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Hindustan Oil Exploration Company Ltd

| Q3 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤25th Feb 26

Summary : HOEC faces short-term production and payment challenges but expects significant growth from new wells and gas grid connectivity.

Management Perspective neutral : We remain confident in our ability to navigate temporary challenges.I'm not happy about it. That's for sure.B-80 is not performing as expected.Short-term challenges do not diminish our long-term value creation outlook.We hope and we pray for that (HPCL resolution).

Concall Report Analysis & Insights

Business Overview

  1. Currently drilling 8 wells in Kharsang, with 5 oil and 1 gas well completed.
  2. Current production is approximately 800 barrels per day.
  3. Dirok gas sales are 13 million standard cubic feet per day, condensate 5,614 barrels.
  4. B-80 production is 45,742 barrels of oil and 0.4 bcf of gas this quarter.
  5. Total reserves and resources are estimated at 100 million barrels of oil equivalent.

Future Growth Prospects

  1. Kharsang: Drilling 9th well in progress, 40 development and 3 exploration wells planned.
  2. Dirok: Revised Field Development Plan approved, 4 new development wells planned.
  3. Cambay: 4 wells on production from North Balol, 2 wells planned in Asjol.
  4. Offshore: 10 wells planned across PY-1, B-80, and B-15 blocks.
  5. Northeast Gas Grid operationalization expected to triple Dirok gas production.

Management Insights

  1. Committed to progressing drilling programs and monetizing discovered reserves.
  2. Acknowledges current production levels and B-80 performance are below expectations.
  3. Not happy with recent quarters due to sales issues and B-80 underperformance.
  4. Short-term challenges do not diminish the long-term value creation outlook.
  5. Current MD will not be in an executive position; new CEO search is underway.

Signs of Skepticism

  1. HPCL payment resolution timeline remains uncertain, potentially delaying plans.
  2. Delays in rig sourcing and workover for B-80 field are impacting production.
  3. Northeast Gas Grid full operationalization timeline is an estimate, not guaranteed.
  4. Management change with current MD leaving executive position and new CEO search.
  5. Partner approval for Kharsang wells is still pending.

Risk Factors

  1. HPCL dispute: Rs. 259 crores plus interest blocked due to crude contamination claim.
  2. B-80 workover delayed post-monsoon due to rig sourcing and resource constraints.
  3. Offshore drilling campaign delayed by revenue impact from HPCL issue.
  4. Production constrained by limited demand and gas grid connectivity delays.
  5. Partner approval needed for drilling additional Kharsang wells.

Good To Know

  1. Consolidated EBITDA for Q3 FY26 is Rs. 30.99 crores, up from Rs. 25.15 crores.
  2. Consolidated PAT for Q3 FY26 is Rs. 8.28 crores, up from Rs. 2.83 crores.
  3. India Ratings reaffirmed IND-A rating for Rs. 500 crores bank loan.
  4. Gas to oil conversion factor: 6,000 standard cubic feet equals 1 barrel.
  5. Current Managing Director, R. Jeevanandam, will not hold an executive position.

Key Drivers

  1. Northeast Gas Grid operationalization.
  2. Resolution of HPCL payment issue.
  3. Increased drilling in Dirok and Kharsang.
  4. New CEO appointment expected soon.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Dirok production is currently constrained by limited demand.
  2. Northeast Gas Grid connectivity is expected to significantly increase gas offtake.
  3. Gas supply will reach Hazira once connected to the national grid.

Financial Highlights

  1. Standalone revenue declined due to lower Dirok offtake and B-80 performance.
  2. B-80 gas production increased to 401 mmscf from 229 mmscf previously.
  3. Field operating expenses increased due to higher B-80 production.
  4. Net debt is Rs. 55 crores, with Rs. 30 crores cash on hand.
  5. Expected EBITDA margins are around 60% for FY27-28.

Product Composition

  1. Kharsang new wells are expected to add over 1,000 barrels of oil production.
  2. Kharsang gas potential is up to 10 million cubic feet per day.
  3. Dirok production is expected to triple with full grid connectivity.

Strategic Considerations

  1. Government is actively pushing for maximum well drilling across blocks.
  2. Approvals from Government of India are not expected to be a constraint.
  3. Board is considering both debt and equity options for future funding.
  4. New CEO appointment is anticipated much earlier than 3-6 months.
  5. Company seeks amicable resolution for HPCL dispute, avoiding litigation.
Hindustan Oil Exploration Company Ltd (HINDOILEXP) Concall Report Analysis & Insights | Dhanarthi