Hindustan Oil Exploration Company Limited — Q2 FY26 earnings call

Call held 21 Nov 2025

Management summary

Hindustan Oil Exploration Company Limited reported a strong standalone revenue of ₹321.51 crores for Q2 FY26, driven by B-80 crude sales. However, consolidated EBITDA saw a decline to ₹25.15 crores due to monsoon impacts on B-80 production and lower gas offtake in Dirok. The company is actively pursuing extensive drilling campaigns across its onshore and offshore assets, supported by ₹250 crores in new debt, while managing a significant payment dispute with HPCL.

Highlights

  • Standalone revenue for the current quarter is ₹321.51 crores, compared to ₹83.48 crores in the previous quarter, mainly due to crude oil sales from B-80 field.

  • Kharsang production reached 900 barrels per day from this block, up from 350 barrels of initial production.

  • Secured environmental clearance for drilling 40 development wells and three exploration wells in Kharsang.

  • Revised development plan for the Dirok block has been approved, enabling extension of the block.

  • Secured debt capital of ₹250 crores to meet capital expenditure requirements.

  • Standalone EBITDA for the current quarter is ₹28.81 crores, compared to ₹27.24 crores in the previous quarter.

Concerns

  • Consolidated EBITDA for the current quarter is ₹25.15 crores, down from ₹35.02 crores in the previous quarter, mainly due to low offtake in Dirok and monsoon fury in B-80.

  • B-80 production was temporarily impacted by monsoon-related disruptions, with oil production at 31,468 barrels and gas at 0.23 BCF, down from 48,406 barrels and 0.37 BCF respectively.

  • Dirok gas sales for the current quarter were 14 MMSCFD, down from 20 MMSCFD in the previous quarter, and condensate production was 5,858 barrels, down from 8,893 barrels.

  • A payment of approximately ₹259 crores from HPCL for 417,000 barrels of crude oil sold from B-80 is pending due to a contamination claim, which management disputes.

  • Well-control issues were encountered while perforating the gas zone of the sixth well in Kharsang, though expected to be resolved within days.

Key financials

  1. Standalone Revenue ₹321.51 Cr +285%QoQ
  2. Consolidated Revenue from Operations ₹325.31 Cr +281%QoQ
  3. Standalone EBITDA ₹28.81 Cr +5.7%QoQ
  4. Consolidated EBITDA ₹25.15 Cr -28.2%QoQ
  5. Standalone PAT ₹19.04 Cr +21.3%QoQ
  6. Consolidated PAT ₹2.83 Cr -75.1%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.

Segment breakdown

  • Kharsang Block
    900 barrels per day Production
  • Dirok Field
    14 MMSCFD Gas Sales0.34 BCF Sales Volume5,858 barrels Condensate Production7.8 US$/MMBTU Gas Price Realized
  • B-80 Block
    31,468 barrels Oil Production0.23 BCF Gas Production10.62 per MMBTU Gas Price Realized4,17,000 barrels Crude Oil Sales₹258.78 Cr Crude Oil Sales Revenue
  • Cambay Blocks
    0.33 MMSCFD Gas Production

Capital allocation

high confidence
  • Capex ₹250 Cr New plan · internal accruals and debt capital
    • Drilling in Northeast region ₹250 Cr
    • Offshore operations
    Our expected capital outlay for the Northeast region for the next two financial years is Rs.250 crores and more, and we endeavour to complete our drilling in the Northeast within two years to commercialize the discovered resources. With internal accruals, we secured a debt capital of Rs. 250 crores to meet the above capital expenditure. This term loan will be used exclusively for our capital expenditure.
  • Debt Debt disclosed
    • New borrowing Secured debt capital for capex ₹250 Cr
    India Ratings has reaffirmed the rating 'IND A' for Rs.500 crores bank loan. With the current cash position and continued production and with the borrowings for capital expenditure as required will meet all our obligations.
  • Liquidity Liquidity disclosed Company has current cash position and continued production to meet obligations, supported by borrowings for capital expenditure.
    India Ratings has reaffirmed the rating 'IND A' for Rs.500 crores bank loan. With the current cash position and continued production and with the borrowings for capital expenditure as required will meet all our obligations.

Guidance & targets

Production

  • Kharsang Production Production · current · High confidence 900 barrels per day

    From 350 barrels per day today

    We have reached a production level of about 900 barrels per day from this block, up from 350 barrels of initial production.

    — Ramasamy Jeevanandam, Managing Director

  • B-15 Field Production Production · within two years · High confidence within two years
    Once the development plan is finalized, we will commence development activities. With a water depth of approximately 40 meters, we are confident of bringing the field into production within two years.

    — Ramasamy Jeevanandam, Managing Director

  • B-80 Stable Production Production · until three wells completed · High confidence 600-700 barrels and about 5 million cubic feet of gas
    So, till the time, it is dwindling around by 600-700 barrels and about 5 million cubic feet of gas.

    — Ramasamy Jeevanandam, Managing Director

  • Overall Production Level Production · FY27 · Medium confidence 6,000 barrels of oil equivalent
    I think, see, if everything goes well, we are targeting about reaching our own production level of at least 6,000 barrels of oil equivalent.

    — Ramasamy Jeevanandam, Managing Director

Drilling

  • Kharsang Development Wells Drilling · ongoing · High confidence 9 development wells (initial phase)
    The drilling will be executed in a phased manner with the initial phase comprising nine development wells. As of today, the drilling of the seventh well is in progress, and five wells have been put into production.

    — Ramasamy Jeevanandam, Managing Director

  • Kharsang Future Drilling Drilling · after initial phase · High confidence additional nine wells and one deep well
    after completion of the initial phase of drilling of these nine wells, we will proceed with the next phase of drilling an additional nine wells and one deep well.

    — Ramasamy Jeevanandam, Managing Director

  • Dirok Development Wells Drilling · future · High confidence three more development wells in Dirok and further drilling in North Dirok
    We will augment our capacity by drilling three more development wells in Dirok and further drilling in North Dirok.

    — Ramasamy Jeevanandam, Managing Director

  • Cambay Wells Drilling · future · High confidence two additional wells in Asjol
    Looking ahead, we plan to drill two additional wells in Asjol.

    — Ramasamy Jeevanandam, Managing Director

  • PY-1 Drilling Program Initiation Drilling · FY27 · High confidence financial year 2027
    Regarding Cauvery Offshore Block PY-1, based on the study by PetroVietnam, we will initiate our drilling program... in financial year 2027.

    — Ramasamy Jeevanandam, Managing Director

  • Total Wells to be Drilled Drilling · future · High confidence 18 shallow wells and three deep wells (onshore), 10 offshore wells
    We remain committed to drilling a total of 18 shallow wells and three deep wells in Kharsang, four wells in Dirok, two wells in Greater Dirok and two wells in each Asjol and Palej in our onshore assets. To unlock the potential of our offshore fields, we plan to drill 10 offshore wells, three wells in PY-1, three wells in B-80 and four wells in B-15.

    — Ramasamy Jeevanandam, Managing Director

Capacity

  • Dirok Production Capacity Capacity · existing facilities · High confidence 50 million standard cubic feet per day
    The field has the capacity to produce up to 50 million standard cubic feet per day with the existing facilities, though the production has historically been constrained by limited demand.

    — Ramasamy Jeevanandam, Managing Director

Infrastructure

  • Northeast Gas Grid Operationalization Infrastructure · FY26 · Medium confidence operational within FY26
    We expect the grid to be operational within FY26 and hope that the increase in offtake will occur before Q4 FY26.

    — Ramasamy Jeevanandam, Managing Director

  • Northeast Gas Grid Full Operationalization Infrastructure · Q1 FY27 · Medium confidence first quarter of FY2026-27
    That means that the entire Northeast Gas Grid would be a fully operational and linked to the national grid. So, the timeline as we discussed and whatever the knowledge we gathered by talking to the people, it should be end of this quarter. And some offtake improvement will take from the fourth quarter by all probability by considering the delays in the past and other things, it should be fully operational from the first quarter of FY2026-27.

    — Ramasamy Jeevanandam, Managing Director

Capex

  • Northeast Region Capital Outlay Capex · next two financial years · High confidence ₹250 crores and more
    Our expected capital outlay for the Northeast region for the next two financial years is Rs.250 crores and more, and we endeavour to complete our drilling in the Northeast within two years to commercialize the discovered resources.

    — Ramasamy Jeevanandam, Managing Director

Offtake

  • Dirok Gas Offtake Improvement Offtake · Q4 FY26 · Medium confidence before Q4 FY26
    We expect the grid to be operational within FY26 and hope that the increase in offtake will occur before Q4 FY26.

    — Ramasamy Jeevanandam, Managing Director

  • Dirok Gas Offtake Increase (DNPL) Offtake · shortly after DNPL completion · High confidence additional 1 million cubic meters per day
    Once that is completed, then the gas offtake immediately can increase at least by about 1 million cubic meters per day. Then it can further augment by another 1 million cubic meters that can take care of our supply therein in a manner that there would not be any demand constraint for our existing six well program.

    — Ramasamy Jeevanandam, Managing Director

  • Dirok Gas Offtake Increase (DNPL + Compressor) Offtake · after grid connectivity · High confidence 2.2 million cubic meters of gas
    See, overall volume increase with the DNPL should be additional 1 million cubic meters of gas and with the compressor, you should go about 2.2 million cubic meters of gas and the local demand therein.

    — Ramasamy Jeevanandam, Managing Director

Profitability

  • PAT Margin Impact from Price Variation Profitability · future · High confidence 3% impact for $10 price variation
    Suppose there is a $10 price variation plus/minus comes, I will have a 3% impact therein. That is what the thumb rule according to me.

    — Ramasamy Jeevanandam, Managing Director

What to watch in Q3 FY26

HPCL Payment Resolution

next quarter
Current ₹259 crores pending due to contamination claim
Target Payment received and dispute resolved

Why it matters

Resolution of this payment is crucial for the company's cash flow and revenue realization.

We are currently engaged in discussion with HPCL to resolve the matter amicably and realize the sales revenue. ... We have been discussing with them. We will let you know actually once we receive. We will give as an information.

Risks & concerns

  • HPCL crude contamination claim and pending payment

    high

    HPCL claims contamination in 417,000 barrels of B-80 crude, withholding ₹259 crores payment. Management denies liability based on COSA terms.

    Management acknowledged

  • Monsoon-related production disruptions in B-80

    medium

    Production in B-80 was temporarily impacted by monsoon, leading to lower oil and gas volumes in Q2 FY26.

    Management acknowledged

  • Delays in Northeast Gas Grid full operationalization impacting Dirok offtake

    medium

    While parts are connected, full grid operationalization has seen delays, affecting Dirok's ability to sell its full production capacity.

    Management acknowledged

  • PY-3 block dispute in International Court of Justice

    medium

    Ongoing arbitration regarding exclusive operation of PY-3 block, where HOEC holds 21% interest.

    Management acknowledged

  • Well-control issues in Kharsang's 6th well

    low

    Encountered while perforating the gas zone, but expected to be resolved within a few days.

    Management acknowledged

Q&A highlights

6 direct
Broader vision for HOEC in energy transition and growth strategy Direct
The underlying reserves and resources of the Company, in our estimates, which is in the order of about 100 million barrels of oil equivalent. So, for this we continuously, as you are talking about transition, majority of our resources, at least more than 50% are gas based. So, that is the energy transition mode for a clean fuel as such. So, that is why we are concentrating more on drilling mode now.

Analyst sought clarity on long-term strategy beyond quarterly numbers, focusing on energy transition, reserve expansion, and partnerships.

Asked by Sucrit D. Patil

Cost management and profit protection amidst price volatility Direct
What is in our control are the two important factors: doing a job properly and then reducing the cost. Since we are on the job, we are basically marginal operators and in a manner that cost becomes priority to us and structuring the contracts and for both we are working in a mode that will not allow the cost escalation, which will kill us.

Analyst questioned how the company plans to protect margins and profits given industry cost pressures and price volatility.

Asked by Sucrit D. Patil

Status and completion timeline of Northeast pipeline (DNPL-IGGL linkage) Partial
I am not privy to that exact details actually, but we hope that should get over by end of this quarter and some offtake improvement should take from fourth quarter and by all probabilities to the best of having spent about more than Rs. 10,000 crores by the Government of India, in all earnestness they wanted to put the grid into operation by first quarter, by all means it should be through in the next financial year.

Analyst pressed for a specific timeline on a critical infrastructure project impacting Dirok's gas offtake, which management could not fully provide.

Asked by Nigel Mascarenhas

Interventions to stabilize and scale up B-80 production, including cost and timeline Direct
So, initially our program is to do one work over and after this, after the next monsoon we will start drilling three development wells. That is by not through a subsea well, for that we are putting a platform there in, after that we'll drill the three wells. So, once the three well drilling gets completed, this block will have stable production.

Analyst sought details on plans to address B-80's production decline and the associated costs and timelines.

Asked by Nigel Mascarenhas

HPCL crude contamination issue, legal liability, and impact on future transactions Direct
Normally in the COSA agreement, we do not guarantee any quality of the crude oil or the product liability thereon. In the COSA agreement also provides there is no consequential damages there. The title of the crude transferred at the outside flange at our FSO in Mumbai offshore. Then it gets into their tanker. From that moment, the title, risks and all insurable interests rest with HPCL.

Analyst questioned the significant HPCL claim, its legal implications, and potential impact on future crude sales, which management clarified as not their liability.

Asked by Riddhesh Gandhi

Payment status from HPCL for crude sales Partial
Yes, we have booked and we are yet to receive the payment. ... Yes. We have been discussing with them. We will let you know actually once we receive. We will give as an information.

Analyst inquired about the realization of revenue from a large crude sale, highlighting a pending payment issue that impacts current quarter financials.

Asked by Anubhav Goel

Cost of production and 1P reserves for B-80, Dirok, and Kharsang Direct
The B-80 our cost of production is about $30 per barrel on an average. ... The 1P reserves of B-80... is about 15 million barrel of oil and about 40-45 BCF of gas as such.

Analyst sought specific operational metrics (cost and reserves) for key assets, providing crucial data for valuation and profitability analysis.

Asked by Kunal Tokas

PY-3 tribunal update and company's stance Direct
We are still holding 21% interest in the block PY-3. When they were trying to do some redevelopment, they were telling they will be able to do it within a period of nine months and we challenged you cannot do it within nine months and then they said they wanted to take an exclusive operation. ... That matter is now being referred to International Court of Justice. So, they have appointed the arbitrator. The schedule has been framed and that is what the status at the moment. It is sub judice if I say anything beyond this.

Analyst inquired about a significant legal dispute concerning a key asset, revealing ongoing arbitration and potential for value unlocking.

Asked by Manpreet Arora

4 min read 7 chapters

Detailed narrative

Kharsang Block Drilling and Production Update

The company is actively progressing its drilling campaign in the Kharsang Block, with the seventh of nine initial development wells currently in progress. Five wells have already been brought into production, contributing to a current production level of 900 barrels per day, a significant increase from the initial 350 barrels per day. Environmental clearance for drilling 40 development wells and three exploration wells has been secured, and after the initial phase, the company plans to drill an additional nine wells and one deep well. However, well-control issues were encountered in the gas zone of the sixth well, which are expected to be resolved within a few days.

Dirok Field Performance and Northeast Gas Grid Connectivity

Dirok field's gas sales for Q2 FY26 were 14 MMSCFD, a decrease from 20 MMSCFD in the previous quarter, resulting in a sales volume of 0.34 BCF compared to 0.49 BCF. Condensate production also declined to 5,858 barrels from 8,893 barrels. Despite this, the realized gas price increased to US$7.8 per MMBTU from US$7.56 per MMBTU. The field has a capacity of 50 MMSCFD, but production has been constrained by limited demand. The company anticipates the Northeast Gas Grid to be operational within FY26, with significant offtake improvement expected before Q4 FY26, and plans to drill three more development wells in Dirok to augment capacity.

Offshore Blocks (B-80, B-15, PY-1) Operations

Production from the B-80 block was temporarily impacted by monsoon-related disruptions, leading to a decrease in oil production to 31,468 barrels and gas production to 0.23 BCF compared to the previous quarter. The average gas price realized was 10.62 per MMBTU. The company plans a workover for the D1 well in Q4 FY26 and subsequent drilling of three development wells to stabilize and increase B-80 production. For B-15, development activities are expected to commence after the plan is finalized, aiming for production within two years. In PY-1, a drilling program including two in-fill wells, one appraisal well, and one exploration well is slated to begin in financial year 2027.

Cambay Blocks and Overall Drilling Strategy

In the Cambay Blocks, two wells were successfully drilled in North Balol, with one flowing oil and the other undergoing further testing or sidetracking. This will result in four producing wells in North Balol. The company also plans to drill two additional wells in Asjol and, upon extension of the Ring-Fenced PSC and Palej block, will install SRPs in existing wells and drill new ones in Palej. Overall, the company is committed to drilling a total of 18 shallow and three deep wells onshore, and 10 offshore wells across its assets, targeting an overall production level of at least 6,000 barrels of oil equivalent by FY27.

Capital Expenditure and Funding

The company anticipates a capital outlay of ₹250 crores and more for the Northeast region over the next two financial years, aiming to complete drilling and commercialize discovered resources within two years. To fund these initiatives, Hindustan Oil Exploration has secured ₹250 crores in debt capital, which will be exclusively used for capital expenditure. Management stated they do not intend to borrow more than this amount, and India Ratings has reaffirmed an 'IND A' rating for a ₹500 crores bank loan, indicating sufficient liquidity for obligations.

HPCL Crude Sales Dispute

The company sold approximately 417,000 barrels of crude oil from B-80 to HPCL, generating ₹258.78 crores in revenue. However, HPCL subsequently raised a claim regarding chloride contamination, leading to a pending payment of approximately ₹259 crores. Management asserts that under the Crude Offtake Sales Agreement (COSA), they do not guarantee crude quality and are not liable for consequential damages, as title and risk transferred offshore. Discussions are ongoing to amicably resolve the matter, with management emphasizing no legal liability.

Q2 FY26 Financial Performance Overview

For Q2 FY26, standalone revenue significantly increased to ₹321.51 crores from ₹83.48 crores in the previous quarter, primarily driven by crude oil sales from the B-80 field. Standalone EBITDA also saw a slight increase to ₹28.81 crores from ₹27.24 crores. However, consolidated EBITDA declined to ₹25.15 crores from ₹35.02 crores in the prior quarter, mainly attributed to lower offtake in Dirok and monsoon-related production issues in B-80. Consolidated PAT stood at ₹2.83 crores, down from ₹11.35 crores in the previous quarter (excluding an exceptional item).

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