Hindustan Oil Exploration Company Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

3 Alan Joseph Anzade, Baroruchi Mishra, Cyril Paul

Analysts

8 Anubhav Goel, Gautam Rajesh, Manan Patel, Manpreet Arora, Nishant Maheshwari, Nirbhay Mahawar, Riddhesh Gandhi, Shubham Jain

Financials & KPIs

Geographic & Segment Commentary

• BAT (Offshore – West Coast): Production impacted by higher water cut from one producing well; compressor trains reconfigured to lower suction pressure (parallel to series), currently in test mode with full production expected by end of August. Workovers on D1 and D2 wells on track; RIC award expected this month, rig mobilization by October. HVCL crude liquidation continues to third parties, though slower than expected.

• B-15 (New Offshore Block): FDP under preparation with 3-4 concepts under evaluation, including tie-in to existing ONGC platform to reduce capital costs. Drilling planned for FY28; reserves of 16 million BOE with upside potential after reprocessing and first well.

• Dirok (Assam): Operator with ~27% stake; production at only 50-70% of wellstock capability due to evacuation constraints. PNGRB has made the DNPL line a common carrier; degraded sections replaced, hot tapping to restore capacity to 2.5 MMSCMD from current degraded 1.0-1.2 MMSCMD, targeted by December. Reservoir pressure of 3,000 PSI from 6 wells speaks to prospectivity.

• Karsang (Assam): Production doubled YoY from 9-well program; 5-6 workovers completed on the 23 identified idle wells. Second phase of 9 wells imminent—rig identified, award pending, tubulars ordered (1-2 months). Virgin gas found in two wells but monetization delayed by lack of pipeline; 24 km route survey tender closes tomorrow, pipeline targeted in 14-18 months subject to forest clearances.

• PY1 (East Coast): Serious production loss from 3 wells; rigless intervention contract awarded for short-term uplift. Two new wells contingent on take-or-pay gas agreements with IOCL/GAIL before spudding, given past water influx from shut-in wells.

• Gujarat (Asdol, Balol, Palit): New belt technology trial at Balol (belt soaks oil and squeezes it out); Palit facility debottlenecked with thermic heaters; 20-30% production increase expected going forward, 5-6% already delivered. Sucker rod pumps ordered for Tandey assets; new exploration block near Palaje in final approval stage.

Company-Specific & Strategic Commentary

• Pipeline evacuation & monetization: DNPL common carrier status removes NRL exclusivity; hot tapping underway with AGCL to bypass NRL shutdown, 16-20 week lead time; NRL's 200-meter connection line not a major constraint. Post-December, Dirok gas can be sold on gas exchange in as little as 3 days without firm buyers.

• BAT development campaign: Integrated program of 2 workovers (10-20 days each) followed by 3 infill wells (30-40 days each) to complete by March-April 2027, with jacket and production deck installation; target ~11,000 bpd (range 8,900-13,000) by June 2027. 2P reserves of 26 million BOE with only 1.5-2 million produced to date.

• Capital allocation & funding: Debt raising underway (banks and investors) to fund BAT workovers and 3 wells unhindered; internal cash flows will fund Karsang and PY1 intervention; gearing at 0.04 provides headroom. Post November-December 2027, cash flows expected sufficient to self-fund B-15.

• Regulatory tailwinds: Samudra Manthan scheme under evaluation for shallow-water drilling support; PNGRB common carrier designation for DNPL; ongoing engagement with Tamil Nadu government on exploration protests.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Dirok/DNPL Pipeline Timeline

• Question: Status and expected timeline for Northeast grid connectivity that Dirok depends on; is pipeline interconnection complete? (Gautam Rajesh)
• Answer: Target December completion. AGCL has adopted hot tapping (no longer requiring NRL shutdown); degraded sections of DNPL laid, tie-back via hot taps has 16-20 week lead time. NRL's 100-200 meter pipeline connection is within their premises and "not such a big thing." (Baroruchi Mishra)

BAT Production, Workovers & HPCL Dispute

• Question: How is BAT production and monetization progressing given HPCL dispute; when resolved? (Gautam Rajesh)
• Answer: Production ongoing without a shutdown day; compressor reconfiguration to series enables lower suction pressure and continued flow, full production by end of August. Workover campaign: 2 wells by Nov-Dec 2026, 3 wells by June 2027. HVCL crude inventory expected fully liquidated by end Oct-early Nov. (Baroruchi Mishra)

Inventory Mark-to-Market Losses

• Question: How much was the P&L impact of mark-to-market losses on held inventory? (Shubham Jain)
• Answer: ~15% of crude sold; losses so far ₹4-6 crore; total expected loss ~7-10% on remainder, but "please don't take it as guidance." Management declined to provide adjusted EBITDA figure citing technical complexity of inventory/profit petroleum/sale adjustments. (Baroruchi Mishra)

BAT Workover Confidence vs History

• Question: What gives confidence this BAT workover will succeed when past attempts (chemicals, equipment) haven't? Is there structural damage? (Riddhesh Gandhi)
• Answer: Prior interventions were non-rig based on subsea wells; this is the first physical rig intervention to shut off water zones and reperforate. 2P reserves of 26M BOE with only 1.5-2M produced remain. Risks exist (tubing stuck, reservoir behavior) but planning minimizes them. (Baroruchi Mishra)

Capex Budget Increase

• Question: Is higher Capex from escalating costs or incremental opportunities? (Riddhesh Gandhi)
• Answer: Rig shortage from rising oil prices has increased contingencies—budget is a facility ceiling, not a commitment. Debt raising underway to fund BAT workovers and 3 wells unhindered; internal cash flows will fund post-workover activity. (Baroruchi Mishra)

Asset-Wise Gas Realizations

• Question: What are the asset-wise gas realizations; blended figure is hard to model with Dirok scaling? (Manpreet Arora)
• Answer: Blended $12/MMBtu; BAT ~$16.50/MMBtu on exchange (IGX), Dirok ~$12.50, PY1 $10-12. Management committed to providing asset-wise realizations in next presentation—data readily available from JV reporting obligations. (Baroruchi Mishra, Alan Joseph Anzade)

Field Priority & Funding

• Question: With funding crunch, which is priority—Dirok, PY1, or BAT? Could BAT new wells be deferred if workovers underperform? (Anubhav Goel)
• Answer: Karsang is self-funding; PY1 rigless intervention funded internally. BAT depends on debt raised; drilling would proceed sequentially—first well tested and logged before second/third. PY1 two new wells will only be drilled after firm gas sales agreements given 15-year-old water influx experience. (Baroruchi Mishra)

DNPL Capacity & Competition

• Question: Who competes for common carrier capacity; how much can Dirok ramp once online? (Manan Patel)
• Answer: Dirok's logged-in volumes are 0.5-0.7 MMSCM gross; capacity will more than double from degraded 1.0-1.2 to 2.5 MMSCMD, sufficient to sell all wellstock gas. No quantity cap issue—the constraint is the pipeline's 90-bar pressure containment (now operating at 40-50 bars due to degradation). (Baroruchi Mishra)

HPCL Loss Attribution

• Question: Given the as-is agreement, why not pass on the 7-10% loss liability to HPCL? (Riddhesh Gandhi)
• Answer: Both parties agreed to a collaborative off-take arrangement after reversing the sale; HPCL has been cooperative, additional guarantees created. Management prefers amicable conciliation (Chief Justice appointed) over adversarial renegotiation with a long-term partner. (Baroruchi Mishra)

Dirok Gas Evacuation & Ramp-Up Speed

• Question: Once DNPL is ready, will there be a lag for buyer contracts before ramp-up? (Anubhav Goel)
• Answer: No—gas can be sold on the exchange in 3 days without firm buyers; technical connection to the national gas grid is the only requirement. Intermediate buyers could charge marketing margin, but exchange sales are viable. (Baroruchi Mishra)

Tamil Nadu Drilling Protests

• Question: What is the status of protests over drilling two wells in Tamil Nadu? (Nishant Maheshwari)
• Answer: Protests exist but central government (MoPNG) is the final arbiter for drilling approvals, which are already in place for the entire field. Management has engaged with state government and shared environmental approvals; expects issue to subside. (Baroruchi Mishra)

Key Takeaway

Standalone revenue rebounded to ₹117.5 crore from -₹194 crore (HPCL reversal impact), aided by Karsang production up 41% QoQ to 17,400 BOE and crude realizations of $95.50/bbl; PBT of ₹12.54 crore benefited from ₹19.37 crore other income (escrow release, insurance, acquisition top-up). Management's focus remains on executing the BAT campaign—2 workovers by Nov-Dec 2026 and 3 infill wells by June 2027 targeting 11,000 bpd (8,900-13,000 range)—funded via debt at 0.04 gearing. Dirok evacuation unblocking via DNPL hot tapping to 2.5 MMSCMD by December is the key near-term catalyst, with exchange-based gas sales enabling immediate monetization. Karsang phase-2 drilling starts within 1-2 months, though the 24 km evacuation pipeline (14-18 months) delays gas monetization. Watch points: BAT workover success, 7-10% loss on remaining HVCL inventory (85% unsold), PY1 take-or-pay agreements, and funding closure for the offshore campaign.