Hindustan Oil Exploration Company Limited — Q1 FY26 earnings call

Call held 18 Aug 2025

Management summary

Hindustan Oil Exploration reported mixed results for Q1 FY26, with increased production from Kharsang and Dirok volumes, but declines in B-80 production and gas realizations. The company is aggressively pursuing a two-year capex plan of INR 1,250 crores to boost overall production to 10,000 bpd. Monsoon disruptions impacted B-80, and the company is working to liquidate 410,000 barrels of oil inventory.

Highlights

  • Kharsang block production increased to 450 barrels per day (bpd) in Q1 FY26, up 28.2% from 351 bpd in Q4 FY25, with 3 of 4 new wells hooked up.

  • Dirok gas sales volume grew 10.8% QoQ to 0.41 Bcf, and condensate production increased 34.7% QoQ to 8,893 barrels.

  • The company plans to add 1,000 bpd production from Kharsang by end of 2025 by completing 9 development wells.

  • An overall capex of INR 1,250 crores is planned over the next two years to achieve a target production of 10,000 bpd for the company's share.

  • India Ratings reaffirmed 'IND A' rating and revised outlook from 'stable' to 'positive' for INR 50 crores bank loan.

Concerns

  • Dirok gas price realized declined by 10.9% QoQ to US$ 7.54 per MMBtu.

  • B-80 oil production decreased by 19.3% QoQ to 48,406 barrels, and gas production declined by 7.5% QoQ to 0.37 Bcf.

  • B-80 production was disrupted in mid-June 2025 due to monsoon fury, leading to FSO de-mooring.

  • Consolidated PAT (including adjustments) decreased by 14.2% QoQ to INR 43.87 crores.

Key financials

  1. Standalone Revenue ₹83.48 Cr +0.13%QoQ
  2. Consolidated Revenue ₹85.5 Cr -0.05%QoQ
  3. Standalone EBITDA ₹27.24 Cr +11.7%QoQ
  4. Consolidated EBITDA (excl. adj.) ₹35.02 Cr -9.6%QoQ
  5. Consolidated PAT (incl. adj.) ₹43.87 Cr -14.2%QoQ
  6. Kharsang Production 450 bpd +28.2%QoQ
  7. Dirok Gas Sales Volume 0.41 Bcf +10.8%QoQ
  8. Dirok Condensate Production 8,893 barrels +34.7%QoQ
  9. Dirok Gas Price Realized 7.54 $/MMBtu -10.9%QoQ
  10. B-80 Oil Production 48,406 barrels -19.3%QoQ
  11. B-80 Gas Production 0.37 Bcf -7.5%QoQ
  12. B-80 Gas Price Realized 11.4 $/MMBtu -5.7%QoQ

What they filed

Q1 FY27: revenue up 45.2%, net profit down 85.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue95 147 43 79 315 +232%75 −49%-206 −575%114 +45%
EBITDA32 74 5 32 23 −28%27 −63%27 +457%6 −83%
Net profit11 43 51 44 3 −74%8 −81%8 −85%6 −86%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹1,250 Cr Raised — increased targeted expenditure · Internal accruals and debt capital
    • Northeastern region drilling (Kharsang, Dirok, Umatara, Block 19) ₹250 Cr
    • B-80 new well $10 Mn
    • Kharsang development wells $2 Mn
    • PY-1 development/appraisal/exploration wells $50 Mn

    Previously planned ₹1,000 Cr

    Our capital outlay for the Northeastern region for the next 2 financial years continues to be INR 250 crores, and we endeavor to complete our drilling in the Northeast within 2 years. So we said it was about INR 1,000 crores. It may increase by another INR 250 crores. INR1,250 crores is our targeted expenditure. With internal accrual, we raised a debt capital of INR 250 crores to meet the above capital expenditure.
  • Debt Debt disclosed
    • New borrowing Raised debt capital to meet capex requirements ₹250 Cr
    With internal accrual, we raised a debt capital of INR 250 crores to meet the above capital expenditure. This long-term loan will be used exclusively for our capital expenditure. India Ratings has reaffirmed the rating "IND A" and revised the outlook from "stable" to "positive" for INR 50 crores bank loan. So we will not be going beyond this INR 250 crores debt and which will get -- within 2 years, we'll be getting the debt-free status.
  • M&A Block B-15 Acquisition · Signed

    Discovered small field with upside potential for exploration

    G&G team started working on development plan focusing on 2 existing discoveries with upside potential.

    Coming to the Mumbai offshore blocks, we signed the Revenue Sharing Contract for Block B-15 in April 2025. You may recall that this is a discovered small field with an area of about 332.4 square kilometers, which we successfully bid for FY'25. After collecting the existing 3D and 2D data from DGH, our G&G team started working on the development plan for this block, focusing on 2 existing discoveries with upside potential for exploration.
  • Liquidity Liquidity disclosed Current cash position and continued production are sufficient to meet obligations.
    With the current cash position and continued production and with the borrowings for capital expenditure as required, we will meet all our obligations.

Guidance & targets

Production

  • Kharsang additional production Production · by end of 2025 · High confidence 1,000 barrels per day
    We will complete this program of 9 wells before December 2025, which we expect should add about 1,000 barrels of production per day by the end of this year.

    — R. Jeevanandam

  • Overall production target (company share) Production · after all capex · High confidence 10,000 barrels per day
    So P90 itself, we are expecting at least 10,000 barrels for our share.

    — R. Jeevanandam

  • B-80 production target Production · High confidence 5,000 barrels per day
    We are planning for a total of 5,000 barrels per day. That's our planned production for B-80.

    — R. Jeevanandam

Capex

  • Northeastern region capex Capex · next 2 financial years · High confidence INR 250 crores
    Our capital outlay for the Northeastern region for the next 2 financial years continues to be INR 250 crores, and we endeavor to complete our drilling in the Northeast within 2 years.

    — R. Jeevanandam

  • B-80 new well cost Capex · High confidence USD 10 million
    See, it is excluding the platform. It is being a platform well, we expect should be in the order of about $10 million.

    — R. Jeevanandam

  • Kharsang well cost Capex · High confidence USD 2 million
    Each is about $2 million.

    — R. Jeevanandam

  • Total capex Capex · next 2 years · High confidence INR 1,250 crores

    Previously INR 1,000 crores → INR 1,250 crores

    So we said it was about INR 1,000 crores. It may increase by another INR 250 crores. INR1,250 crores is our targeted expenditure.

    — R. Jeevanandam

  • PY-1 total capex for 4 wells Capex · High confidence USD 50 million
    And by all probabilities, the total capex as estimated initially for 4 wells together, it should not exceed $50 million.

    — R. Jeevanandam

Drilling

  • Northeastern region drilling completion Drilling · within 2 years · High confidence within 2 years
    Our capital outlay for the Northeastern region for the next 2 financial years continues to be INR 250 crores, and we endeavor to complete our drilling in the Northeast within 2 years.

    — R. Jeevanandam

  • PY-1 drilling commencement Drilling · last quarter of FY26 · High confidence last quarter of FY26
    We are embarking on planning the first well drilling before the end of this financial year, and we are trying to line up the drilling rig as well as the other long lead items and also pursuing whatever the clearances are required from the Ministry of Environment and Forest.

    — R. Jeevanandam

Offtake

  • Dirok increased offtake commencement Offtake · Q3 FY26 · Medium confidence Q3 FY26
    We hope that the increase in offtake will commence in the third quarter of this financial year and is likely to occur before the end of the fourth quarter of the current financial year on 31st March 2026.

    — R. Jeevanandam

Infrastructure

  • Northeast Gas Grid operational Infrastructure · FY26 · Medium confidence within FY26
    Although the timeline remains uncertain, we anticipate the grid to be operational within FY'26.

    — R. Jeevanandam

Inventory

  • Oil inventory liquidation timeline Inventory · before 31st August · High confidence 1-1.5 months (before 31st August)
    So we are holding around 410,000 barrels of inventory at the moment and which we have already this has to be through an auction process to be on a transparent basis. We have appointed M-junction to carry out the auction and the technical evaluations have been completed. And so after that, we will be asking them to bid a price for it. Once the price bid is accepted, then it will take about 10-15 days for them to take the offtake. That's what we plan. It's already in the process now. Before the end of this month, before 31st August.

    — R. Jeevanandam

  • Oil inventory liquidation value Inventory · High confidence > USD 25-26 million (INR 220 crores)
    You take the current price or whatever it is, it should be about some $25 million, $26 million. We should be crossing more than INR 220 crores value. That's what we believe.

    — R. Jeevanandam

Debt

  • Debt-free status Debt · within 2 years · High confidence within 2 years
    So we will not be going beyond this INR 250 crores debt and which will get -- within 2 years, we'll be getting the debt-free status.

    — R. Jeevanandam

What to watch in Q2 FY26

Kharsang additional production

by end of 2025
Current 350 bpd added from 3 wells
Target 1,000 bpd additional production

Why it matters

Verifying the ramp-up of Kharsang production is key to the company's near-term growth targets.

We will complete this program of 9 wells before December 2025, which we expect should add about 1,000 barrels of production per day by the end of this year.

Risks & concerns

  • Monsoon disruptions affecting production

    medium

    Adverse weather in June and July led to production disruptions and FSO de-mooring in B-80, similar to previous monsoons.

    Management acknowledged

  • Dirok gas demand constraints

    medium

    Dirok production is constrained by limited demand, despite the field's capacity, impacting sales volumes.

    Management acknowledged

  • Northeast Gas Grid timeline uncertainty

    medium

    While anticipated to be operational within FY26, the timeline for the Northeast Gas Grid remains uncertain, impacting Dirok's full monetization.

    Management acknowledged

  • PY-3 arbitration status

    low

    The tribunal for PY-3 arbitration is yet to be constituted, and the timeline for resolution is unknown.

    Management acknowledged

Q&A highlights

7 direct
Kharsang production share Direct
The total production from the field. 35%. Our share including subsidiary is 35%.

Clarified the company's actual share of production from the Kharsang block, which is 35% of the stated total.

Asked by Dhruv Rawani

Northeast pipeline commissioning timeline Direct
We expect that from the third quarter it should be completed. By all probability, end of the fourth quarter, it should be fully commissioned. That's what we believe in.

Provided a specific timeline for the critical Northeast Gas Grid, which is essential for unlocking Dirok's full potential.

Asked by Andrey Purushottam

Unsold oil inventory liquidation strategy Direct
So we are holding around 410,000 barrels of inventory at the moment... We have appointed M-junction to carry out the auction... it will take about 10-15 days for them to take the offtake. Before the end of this month, before 31st August.

Detailed the plan and timeline for monetizing a significant inventory of 410,000 barrels of oil, providing clarity on a key liquidity event.

Asked by Andrey Purushottam

B-80 oil sale price strategy Direct
If there is a price movement which is favorable, then we will wait actually. But they are indicating that oil price would be in the range of $65 to $70, then we thought it is prudent to liquidate. ... For that, we need this money as such, so we are going ahead and getting it done.

Explained the rationale behind selling oil at current prices ($65-70/barrel) despite a previous target of $75, citing market conditions and the need for funds for ongoing capex.

Asked by Tejas Shah

Overall capex and production target Direct
So we said it was about INR 1,000 crores. It may increase by another INR 250 crores. INR1,250 crores is our targeted expenditure. So P90 itself, we are expecting at least 10,000 barrels for our share.

Consolidated the company's total capex plan for the next two years (INR 1,250 crores) and linked it directly to the ambitious production target of 10,000 bpd for their share.

Asked by Riddhesh Gandhi

Realism of Northeast Gas Grid common carrier timeline Partial
Whether it is a common carrier or a contract carrier, once the line gets augmented, then the gas has to go in the pipeline, right? ... Government is taking all initiatives to make the stranded gas to be put on into the use. So we are hoping that should not be a problem to us on the demand ramp-up.

Addressed concerns about the feasibility of the Northeast Gas Grid becoming a common carrier by FY26, emphasizing government support and the broader need for connectivity.

Asked by Vaibhav

PY-3 PetroVietnam report and monetization plan Direct
PetroVietnam has reconfirmed our internal working, and they have come out with a good report. And they are saying to go for 2 in-fill development wells... and 1 appraisal well. So 3 wells with the existing platform... and 1 well is an exploration outside the platform... The 4-well plan they have given.

Provided detailed insights into the confirmed development plan for PY-1 based on PetroVietnam's report, outlining the number and type of wells and their integration with existing infrastructure.

Asked by Mehul Panjwani

Seasonality in business Direct
See, year-on-year would be more appropriate because quarter-to-quarter, sometimes the demand is varying in the offtake. If the offtake issues are there, local demand is one of the constraints. And second thing, from our side, our ability during the monsoon. ... once eased out through the gas grid, then it would not the seasonality will go off.

Clarified the impact of seasonality on the business, attributing it to demand constraints and monsoon, and linking its potential reduction to the Northeast Gas Grid's operationalization.

Asked by Andrey Purushottam

3 min read 7 chapters

Detailed narrative

Northeastern Region Operations & Expansion

The Kharsang block saw significant activity, with 4 development wells drilled, 3 of which are now hooked up and contributing an additional 350 barrels of oil per day. This increased Kharsang's total production to 450 bpd in Q1 FY26, a 28.2% QoQ growth. The company aims to complete 9 wells by December 2025, expecting to add 1,000 bpd. For the Dirok field, a well in North Dirok and 3 more development wells are planned to augment capacity. The total capital outlay for the Northeastern region is INR 250 crores over the next two financial years, with drilling expected to be completed within this period.

Dirok Field Performance & Gas Grid Connectivity

Dirok field's gas sales for Q1 FY26 increased to 20 million standard cubic feet per day (0.41 Bcf), up 10.8% QoQ from 15 MMSCFD (0.37 Bcf). Condensate production also saw a substantial 34.7% QoQ increase to 8,893 barrels. However, the realized gas price declined by 10.9% QoQ to US$ 7.54 per MMBtu. Production remains constrained by limited demand, but the company anticipates increased offtake starting in Q3 FY26, with the Northeast Gas Grid expected to be operational within FY26, connecting Dirok to the National Gas Grid.

Cambay & Offshore Blocks Updates

In the Cambay blocks, environmental clearance has been received for drilling 2 wells each in North Balol and Asjol. Workover operations on NB-1 in North Balol are complete, and the first development well has been drilled. For offshore assets, the Revenue Sharing Contract for Block B-15 was signed in April 2025. PetroVietnam's review of PY-1 (formerly PY-3) suggests a 4-well plan (2 in-fill, 1 appraisal, 1 exploration) with an estimated capex of up to USD 50 million, with drilling expected to commence in the last quarter of FY26.

B-80 Production & Monsoon Impact

Production from Block B-80 saw a decline in Q1 FY26, with oil production at 48,406 barrels (down 19.3% QoQ) and gas at 0.37 Bcf (down 7.5% QoQ). The realized gas price also fell by 5.7% QoQ to US$ 11.4 per MMBtu. Production was disrupted in mid-June 2025 due to monsoon conditions, leading to the de-mooring of the FSO for safety. The FSO was re-moored in August 2025, and a workover for D1 and D2 wells is planned post-monsoon. A new well is planned for B-80, estimated to cost USD 10 million, with a target production of 5,000 bpd.

Financial Performance Overview

Standalone revenue for Q1 FY26 was INR 83.48 crores, a marginal increase from INR 83.37 crores in the previous quarter. Consolidated revenue from operations was INR 85.5 crores. Standalone EBITDA grew 11.7% QoQ to INR 27.24 crores, while consolidated EBITDA (excluding adjustments) declined 9.6% QoQ to INR 35.02 crores. Consolidated PAT (including year-end adjustments) stood at INR 43.87 crores, a 14.2% QoQ decrease from INR 51.16 crores.

Capital Expenditure & Funding Strategy

The company has revised its overall capital expenditure target to INR 1,250 crores over the next two years, up from a previous estimate of INR 1,000 crores. This capex is aimed at unlocking value from both onshore and offshore assets, including drilling in Kharsang, Dirok, Cambay blocks, and PY-1. To support this, the company raised INR 250 crores in debt capital. Management expressed confidence in achieving a debt-free status within two years, leveraging increased production from new wells.

Oil Inventory Liquidation

Hindustan Oil Exploration currently holds 410,000 barrels of oil in stock from its B-80 block. To liquidate this inventory transparently, an auction process has been initiated with M-Junction. The company expects to complete the sale within 1 to 1.5 months, specifically before August 31st, 2025. This liquidation is projected to generate over USD 25-26 million, equivalent to more than INR 220 crores, providing significant revenue.

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