31st December, 2009 .................................................................................................... 9 Hardy Oil and Gas plc. E2291 GCA TABLE OF CONTENTS Page No. 0.6 Summary of Gross and Net Gas Prospective Resources for Prospects as at 31st December, 2009 .................................................................................................... 10 0.7 Summary of Gross and Net Oil Prospective Resources for Prospects as at 31st December, 2009 .................................................................................................... 13 Figures 0.1 Location Map of Hardy’s Interests in India ....................................................................... 2 1.1 Location of PY-3 Field and Block CY-OS/2, Offshore Cauvery Basin, India ........... 15 1.2 Cauvery Basin Lithostratigraphic Column ....................................................................... 16 1.3 PY-3 Pay Top Structure Map with OWC @3,505 m SS ............................................... 17 1.4 PY-3 Pay Top Structure Map _Volumetric Polygons ...................................................... 19 1.5 PY-3 Field Production Performance and Forecast .......................................................... 20 1.6 CY-OS/2 Prospect Location Map ........................................................................................ 26 1.7 Bombay Basin Lithostratigraphic Column ......................................................................... 29 1.8 GS-01 Block Location ............................................................................................................. 30 1.9 GS-01 3D Area Depth Structure Map At Top Bassein Formation ............................. 32 1.10 GS-OSN-1 Map ........................................................................................................................ 33 1.11 Block GS-01 Seismic Line Through the B-1 and A-1 Locations ................................... 37 1.12 Blocks D9/D3 Post-Mesozoic Stratigraphy ....................................................................... 39 1.13 Location Map Showing D3 and D9 Licences .................................................................... 40 1.14 D9 Prospect and Lead Location Map ................................................................................. 41 1.15 D3 Prospect Map..................................................................................................................... 47 1.16 Oil Fields South Of Brahmaputra River AS-ONN-2000/1 ............................................ 54 1.17 Stratigraphic Column Assam-Arakan Basin ....................................................................... 55 1.18 Seismic Line As-17-08 In Assam Block ............................................................................... 56 1.19 AS-ONN-2000/1 Prospect and Lead Location Map Sylhet Formation Time Structure Map .......................................................................................................................... 57 Appendices I. Glossary II. SPE/WPC/AAPG/SPEE, Petroleum Resources Management System Definitions and Guidelines Hardy Oil and Gas plc. E2291 Bentley Hall Gaffney, Cline & Associates Ltd Blacknest, Alton Technical and Management Advisers to the Petroleum Industry Internationally Since 1962 Hampshire GU34 4PU United Kingdom Telephone: +44 (0) 1420 525366 Facsimile: +44 (0) 1420 525367 email: [email protected] Registered London No. 1122740 www.gaffney-cline.com MIH/E2291/ngk/0418 9th April, 2010 The Directors, Hardy Oil & Gas Plc, Lincoln House, 37-143 Hammersmith Road, London, W14 0QL. Dear Sirs, COMPETENT PERSON’S REPORT (CPR) INTRODUCTION In accordance with the instruction letter of Hardy Oil & Gas Plc (Hardy) dated 29th January, 2010 Gaffney, Cline & Associates Ltd (GCA) has reviewed the petroleum interests owned by Hardy in India (Figure 0.1). These assets include producing properties, potential developments, discoveries and duly licensed exploration interests. Hardy has made available to GCA a data-set of technical information, including geological, geophysical, and engineering data and reports, together with financial data and the fiscal terms applicable to each of the assets. GCA has also had meetings and discussions with Hardy technical and managerial personnel. In carrying out this review GCA has relied on the accuracy and completeness of the information received from Hardy. GCA has not been requested to perform a site visit, nor has GCA considered this necessary for the purposes of this CPR. Industry Standard abbreviations are contained in the attached Appendix I Glossary, some or all of which may have been used in this report. GCA uses the Petroleum Resources Management System (SPE PRMS) published by the Society of Petroleum Engineers/World Petroleum Congresses/ American Association of Petroleum Geologists/Society of Petroleum Evaluation Engineers (SPE/WPC/AAPG/SPEE) in March, 2007 as the basis for its classification and categorization of hydrocarbon volumes. An abbreviated form of the SPE PRMS is appended as Appendix II. UNITED KINGDOM UNITED STATES SINGAPORE AUSTRALIA ARGENTINA UAE RUSSIA KAZAKHSTAN GCA GAFFNEY, CLINE & ASSOCIATES FIGURE 0.1 LOCATION MAP OF HARDY’S INTERESTS IN INDIA New Delhi AS-ONN- Kathmandu GangtokGangtok 2000/1 ItanagarItanagarItanagar JaipurJaipur LucknowLucknow SaidpurSaidpur KohimKohim a a PatnaPatna ShillongShillong KohimKohim a a ShillongShillong VaranasiVaranasi VaranasiVaranasi raachichi ImphalImphalImphal AgartalaAgartala BhopalBhopal RanchiRanchi BhopalBhopal AhmadabadAhmadabad