Hindustan Oil Exploration Company Limited
Q1 FY26
Call date · August 18, 2025
1 · Management Commentary
Key Positives
- Kharsang block: 4 of 9 planned development wells drilled; 3 wells hooked up, adding 350 barrels/day; program to complete 9 wells by Dec 2025, targeting 1,000 barrels/day incremental production.
- Dirok field: Gas sales up to 20 mmscfd (from 15 mmscfd); sales volume for the quarter at 0.41 Bcf (vs 0.37 Bcf prior); condensate production increased.
- Environmental clearances and drilling progress across multiple blocks (Kharsang, Dirok, Greater Dirok, Umatara, Cambay).
- B-80: Both D1 and D2 wells flowing; vessel re-moored and production resumed post-monsoon.
- PY-3 (Cauvery): PetroVietnam review confirms upside; plan for 4 new wells.
- Standalone and consolidated EBITDA remain robust; debt rating outlook revised to “positive”.
Key Negatives
- B-80 production disrupted in June due to monsoon; lower oil and gas output vs previous quarter.
- Dirok and B-80 gas prices realized lower than previous quarter.
- Demand constraints at Dirok due to limited regional offtake; grid connectivity timeline remains uncertain.
- Total expenses increased in consolidated accounts; profit after tax lower than previous quarter (excluding year-end adjustments).
Forward Guidance
- Capex plans: INR 1,250 crores over 2–2.5 years; INR 250 crores earmarked for Northeast region.
- Drilling: 18 shallow and 3 deep wells in Kharsang, 4 in Dirok, 2 in Greater Dirok, 2 each in North Balol and Asjol; 10 offshore wells (3 in PY-1, 3 in B-80, 4 in B-15).
- B-80: Workover of D1 well post-monsoon; platform installation and 3 new wells planned.
- PY-3: Drilling to commence in last quarter FY26; 4-well program.
- Grid connectivity for Dirok expected by Q3/Q4 FY26; demand ramp-up anticipated post-connection.
- Oil inventory (410,000 barrels) to be auctioned by end-August; expected realization >INR 220 crores.
- Production target post-capex: 10,000 barrels/day (company share).
- Debt to remain at INR 250 crores, with aim to be debt-free in 2 years.
2 · Q&A Highlights
Q 1 (Composite): What is the status and timeline for Northeast Gas Grid connectivity, and how will it impact production and sales?
A (Management):
• Grid expected to be operational by Q3/Q4 FY26; local demand to increase post-connection.
• Some regulatory and technical issues remain, but government and stakeholders are progressing.
• Once connected, demand constraints should ease and seasonality reduce.
Q 2 (Composite): What is the status and plan for monetizing the large oil inventory at B-80?
A (Management):
• 410,000 barrels in stock; auction process via M-Junction underway, to be completed by end-August.
• Expected realization is $25–26 million or >INR 220 crores.
Q 3 (Composite): What are the capex plans, funding, and expected production post-investment?
A (Management):
• Total capex of INR 1,250 crores over 2–2.5 years; debt to remain at INR 250 crores, aiming for debt-free status in 2 years.
• Targeting 10,000 barrels/day production (company share) after all drilling programs.
Q 4 (Composite): What is the drilling and development plan for key blocks (Kharsang, Dirok, B-80, PY-3)?
A (Management):
• Kharsang: 9 wells by Dec 2025; 4 drilled, 5th in progress.
• Dirok: Drilling in North Dirok and 3 more development wells planned.
• B-80: Workover of D1 well post-monsoon; platform and 3 new wells to be drilled.
• PY-3: 4-well program (3 on platform, 1 exploration); drilling to start last quarter FY26.
Q 5 (Composite): What are the expected costs for new wells and platforms?
A (Management):
• B-80 new well (platform): ~$10 million (excluding platform).
• Kharsang well: ~$2 million each.
• PY-3: 3 platform wells ~$30 million; 4 wells total capex not to exceed $50 million.
Q 6 (Composite): Is there seasonality in production and financials?
A (Management):
• Yes, due to monsoon-related shutdowns and local demand fluctuations; year-on-year comparison more appropriate.
• Seasonality expected to reduce post-grid connectivity and with improved offshore operations.
Q 7 (Composite): What is the status of the PY-3 arbitration and other regulatory matters?
A (Management):
• Tribunal for PY-3 arbitration yet to be constituted; timeline not known.
3 · Other Key Numbers
- Kharsang block: 4 wells drilled, 3 hooked up; 350 barrels/day incremental (total field production, HOEC share 35%).
- Kharsang Q1 FY26 average production: 450 barrels/day (vs 351 barrels/day in Q4 FY25).
- Dirok gas sales: 20 mmscfd; Q1 sales volume 0.41 Bcf (vs 0.37 Bcf prior); condensate 8,893 barrels (vs 6,603 prior).
- Dirok gas price realized: US$ 7.54/MMBtu (vs US$ 8.45/MMBtu prior).
- B-80 production: 48,406 barrels oil and 0.37 Bcf gas (vs 60,000 barrels oil and 0.4 Bcf gas prior).
- B-80 gas price realized: US$ 11.4/MMBtu (vs US$ 12.09/MMBtu prior).
- Oil inventory: 410,000 barrels.
- Standalone revenue: INR 83.48 crores (vs INR 83.37 crores prior); with adjustments, prior quarter INR 142.61 crores.
- B-80 revenue: INR 38.58 crores (gas sales) vs INR 44.15 crores prior.
- Dirok revenue: INR 36.97 crores vs INR 31.47 crores prior.
- Standalone EBITDA: INR 27.24 crores (vs INR 24.38 crores prior; prior with adjustment INR 148.32 crores).
- Standalone PAT: INR 48.21 crores (vs INR 130 crores prior with adjustment).
- Consolidated revenue: INR 85.5 crores (vs INR 85.54 crores prior).
- Consolidated EBITDA: INR 35.02 crores (vs INR 38.74 crores prior; prior with adjustment INR 61.85 crores).
- Consolidated PAT: INR 43.87 crores (vs INR 51.16 crores prior with adjustment).
- Field operating expenses: INR 55.8 crores (vs INR 62.59 crores prior).
- Statutory levies: INR 12.13 crores (vs INR 13.5 crores prior).
- Total cost: INR 66.28 crores (vs INR 48.01 crores prior).
- India Ratings: “IND A”, outlook revised to “positive” for INR 50 crores bank loan.
- Capex for Northeast: INR 250 crores over 2 years.
- Total targeted capex: INR 1,250 crores over 2–2.5 years.
- Expected post-capex production: 10,000 barrels/day (company share).
- Debt: INR 250 crores, to be repaid within 2 years.