Hindustan Oil Exploration Company Q1 FY27 earnings call

Hindustan Oil Exploration Company Limited reported a consolidated revenue from operations of INR 124 crores for Q1 FY27. Net consolidated revenue, after accounting for profit petroleum and revenue sharing, stood at INR 114.17 crores. Consolidated profit before tax and exceptional items^📎 was INR 6.5 crores, a decline from INR 9.01 crores in the previous quarter. The previous quarter's standalone revenue was negative INR 194 crores due to the HPCL sale reversal, which also impacted standalone PBT at INR 12.54 crores compared to INR 30.4 crores previously.

The quarter's improved performance was primarily driven by higher production from the Kharsang field, which increased from approximately 12,300 BOE to 17,400 BOE. Crude and condensate realizations saw a significant jump to $95.5 per barrel, up from $70.8 per barrel in the previous quarter. Blended gas price realization also improved to $12 MMBTU from $9.8 MMBTU. Specifically, B-80 gas realization was $16.5 per MMBTU, and Dirok gas realization was $12.5 per MMBTU.

Production at the B-80 offshore asset was impacted by a higher water cut from one of the producing wells. To address this, the company reconfigured compressor trains on the MOPU to operate with lower suction pressure. Workovers for two existing wells (D1 and D2) are on track, with rig award expected this month and mobilization by October 2026. These workovers aim to shut off water zones and open new oil/gas zones, with two wells expected on production by November/December 2026 and three new wells by June 2027. The B-80 program, including these wells and associated infrastructure, will be funded through debt.

The evacuation route for Dirok gas is being improved, with the DNPL line now a common carrier. Degraded sections of the pipeline are being replaced and tied back, with the goal of restoring capacity to 2.5 MMSCMD from the current 1-1.5 MMSCMD by December 2026. For Kharsang, despite finding virgin gas, monetization is delayed due to the absence of a pipeline and buyers. A 24-kilometer pipeline route survey is underway, with an estimated 14-18 months for completion, facing regulatory challenges^🌐 due to its path through a forest area.

In the Cambay Basin, new belt technology is in trial at Balol, and Palej facilities have been debottlenecked using thermionic heaters, contributing to a 5-6% production increase last quarter and an expected 20-30% increase going forward^⏳. At PY-1, the asset suffered serious production loss. The company has awarded a contract for rig-less intervention to increase short-term production, funded from its own books. New well drilling at PY-1 is contingent on securing firm gas sales agreements to avoid past issues of production without buyers.

The company is in the process of liquidating B-80 crude that was commingled and stored with HPCL, selling it to third parties. This process has been slower than expected, but the entire inventory is anticipated to be cleared by the end of October/early November 2026. Due to a reduction in Brent prices, the company incurred an inventory loss of INR 4-6 crores on approximately 15% of the crude already sold. Management emphasized a collaborative approach with HPCL to resolve the issue.

The company maintains a low gearing of 0.04, with an existing INR 20 crores bank loan. The B-80 development program, encompassing workovers and new wells, is planned to be funded through debt, which the company is currently in the process of raising. Looking ahead, internal cash flows from November/December 2027 are projected to be sufficient to fund the growth initiatives for the B-15 block.