Interim Results for 12 Months to 31 December 2013

27 February 2014

Hardy Oil and Gas plc

("Hardy", the "Company" or the "Group")

Interim Results for twelve months ended 31 December 2013

Hardy Oil and Gas plc (LSE: HDY), the oil and gas exploration and production company focused in India, reports its results for the twelve months ended 31 December 2013.

As announced on 7 November 2013, to improve reporting efficiencies the Board agreed to synchronise the Group's accounting reference date to 31 March. As a result, these results are interim results for the 12 month period to 31 December 2014. We will be publishing our 15 month final results for the period ending 31 March 2014 in June 2014.

All financial amounts are stated in US dollars unless otherwise indicated.

Summary

· D3 - The joint venture applied for a twelve month extension to exploration Phase I. Various geophysical studies were undertaken to advance finalisation of prospect locations toward completion of the minimum work programme (MWP)

· D3 - Declaration of commerciality (DOC) for the Dhirubhai 39 and 41 natural gas discoveries is with the Government of India (GOI)

· PY-3 - Technical consensus of a full field development plan (FDP) has been achieved. Commercial aspects of the FDP remain under review by partners

· GS-01 - Seeking to acquire the operator's participating interest. Field development plan for Dhirubhai 33 natural gas discovery is with the GOI

· CY-OS/2 - The GOI lodged an appeal, against the Hon'ble tribunal award, with the High Court of Delhi

· Appointment of Mr TK Ananth Kumar, as a non-executive director of the Company's wholly owned subsidiary Hardy Exploration & Production (India) Inc

Financial

· Total loss amounted to $4.6 million (2012: loss of $11.1 million), reflecting reduced cost base and operational activity

· Cash outflow from operations (before changes in working capital) $4.8 million (2012: outflow $6.8 million)

· Cash and short term investments at 31 December 2013 amounted to $25.4 million (2012: $29.1 million); Hardy has no debt

Outlook

· D3 - Exploration drilling is expected to recommence in 2014

· PY-3- Reach a consensus on outstanding commercial issues and secure approval of the proposed FDP

· GS-01 - Acquire our joint venture partner's interest in the block and advance approval of the proposed FDP

· CY-OS/2 - GOI's appeal of the Hon'ble tribunal's award may continue through 2014

Ian MacKenzie, Chief Executive Officer of Hardy, commented:

"We have been making progress and our short-term focus is to establish a commercial framework for all PY-3 stakeholders and encourage the D3 operator to fulfil the exploration programme in a timely manner. The longer term strategy in India will be shaped by the outcome of these activities."

For further information please visit www.hardyoil.com or contact:

CHAIRMAN'S STATEMENT

Overview

Through 2013 we have made progress on a number of initiatives set out for our India focused portfolio. The CY-OS/2 arbitration award in our favour was very positive and we have made good progress with advancing the PY-3 field development plan. The exploration drilling programme at D3 was pushed back to 2014, due to the lack of rig availability. The Group realised a significant reduction in loss due in part to measures taken in the second half of 2012 to minimise administrative expenditure.

Our Strategy

We believe that our India focused portfolio has the potential to add significant value to shareholders by delivering hydrocarbons to the local market. The outcome of planned activity through 2014 is expected to verify our view on the longer-term prospects of our portfolio. In the interim, we will continue to consider all opportunities to accelerate value creation for our shareholders.

India's demand for natural gas is expected to grow by about 19 per cent per annum (from 194 mmscmd in 2013 to 466 mmscmd in 2017) to meet the ever increasing requirements of the power, fertiliser and other industries. The CNG and city gas sector will also see a quantum growth in natural gas use. Furthermore, it is expected that by 2017, 300 cities will have the infrastructure for gas distribution. Domestic supply by 2017 is projected to be 231 mmscmd, falling well short of expected demand and creating a robust environment in which to monetise the Group's current and potential gas discoveries. Finally, the GOI's approval of a gas pricing formula based on a basket of international market prices is expected to result in higher domestic gas prices.

Operations

The Company's activities have been focused on the finalisation of the PY-3 comprehensive FDP which will enable us to meet our target to recommence production in early 2015. The cooperation of our joint venture partners has allowed Hardy to make good progress towards this goal although there remain key commercial considerations regarding levy obligations which need to be resolved by the GOI prior to the FDP being formally considered.

As announced in 2013, exploration drilling in D3 is expected to restart in 2014. India's Ministry of Defence (MOD) notified the joint venture that a portion of the southwest area of the block has been identified as a Defence Research & Development Organisation (DRDO) impact zone. As a result access to this portion of the D3 block may be restricted from time-to-time. The D3 joint venture continued to progress a number of geotechnical studies focused on assessing the potential of the eastern area and the high grading of identified prospects. In accordance with GOI policy, an application to extend the exploration phase of the block to the end of 2014 was submitted to the GOI.

The Hon'ble Tribunal award in respect of CY-OS/2 in favour of the joint venture was a positive development in 2013. The award provided for interest on investment currently valued at $32.1 million net to Hardy and is currently recognised as a contingent asset. Unfortunately, the GOI filed an appeal against the award in the High Court of Delhi in August 2013 and this action has caused a delay in the restoration of the block and recommencement of appraisal activity. We have subsequently filed an execution petition in the Delhi High Court. The Company believes that the unanimous international tribunal award is well reasoned and, as per the India Arbitration & Conciliation Act 1996, may not be subject to appeal in Indian courts.

The GS-01 operator notified the GOI that it intends to relinquish its participating interest in the block. In accordance with our joint operating agreement, Hardy is entitled to assume the interest of a withdrawing party. The Company is continuing to pursue the acquisition of the operator's participating interest and progress the approval of the proposed FDP.

Financial

To improve reporting efficiencies the Board agreed to synchronise the Group's accounting reference date to 31 March. As a result we will be publishing our 15 month results for the period ending 31 March 2014 in June of 2014.

The Group is reporting a total comprehensive loss of $4.6 million for the twelve months ended 31 December 2013 compared to a loss of $11.1 million for the same period in 2012. Steps taken in 2012 to reduce our overhead contributed to administrative expense falling by $2.0 million to $5.5 million in 2013 compared with the same period in 2012.

Cash out-flow from operating activities before changes in non-cash working capital was $4.8 million for the twelve months ended 31 December 2013 compared to a cash outflow from operating activities of $6.8 million for the same period in 2012. The Group's capital expenditure during the twelve month period ended on 31 December 2013 amounted to $0.2 million, compared to $1.5 million incurred for the same period in 2012.

With cash and short-term investments of $25.4 million as at 31 December 2013, and no debt, the Group is well funded to meet its future work commitments.

Corporate

We are pleased to announce the appointment of Mr TK Ananth Kumar as a non-executive director of Hardy's wholly owned subsidiary Hardy Exploration & Production (India) Inc (HEPI).

Mr Kumar has over thirty years experience in the oil and gas sector in financial, commercial and business aspects, recently superannuated as Director Finance of Oil India Limited a $5 billion Navaratna Company and India's second largest exploration and production state enterprise. He is a qualified chartered accountant, a member of the Institute of Chartered Accountants of India and has a Bachelors degree in Commerce from Osmania University, India.

Mr Kumar's recent achievements include leading the Government of India'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 which was oversubscribed over 31 times, one of the most successful government IPO's in India.

Mr Kumar will bring to the Company a wealth of financial management experience as well as investor relations, corporate finance and capital market awareness and strong interaction with key stakeholders across the spectrum of the Company's business.

In addition to his role at Oil India, Mr Kumar was also previously on the board of Brahmaputra Polymers and Chemicals Limited and earlier Director Finance, Numaligarh Refinery Limited (Assam) and General Manager - Finance, Hindustan Petroleum Corporation Limited.

Mr Ramasamy Jeevanandam, the Chief Financial Officer of HEPI resigned effective 6 July 2013. Mr Jeevanandam joined Hardy in 1997 in a commercial role for Indian operations and has been the CFO and a Director of HEPI since 2000. We would like to thank Mr Jeevanandam for his considerable contributions to Hardy. His expertise and leadership have been instrumental in advancing a number of our strategic objectives and we wish him every success in the future.

In the interim, Mr Ian MacKenzie, Chief Executive Officer, and Mr Richard Galvin, Treasurer & Corporate Affairs Executive, have assumed his responsibilities for overall management and leadership of the Indian operation until a suitable successor is appointed. Hardy has outsourced the finance and accounting functions to an India based entity engaged in providing accounting and finance related activities.

Risk management

The Company has previously established a risk and uncertainties review process involving the identification of key risks and implementation of strategies to mitigate these risks. The following principal risks facing the Group in the near-term remain: exploration risk inherent to any oil and gas business; the timing or execution of activities may not commence as forecast and delays may be experienced, and; the possible relinquishment of exploration and appraisal acreage.

Outlook

Our primary objectives remain to secure key stakeholders' approvals and initiate activity that will take us closer to realising production from our portfolio of assets. We have clear deliverables for each asset and management are fully accountable for the implementation of the agreed plans. Energy demand in India is growing at an exceptional rate and it is clear that the GOI is committed to facilitating the timely exploitation and development of the country's natural resources.

The Group remains in a strong working capital position from which to fund its planned work activity.

Alasdair Locke

Chairman

26 February 2014

REVIEW OF OPERATIONS

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

Summary table - The table below provides a brief comparison of our stated operational objectives for 2013 and our progress to-date:

Key Performance Indicators

The Board of Hardy have identified several key performance indicators which were revised in 2012. The key performance indicators for 2013 are summarised below;

* Administrative expense less - share based payments, foreign exchange charges, partner recharge

+excludes restructuring charge of $0.7 million

Health Safety and Environment

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

Block KG-DWN-2003/1 (D3): Exploration (HEPI 10 per cent interest)

Operations -The joint venture continued to undertake a number of geotechnical studies, including the interpretation of PSDM seismic data, with a focus on assessing the potential of the eastern area of the block and high grading prospects, including testing deeper plays.

In accordance with the GOI extension policy, the joint venture applied to extend the block's Phase I exploration period to December 2014.

The Ministry of Defence (via the Directorate General of Hydrocarbons (DGH)) has communicated that the southwest portion of the D3 block falls under a DRDO designated impact zone. The operator continued discussions with DGH and DRDO to clarify any conditions that may be imposed on the impact zone and agree a way forward.

A revised proposal for the DOC for the Dhirubhai 39 and 41 natural gas discoveries, submitted in 2012, remained under review by the GOI. The proposed development plan provides for a dry gas, sub-sea cluster development with the flexibility to add in additional wells and to include possible discoveries in the adjoining area.

Outlook - Exploration drilling is expected to commence in 2014 and the GOI's review of the D3 DOC proposal will likely continue through to the completion of exploration Phase I.

The D3 joint venture operator, Reliance Industries Limited (Reliance) is currently operating the deep-water drill ships Dhirubhai Deepwater KG2 and Dhirubhai Deepwater KG1 on the east coast of India. Correspondence with the operator indicates that drilling on D3 is to commence in the second quarter of 2014. The GOI's review of the D3 DOC proposal will likely continue through 2014.

Background - Situated in the Krishna Godavari Basin, a prolific petroleum province on the East coast of India, the D3 exploration licence encompasses an area of 3,288 km2, in water depths of 400 m to 2,200 m, and is located approximately 45 km offshore. The D3 block is operated by Reliance which holds a 60 per cent participating interest while BP and Hardy hold participating interests of 30 per cent and 10 per cent respectively. To date, four consecutive gas discoveries have been made via the Dhirubhai 39, 41, 44 and 52 (KGV-D3-A1, B1, R1 and W1) exploration wells. The joint venture has acquired approximately 3,250 km2 of 3D seismic data over the block.

Block CY-OS 90/1 (PY-3): Oil Field (HEPI 18 per cent interest - Operator)

Operations - Following a number of technical and operating committee meetings, regarding a comprehensive FDP, technical consensus has been achieved. Discussions between partners continued to establish an acceptable commercial framework to proceed with the recommencement of production.

Outlook - Secure approval of the FDP from the GOI after which we intend to target the recommencement of production in early 2015. This will be achieved by securing the appropriate offshore production and storage facilities and initiating planning for a development drilling programme.

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

Block GS-OSN-2000/1 (GS-01): Appraisal (HEPI 10 per cent interest)

Operations - The operator recently notified the GOI of its intention to relinquish its 90 per cent participating interest in the block. Subsequently, Hardy has notified the operator of its election to acquire the operator's interest in accordance with the block's joint operating agreement. Assignment of the operator's participating interest is pending.

A detailed FDP, for the Dhirubhai 33 natural gas discovery, was submitted to GOI for review and approval in 2012. The development plan provides for several dry tree wells, an unmanned platform, multiphase pipeline to shore and onshore processing and export facilities.

Outlook - Conclude discussions with our joint venture partner to acquire their participating interest in the block. Following this, a priority will be to secure GOI approval of the FDP and initiate planning for development.

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

Operations - On 4 February 2013 the Company announced that the joint venture was successful in obtaining an extension of the CY-OS/2 licence (award detail provided in background). Hardy subsequently submitted a request for the GOI to comply with the Hon'ble Tribunal's award and restore the block to the CY-OS/2 joint venture. On 2 August 2013, the Company received notification that the GOI has filed an appeal with the Delhi High Court of India.

In December 2013, Hardy filed an execution petition with the Delhi High Court. The Company believes that it has a strong position as the unanimous international award is well reasoned and, as per the India Arbitration & Conciliation Act 1996, may not be subject to appeal in Indian courts.

Outlook - We will continue our endeavours to ensure that the GOI restores the block to the CY-OS/2 joint venture in a timely manner. The GOI appeal is being heard in the Delhi High Court and this is likely to continue through 2014. Hardy will recommence work on the appraisal of the Ganesha-1 natural gas discovery once the block has been restored to the CY-OS/2 joint venture.

Background - Hardy is the operator of the CY-OS/2 exploration block and holds a 75 per cent participating interest*, through its wholly owned subsidiary Hardy Exploration & Production (India) Inc and Gas Authority of India Limited (GAIL) holds the remaining 25 per cent participating interest. The block is located in the northern part of the Cauvery Basin immediately offshore from Pondicherry, India and covers approximately 859 km2. The licence comprises of two retained areas with the Ganesha-1 natural gas discovery located in the northern area, which comprises an area of approximately 300 km2.

* In the event of a declaration of commerciality, the Government of India's nominee is entitled to assume a 30 per cent participating interest in the block. As a result Hardy's participating interest would be 52.5 per cent.

Ganesha-1 - The natural gas discovery Ganesha-1, announced in January 2007, was drilled to a depth of 4,089 metres, encountering sandstone reservoir within the Cretaceous section. The well flow tested at a peak rate of 10.7 mmscfd. The Company published a competent person report, prepared by Gaffney, Cline & Associates, dated March 2011, which estimates gross 2C Contingent Resources of approximately 130 BCF.

A brief summary of the Hon'ble Tribunal's award is provided below;

Dispute -Hardy along with GAIL and Oil & Natural Gas Corporation (ONGC) are a party and operator to a Production Sharing Contract (PSC) for the CY-OS/2 block. Hardy holds 75 per cent participating interest in the block. Hardy and GAIL declared a gas discovery on 8 January 2007 which discovery qualified as Non Associated Natural Gas (NANG) under the terms of the PSC. The Government of India, Ministry of Petroleum and Natural Gas (MOPNG) however, stated that the discovery being Oil and the commerciality of the block not having been declared within 24 months from the date of the notification of the discovery, the block stood relinquished. Hardy had disputed the characterisation of the discovery as oil and the consequential relinquishment.

Hon'ble Tribunal - This dispute was referred to Arbitration under the PSC to a Tribunal consisting of 3 Arbitrators who were former Chief Justices of India. The Hon'ble Tribunal passed the award on 2 February 2013 at Kuala Lumpur, Malaysia.

Award summary - The Hon'ble tribunal has awarded and directed as follows:

a) The Ganesha-1 discovery made by Hardy and GAIL is NANG;

b) The order of relinquishment by the MOPNG was illegal, being on the erroneous impression that the discovery was oil;

c) That the parties shall be immediately relegated to the position in which they stood prior to the order of relinquishment and the block shall be restored to Hardy and GAIL;

d) Hardy shall be entitled to a period of 3 years from the date on which the block is restored to it, to carry out further appraisal;

e) MOPNG shall pay to Hardy and GAIL interest at the simple rate of 9 per cent per annum on the amount of Rs.5.0 billion spent by them on the block, from the date of relinquishment till the date of the award (as at 31 December 2013 - $22.2 million net to Hardy).

f) From the date of award interest will accrue at a rate of 18 per cent per annum on the amount of Rs.5.0 billion until such time as the block is restored to the parties (as at 31 December 2013 - $9.9 million net to Hardy).

FINANCIAL REVIEW

Accounting reference date

The Group maintains different accounting reference dates for the Company and its India based activities. To streamline the Group's reporting process, the Board decided to synchronise the Group's accounting reference date to 31 March. As a result of this change, the Group's Audited results for the 15 month period to 31 March 2014 will be announced by the end of June 2014.

Overview

In the twelve months ended 31 December 2013, the Group recorded an operating loss of $5.7 million and exited the period with cash and short-term investments of $25.4 million with no debt. The Company currently plans to drill up to two exploration wells in 2014 which will be funded from existing cash resources.

Twelve months results

The Group recorded a total comprehensive loss of $4.6 million for the twelve months ended 31 December 2013. No dividends were paid or declared during the period.

Administrative expense

Administrative expense was $5.7 million compared to $7.5 million for the same period in 2012. Measures taken to reduce costs in 2012, including the move of our corporate office to Aberdeen, Scotland from London, and the reduced staff in the UK and India, contributed to the fall. Administrative expense in 2012 included a provision and restructuring costs amounting to $1.7 million. In 2013, administrative expense provided for an unrealised foreign exchange loss of $0.8 million related to India Rupee denominated term deposits, including the PY-3 site restoration fund, and an inventory write-down of $0.3 million.

Operating loss

The Group is reporting an operating loss of $5.7 million for the twelve months ended 31 December 2013 compared with a loss of $13.2 million for the same period in 2012. Hardy had incurred unsuccessful exploration costs of $5.4 million in 2012.

Interest and investment income

Interest and investment income decreased by $0.5 million to $0.4 million for the twelve months ended 31 December 2013. In 2012 the Group had realised interest on overpaid tax of $0.1 million.

Taxation

No current tax was payable for the twelve months ended 31 December 2013. The Group has recorded a deferred tax credit of $1.1 million against the pre tax loss of $5.7 million for the twelve months ended 31 December 2013. This compared to a deferred tax credit of $1.6 million for the same period in 2012. The deferred tax asset is expected to be realised with the recommencement of production from the PY-3 oil field and also from the production of oil and gas from those areas which are available for commercial development.

Total Comprehensive loss

The Group recorded total comprehensive loss of $4.6 million for the twelve months ended 31 December 2013 compared to a total comprehensive loss of $11.1 million for the same period in 2012. The reduction is attributed to a significant reduction in administration expense in 2013 and the Group incurring unsuccessful exploration costs of $5.4 million in 2012.

Cash Flow from operating activities

The Group's net cash outflow from operating activities is $4.3 million for the twelve months ended 31 December 2013 compared with $6.5 million for the same period in 2012.

Capital Expenditure

The Group's capital expenditure during the twelve months ended 31 December 2013 amounted to $0.2 million compared to $1.5 million incurred for the same period in 2012. Capital expenditure was primarily associated with geophysical studies undertaken by the operator of the Group's D3 exploration licence.

Cash and Short-term Investments

The Group has cash and short-term investments of $25.4 million on 31 December 2013 compared to $29.1 on 31 December 2012. The Group has no debt.

Summary statement of financial position

The Group's non-current assets increased from $95.1 million at 31 December 2012 to $96.0 million at 31 December 2013. Current assets represent the Group's cash resources, trade and other receivables and inventories have decreased from $32.5 million as at 31 December 2012 to $28.0 million as at 31 December 2013. Current liabilities which are principally trade and other accounts payable declined by $0.3 million to $5.8 million on 31 December 2013. The Group has considered a contingent asset of $32.1 million on the interest cost awarded by the arbitration tribunal for the block CY-OS/2 (note 7).

Dividend

The Directors do not recommend the payment of a dividend in the foreseeable future.

Accounting policies

The Group's significant accounting policies and details of the significant judgements and critical accounting estimates are disclosed within the notes to the financial statements. The Group has changed its accounting reference date to 31 March. The Group has not made any other change to its accounting policies in the twelve months ended 31 December 2013.

Liquidity risk management and going concern

The Company closely monitors and manages its liquidity risk. Cash forecasts are regularly produced and sensitivities run for different scenarios including changes in timing of developments and cost overruns of our exploration activity. At 31 December 2013, the Company had liquid resources of approximately $25.4 million, in the form of cash and short-term investments, which is available to meet ongoing capital, operating and administrative expenditure. The Company's forecasts, taking into account reasonably possible changes as described above, show that the Company will have sufficient financial resources for the 12 months from the date of approval of the 2013 Interim Statement and Accounts. At the present time, the Group does not have any debt.

RISKS AND UNCERTAINTIES

The Group has a systematic approach to risk identification and management which combines the Board's assessment of risk with risk factors originating from and identified by the Group's senior management team. The processes implemented by the Board for the identification, mitigation of risk and uncertainties are outlined on page 25 of the Company's 2012 Annual Report and Accounts.

PRINCIPAL RISKS

The Board has identified principal risks and uncertainties for 2013 and establishing clear policies and responsibilities to mitigate their possible negative impact to the business, a summary of which is provided below:

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

· the interim consolidated financial statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the EU; and

· give a true and fair view of the assets, liabilities and loss of the group; and

· the Interim report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first twelve months of the financial year and their impact on the set of interim consolidated financial statements; and a description of the principal risks and uncertainties for the remaining twelve months of the year.

On behalf of the Board

Ian MacKenzie,

Chief Executive Officer

26 February 2014

INDEPENDENT REVIEW REPORT TO HARDY OIL AND GAS PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the 12 months ended 31 December 2013 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related explanatory notes numbered 1 to 12. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company, as a body, in accordance with our instructions. Our review has been undertaken so that we might state to the company those matters we are required to state to them in a review 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, for our work, for this report, or for the opinions we have reached.

Directors' Responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note one, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 12 months ended 31 December is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Crowe Clark Whitehill LLP

Statutory Auditor

London

26 February 2014

HARDY OIL AND GAS PLC

Consolidated Statement of Comprehensive Income

For the period ended 31 December 2013

HARDY OIL AND GAS PLC

Consolidated Statement of changes in Equity

For the period ended 31 December 2013

HARDY OIL AND GAS PLC

Consolidated Statement of Financial Position

For the period ended 31 December 2013

HARDY OIL AND GAS PLC

Consolidated Statement of Cash Flows

For the period ended 31 December 2013

HARDY OIL AND GAS PLC

Notes to Interim Consolidated Financial Statements (Unaudited)

1. Accounting Policies

i) Basis of preparation

These interim consolidated financial statements are for the twelve months ended 31 December 2013 and have been prepared in accordance with International Accounting Standard 34 "Interim Financial Statements". The accounting policies applied are consistent with International Financial Reporting Standards (IFRS) adopted for use by the European Union. The accounting policies and methods of computation used in the interim consolidated financial statements are consistent with those used in the Company's Annual Report for 2012 and are expected to be applied for the year ended 31 March 2014.

ii) Cyclicality

The interim results for the twelve months ended 31 December 2013 are not necessarily indicative of the results to be expected for the year ended 31 March 2014. The operations of Hardy Oil and Gas plc are not affected by seasonal variations.

2. Critical Accounting Estimates and Judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are addressed below:

i) Intangible assets - exploration

Hardy has been awarded costs and interest after the conclusion of the arbitration on the CY-OS/2 block, in which it holds a 75 per cent participating interest, and interest is to continue to accrue on the investment until the block is restored to the parties. As at 31 December 2013 Hardy's share of the award and accrued interest totalled approximately $32.1 million and has been disclosed as a contingent asset. This is regarded as a significant area of judgment and full details are disclosed in note 7 to these financial statements.

ii) Decommissioning

The liability for decommissioning is updated to the current cost estimates of decommissioning. Accordingly, the provision made in the books will reflect the risk free discounted future cost for decommissioning and this is an annual adjustment based on the changes in costs as a result of technical advancements and other factors.

iii) Deferred Tax Asset

The deferred tax asset will be realised with the recommencement of production from PY-3 field and also from the production of oil and gas from those areas which are available for commercial development. Further details are contained in note 4.

3. Segment Analysis

The Group is organised into two business units: India and United Kingdom. The India 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.

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

4. Taxation

Indian operations of the Group are subject to a tax of 42.024 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. 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.

5. Loss per share

Loss per share is calculated on a loss of US$4,602,939 for the period ended 31 December 2013 (FY2012: US$11,069,191) on a weighted average of 73,065,162 ordinary shares for the period ended 31 December 2013 (FY2012: 72,984,352). No diluted loss per share is calculated.

Comprehensive loss per share is calculated on a loss of US$4,602,939 for the period ended 31 December 2013 (FY2012: US$11,069,191) on a weighted average of 73,065,162 ordinary shares for the period ended 31 December 2013 (FY2012: 72,984,352). No diluted loss per share is calculated.

6. Property, plant and equipment

7. Intangible assets - exploration

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

The arbitrators ruled on 2 February 2013 that the discovery was a gas discovery and consequently that the order for the relinquishment of the block was illegal. The arbitrators have ordered the Government of India to restore the block to Hardy and its partners and to allow them a period of three years from the date of restoration to complete the appraisal programme. In addition, the arbitrators awarded costs of $0.2 million and interest on the exploration expenditure incurred to date. As at 31 December 2013, Hardy's 75 per cent share of the interest awarded is approximately $32.1 million. On 2 August 2013 the Government of India filed an appeal, of the arbitration award, with the High Court Delhi, therefore the cost and interest award is currently treated as a contingent asset until receipt is virtually certain.

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

8. Share capital

The Company has authorised share capital of 200 million US$ 0.01 ordinary shares. Changes in issued and fully paid ordinary shares during the twelve months ended 31 December 2013 are as follows:

Restricted shares issued during the period consist of 40,710 shares issued to non-executive directors on 15 March 2013.

9. Share Options

Changes in outstanding share options during the twelve months ended 31 December 2013 are summarised below:

Detail regarding the estimated fair value of granted share options has been set out in note 8 (page 61) of the Company's 2012 Annual Report and Accounts.

10. Contingent liabilities

The Group issues guarantees in respect of obligations under various Production Sharing Contracts (PSC) in the normal course of business. A bank guarantee for US$2,292,650 has been issued to the GOI as at 31 December 2013. The Bank Guarantee was obtained by placing a fixed deposit of US$1,855,500. The parent company guarantees the Group's obligation under various PSCs to the Government of India. The guarantee is deemed to have negligible fair value and are therefore accounted for as contingent liability.

11. Dividends

The Board of Directors do not recommend the payment of an interim dividend for the period ended 31 December 2013.

12. Approval of interim Consolidated Financial Statements

These interim consolidated financial statements have been approved by the Board of Directors on 26 February 2014.

GLOSSARY OF TERMS

NOTES TO THE EDITORS

Hardy Oil and Gas plc is an upstream oil and gas company focused in India. Its portfolio includes a blend of exploration, appraisal, and production assets. Hardy's goal is to evaluate and exploit its asset base with a view to creating significant value for its shareholders.

Hardy Oil and Gas plc is the operator of the PY-3 oil field (shut-in July 2011) located offshore India's east coast in the Cauvery basin. Hardy also has interests in three offshore exploration blocks in India's Saurashtra, Cauvery, and Krishna Godavari basins.

Hardy is incorporated under the laws of the Isle of Man and headquartered in Aberdeen, UK. Ordinary shares of Hardy were admitted to the Official List and the London Stock Exchange's market for listed securities effective 20 February 2008 under the symbol HDY.

The Company's Indian assets are held through the wholly owned subsidiary Hardy Exploration & Production (India) Inc, located in Chennai, India.

For further information please refer to our website at www.hardyoil.com