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Hindustan Oil Exploration Company Limited — Q3 FY26 earnings call

Call held 25 Feb 2026

Management summary

Hindustan Oil Exploration reported a mixed Q3 FY26, with consolidated financials showing strong QoQ growth driven by B-80 production, despite a significant standalone revenue decline due to prior quarter's crude sale. The company faces a major challenge with Rs. 259 crores blocked due to an HPCL dispute, which is impacting offshore drilling timelines. Progress on gas grid connectivity in the Northeast offers future volume growth potential, but current B-80 performance and workover delays remain concerns.

Highlights

Consolidated Revenue (excl. crude oil sales) increased by 25.58% QoQ to Rs. 81.04 crores.
Consolidated EBITDA grew by 23.22% QoQ to Rs. 30.99 crores.
Consolidated PAT saw a significant QoQ increase of 192.58% to Rs. 8.28 crores.
B-80 oil production rose to 45,742 barrels of oil and 0.4 bcf of gas in Q3 FY26 from 31,468 barrels of oil and 0.23 bcf of gas in Q2 FY26.
Mechanical completion of the DNPL line is achieved, with connection to IGGL expected by end of March 2026.

Concerns

Standalone revenue declined by 75.96% QoQ to Rs. 77.32 crores, primarily due to the absence of a large crude oil sale from B-80 in the current quarter.
A dispute with HPCL regarding crude contamination has blocked Rs. 259 crores plus interest, impacting liquidity and delaying offshore drilling plans.
Dirok gas sales volume decreased to 13 mmscfd from 14 mmscfd QoQ, and the price realized fell to $7.32 per mmbtu from $7.8 per mmbtu.
The B-80 field is not performing optimally, and the planned workover for the D1 well is delayed until after the monsoon.

Key financials

01 Standalone Revenue ₹77.32 Cr -76%QoQ
02 Standalone EBITDA ₹23.89 Cr -17%QoQ
03 Standalone PAT ₹11.96 Cr -37.3%QoQ
04 Consolidated Revenue (excl. crude oil sales) ₹81.04 Cr +25.6%QoQ
05 Consolidated EBITDA ₹30.99 Cr +23.2%QoQ
06 Consolidated PAT ₹8.28 Cr +192.6%QoQ

What they filed

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

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	95	147	43	79	315 +232%	75 −49%	-206 −575%	114 +45%
Expenses	63	73	39	46	292	48	-233	109
EBITDA	32	74	5	32	23 −28%	27 −63%	27 +457%	6 −83%
Margin	33%	51%	11%	41%	7%	36%	—	5%
Other income	5	4	57	35	2	4	7	20
Interest	5	5	5	4	4	4	4	3
Depreciation	18	20	22	18	17	20	20	16
Profit before tax	13	52	36	45	4 −70%	7 −87%	9 −75%	7 −85%
Tax rate	19%	17%	-44%	2%	29%	-21%	14%	5%
Net profit	11	43	51	44	3 −74%	8 −81%	8 −85%	6 −86%
EPS	0.82	3.28	3.87	3.32	0.21	0.63	0.59	0.47

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

Dirok Field
13 mmscfd Gas Sales Volume0.31 bcf Sales Volume5,614 barrels Condensate Production7.32 $/mmbtu Price Realized
B-80 Field
45,742 barrels Oil Production0.4 bcf Gas Production10.5 $/mmbtu Price Realized
Cambay Wells
0.32 mmscfd Gas Production
Kharsang Block
800 barrels per day Current Production

Capital allocation

high confidence

Capex Capex disclosed internal accrual and continued production and with the borrowings for capital expenditure as required
- Drilling 18 shallow wells and 3 deep wells in Kharsang, 4 wells in Dirok, 2 wells in Greater Dirok and 2 wells each in Asjol and Palej.
- Drilling 10 offshore wells, 3 wells in PY-1, 3 wells in B-80 and 4 wells in B-15.
With the internal accrual and continued production and with the borrowings for capital expenditure as required, we will meet all our obligations.
Debt Net ₹55 Cr

Rs. 55 crores as on date.
Liquidity Cash ₹30 Cr Internal accruals and borrowings for capital expenditure will meet all obligations.

Rs. 55 crore debt and the cash is about Rs. 30 crores cash is there. With the internal accrual and continued production and with the borrowings for capital expenditure as required, we will meet all our obligations.

Guidance & targets

Production

Dirok Gas Production (Full Potential) Production · Once Northeast Gas Grid DNPL connectivity happens · High confidence 40-45 million standard cubic feet per day

I think we can go to the full potential, which is about 40-45 million cubic feet per day.

— R. Jeevanandam
Dirok Gas Production (FY27) Production · FY27 · High confidence triple of current production

We expect triple of this year.

— R. Jeevanandam
Kharsang Oil Production Production · with existing wells · Medium confidence 1,000-plus barrels

The production plan per se is about targeting about 1,000-plus barrels with the existing well.

— R. Jeevanandam
Kharsang Gas Production Production · from shallower parts of existing wells and 1-2 new wells · Medium confidence minimum of 10 million cubic feet per day

If the gas we are expecting even by perforating the shallower part of the existing wells and some other 1 or 2 new wells, we can go up to a minimum of 10 million cubic feet per day.

— R. Jeevanandam
B-15 Field Production Production · within about 2 years from the submission of the development plan · Medium confidence on production

we will be able to put the field on production within about 2 years from the submission of the development plan.

— R. Jeevanandam

Profitability

EBITDA Margin Profitability · FY27-28 · Medium confidence around 60%

It would be somewhere around 60%.

— R. Jeevanandam

Operations

B-80 D1 Well Workover Operations · immediately after the monsoon · Medium confidence completed

I think we are supposed to do it, but by all probabilities, we should be able to immediately after the monsoon.

— R. Jeevanandam
PY-1 Drilling Operations · up to October · Medium confidence start

PY-1 well, we can go up to still October.

— R. Jeevanandam

Infrastructure

DNPL Line Connection to IGGL Infrastructure · by end of March 2026 · High confidence completed

Now the connection of DNPL line with the IGGL line is yet to be completed, expected by end of March 2026.

— R. Jeevanandam

Offtake

Dirok Offtake Increase Offtake · before the end of Q4 FY26 or early Q1 FY27 · Medium confidence occur

We hope that the increase in offtake will occur before the end of the fourth quarter of the current financial year ending 31st March 2026 or early first quarter of '26-'27.

— R. Jeevanandam

What to watch in Q4 FY26

HPCL Payment Dispute Resolution

within 3-4 months (arbitration timeline)

Current Rs. 259 crores plus interest blocked

Target Resolution and payment received

Why it matters

Resolution of this dispute is crucial for improving liquidity and enabling planned offshore capital expenditure.

We have been requesting and we continue to request and we hope some resolutions will come, because our substantial money get blocked.

Risks & concerns

HPCL Payment Dispute
high

Rs. 259 crores plus interest blocked due to alleged crude contamination, impacting liquidity and delaying offshore drilling plans.

We have been requesting and we continue to request and we hope some resolutions will come, because our substantial money get blocked. So, we wanted to have an early resolution, and we have been doing all the best possible efforts and trying to talk to HPCL. That's the status now.

Management acknowledged
B-80 Field Underperformance & Workover Delay
medium

B-80 is not performing as expected, and the crucial D1 well workover is delayed until after the monsoon due to resource constraints.

So that what we are struggling with that we need to have a workover of the well, and that is getting delayed. Once the workover is done, the D1 well will do much better.

Management acknowledged
Dirok Demand Constraint
medium

Dirok production is constrained due to limited demand, awaiting full operationalization of the Northeast gas grid.

While the field with the existing wells has the capacity to produce up to 45 million standard cubic feet per day, production has been constrained due to limited demand.

Management acknowledged
Offshore Drilling Delays
medium

Offshore campaigns (PY-1, B-80, B-15) are experiencing delays due to the impact on revenue from the HPCL issue and resource constraints.

As I told you, the offshore campaign is a little getting delayed because of the impact of the revenue.

Management acknowledged

Q&A highlights

6 direct

HPCL crude contamination dispute and blocked funds Direct

We have been requesting and we continue to request and we hope some resolutions will come, because our substantial money get blocked. So, we wanted to have an early resolution, and we have been doing all the best possible efforts and trying to talk to HPCL. That's the status now.

This issue is blocking Rs. 259 crores plus interest, impacting the company's liquidity and ability to fund offshore drilling, making its resolution critical.

Asked by Mehul Panjwani

B-80 field underperformance and workover timeline Direct

I think we are trying to do that before 15th of May. But by almost likely, it will be happen after the monsoon. ... Not only source a rig and there is an onshore activities are going in a full swing in Eastern region because as we are speaking, we are drilling on the wells in Kharsang and some resource constraints because we have to get the money from HPCL. So with these resource constraints, I think we will be able to do it in the after the monsoon would be sure and before the monsoon, it's little doubt.

Management acknowledged B-80 is not performing optimally and the crucial workover is delayed until after the monsoon, partly due to resource constraints linked to the HPCL dispute, impacting future production.

Asked by Dhruv Rawani

Northeast gas grid connectivity for Dirok Direct

For that, they may look for some shutdown of the refinery for some days. Once that is done, then the line would get connected. That will immediately augment in a manner that as at the moment, it is established from the outside gas can come up to Numaligarh. ... We expect it should get completed by March 2026 and the augmentation of the offtakes should take place at least by the first quarter of the next year.

The full operationalization of the gas grid is crucial for increasing Dirok's gas offtake and realizing its full production potential, with a clear timeline provided.

Asked by Gautam Rajesh

Management transition and new CEO Direct

I think the NRC and the Board is looking for the new CEO, which you will get an announcement shortly on that. ... I won't be in any executive position. ... Yes, I will not be in this position.

The company is undergoing a significant leadership change with the current MD stepping down and a new CEO expected soon, which could influence future strategy and operations.

Asked by Amit Mehendale

Dirok production potential post connectivity Direct

I think we can go to the full potential, which is about 40-45 million cubic feet per day. ... We expect triple of this year.

Management provided specific guidance for Dirok's gas production potential (40-45 mmscfd) and a triple increase for FY27, contingent on gas grid connectivity, offering a clear growth outlook.

Asked by Sabri Hazarika

Kharsang block potential and production plan Direct

So Kharsang, you see there is a well control issue on one of the well drilled, and that means the potential of the gas is substantially enough to connect to the grid line. So, Oil India is interested to drill more number of wells. So, we will be in a continuous mode of drilling there and the deeper prospects also. This will unlock substantial value of the block. That's what we believe in. And every well would be adding at least about 100 barrels per day additional production. If the gas we are expecting even by perforating the shallower part of the existing wells and some other 1 or 2 new wells, we can go up to a minimum of 10 million cubic feet per day.

Management outlined the significant potential of the Kharsang block, with targets of 100+ bpd oil per new well and a minimum of 10 mmscfd gas, indicating future growth drivers.

Asked by Riddhesh Gandhi

PY-3 arbitration update Partial

So it is the tribunal has been constituted. Now the tribunal will be deciding on this seat and venue and after that, they will get on to the substance of the matter. ... Arbitration, what timeline I can give you. It is up to the tribunal can give you the timeline.

The arbitration process for PY-3 is progressing with the tribunal constituted, but specific timelines for resolution remain unclear, leaving uncertainty about this asset.

Asked by Mehul Panjwani

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Detailed narrative

Q3 FY26 Financial Performance Overview

Hindustan Oil Exploration reported a significant QoQ decline in standalone revenue by 75.96% to Rs. 77.32 crores, primarily due to the absence of a large crude oil sale from B-80 that occurred in the previous quarter. However, consolidated revenue (excluding crude oil sales) showed a robust increase of 25.58% QoQ to Rs. 81.04 crores. Consolidated EBITDA grew by 23.22% QoQ to Rs. 30.99 crores, and consolidated PAT surged by 192.58% QoQ to Rs. 8.28 crores, indicating underlying operational improvements despite standalone volatility.

Northeast Region Operations & Gas Grid Connectivity

In the Kharsang block, 8 wells have been drilled, with 5 oil wells and 1 gas well completed, and the ninth well is in progress. Current production is 800 barrels per day, with plans to reach 1,000+ barrels of oil and a minimum of 10 mmscfd of gas. Dirok gas sales for the quarter were 13 mmscfd, down from 14 mmscfd in the previous quarter, with a price realized of $7.32 per mmbtu. The mechanical completion of the DNPL line is achieved, and its connection to the IGGL line is expected by end of March 2026, which is anticipated to significantly increase Dirok's gas offtake to 40-45 mmscfd by Q1 FY27.

Offshore Blocks Performance & Challenges

B-80 production saw a notable increase to 45,742 barrels of oil and 0.4 bcf of gas in Q3 FY26, up from 31,468 barrels of oil and 0.23 bcf of gas QoQ. However, management noted that B-80 is not performing optimally, and the planned workover for the D1 well is delayed until after the monsoon due to resource constraints. For B-15, the development plan is in progress, with production targeted within 2 years of submission. Drilling for PY-1 is expected to commence by October, with offshore campaigns generally facing delays due to revenue impacts.

HPCL Crude Contamination Dispute

The company is embroiled in a dispute with HPCL over alleged crude contamination, resulting in Rs. 259 crores plus interest being blocked. Management asserts that the sale was on an FOB basis, transferring title and risk to HPCL, and they are not responsible for any contamination. This issue is significantly impacting the company's liquidity and is cited as a reason for delays in offshore drilling plans, with the company actively seeking an amicable resolution.

Cambay Blocks Update

In the Cambay blocks, two wells have been drilled in North Balol, with one flowing oil and the second planned for side-tracking. The company plans to drill two wells in Asjol and expects final clearance for the Ring-Fenced Production Sharing Contract. Overall production from Cambay wells remained stable at 0.32 mmscfd of gas in Q3 FY26, consistent with 0.33 mmscfd in the previous quarter.

Future Outlook & Production Targets

Management provided optimistic guidance for future production, expecting Dirok's gas output to triple in FY27 to its full potential of 40-45 mmscfd once grid connectivity is established. Kharsang is targeted to produce 1,000+ barrels of oil and a minimum of 10 mmscfd of gas from new wells and workovers. The company also guided for an EBITDA margin of approximately 60% for FY27-28, reflecting confidence in improved operational efficiency and higher volumes.

Management Transition

The company announced an upcoming leadership change, with the current Managing Director, Mr. R. Jeevanandam, confirming his departure from an executive position. The Nomination and Remuneration Committee (NRC) and the Board are actively seeking a new CEO, with an announcement expected shortly. This transition marks a significant development for the company's future strategic direction.

This is an AI-generated summary of a publicly available earnings call transcript.

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