Hindustan Oil Exploration Company Limited (500186) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Hindustan Oil Exploration Company Limited Q3 and 9 Months FY '25 Earnings Conference Call hosted by Valorem Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Nupur Jainkunia from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone, and a very warm welcome to you all. My name is Nupur Jainkunia from Valorem Advisors. We represent the Investor Relations of Hindustan Oil Exploration Company Limited. On behalf of the company and Valorem Advisors, I would like to thank you all for participating in the company's earnings conference call for the third quarter and 9 months of the financial year 2025. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management beliefs as well as assumptions made by information currently available to management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. R. Jeevanandam, Managing Director; Mr. N. S. Senthilnathan, Chief Financial Officer; Mr. Krishnan Raghavan, Chief Technical Officer, E&P. Without any further delay, I request Mr. R. Jeevanandam to start with his opening remarks. Thank you, and over to you, sir.

Thank you. Good morning to you all. Hope everyone has received the updated presentation. It is on our website for your reference. I have with me Krishnan Raghavan, CTO; and Senthilnathan, CFO; and Daisy, our Company Secretary. I would like to start with updates on Northeastern region. After the Dirok workover, Sand-9 is on continuous production, and we plan to activate Dirok-4 wells. Pre-stack depth migration study has been completed to place the new development wells and to target all deeper sands. Land acquisition for new development wells are initiated. Dirok gas sales for the current quarter is 17.64 million standard cubic feet per day, and the offtake in the previous quarter was 15 million standard cubic feet per day. There is a marginal increase in the current quarter. Therefore, the sales volume of current quarter is 0.44 Bcf compared to 0.37 Bcf in the previous quarter for our share. Condensate is 7,499 barrels compared to 5,858 barrels in the previous quarter. Though this field can produce more than 50 million cubic feet of gas, we have to restrict the production due to lack of demand. Price realized in the current quarter is USD 8.25 per MMBtu, whereas it was USD 9.08 per MMBtu in the previous quarter. The price difference of PPAC in the nominated block was about USD 1 per MMBtu. As long as the price of gas for the nominated block is lesser than the PPAC price, first uptake will be from ONGC and Oil. Therefore, full potential of the field could be achieved once the demand constraint is eased out. We have been updating ourselves with the progress of Northeastern gas grid. As and when the concept of common carrier is accepted and the gas grid connectivity is established, the situation of the demand constraint would get reversed. It is difficult to predict the time line, but we believe that it should be operational in 2025, '26. We have received the approval from Assam Pollution Control Board for [ North Dirok-1 ] well, and we plan to drill this well after the Barail formation. We are ready to meet the potential increase in demand once the demand constraint is eased out by connecting the Northeast gas grid to the national gas grid. GeoEnpro, wholly-owned subsidiary is the operator to Kharsang Block and the group has 35% participating interest in the block. Continuous workover is being carried out in the producing wells to maintain current production. Our program to drill the development well will commence before the end of this financial year and an exploration well is being pursued with the partners for approval. GeoEnpro operating office in Delhi has been moved to Chennai for ease of operation. We have successfully completed the public hearing at Kharsang, Arunachal Pradesh on 26th November 2024 for EC clearance or environmental clearance. About 250 people participated in the public hearing, and we received the full support for the project. The Environmental Appraisal Committee meeting was also held on 9th January 2025. EAC has recommended the project for approval to MOEF. We are awaiting the final formal approval from MOEF. 1,000 [ hours for rigs ] have been secured and the LOE issued for drilling 9 wells. Civil work tender is under finalization. Contracts for other services are under discussion, and we endeavor to commence the drilling of first development well in Kharsang before 31st March 2025. We also plan to drill one exploration well subject to partners' approval in the ensuing financial year to the depth of about 400 -- 4,000 meters, which would unlock substantial value in the block. Our plan to drill initial 9 wells in Upper Girujan would increase the field production at the earliest. Depending on the results, we will continue to drill shallow wells to enhance the production. We believe substantial upside exists in Lower Girujan, Tipam, and Barail formation. With the connectivity of Northeastern gas grid to national grid, monetization of the gas development would be faster with a better price. AA-ONHP-2017/19 adjacent to Dirok called as a Greater Dirok is analog to Dirok structure. We are expecting the extension of the block for 1 more year to start and complete the committed work program. Plans for laying approach road and civil work is in progress. We have carried out the pre-stack depth migration study, which is quite encouraging and the prospects look much better. Our capital outlay for the Northeast region for the next 2 financial year continues to be INR 250 crores. Cambay Blocks, in Cambay, we have secured the environmental clearance after 4 years for North Balol and Asjol. We have also received the consent from the Pollution Control Board. We have secured a rig for workover of 2 wells in North Balol and will start as soon as we get the final approval from partners. We have also secured a rig for drilling 2 wells in North Balol and tangibles are in place to commence the drilling, awaiting approval from our JV partner. After the initial workover in drilling, we will continue with the drilling of additional development wells. We are also expecting the final clearance of ring-fenced PSC along with the extension of Palej Block. This could add substantial value to the Cambay Blocks. Now I move on to Offshore Blocks. We are awaiting the award of DSF Special Bid Round 2024, wherein we bid for Block B-15 in Mumbai Offshore, we discovered small field with an area of about 332.4 square kilometers. Being the sole bidder and an award of the block by Government of India, we will embark on the development of this field. The water depth of this field is about 40 meters. B-80, both the wells are on production. Production in the current quarter is 88,073 barrels of oil and 0.6292 Bcf of gas compared to 58,000 barrels of oil and about 0.38 Bcf of gas in the previous quarter. During this quarter, the average gas price realized is $10.78 MMBtu compared to $9.89 per MMBtu in the previous quarter. Now the gas price in Western region is moving akin to the imported LNG price. In PY-1 offshore field, all facilities for processing and transporting gas are in existence. We have issued a letter of intent to PetroVietnam, a state-owned oil and gas company in Vietnam, producing oil and gas from the basement akin to the complex geology of PY-1. PetroVietnam will evaluate the block potential as well as review the locations released by the in-house surface team. This will bring new hope to the field. These studies will give more confidence on our plan for 3 wells. And if everything goes as per plan, drilling of the first well will commence in '25, '26. The existing contract with the GAIL has expired after the completion of 15 years. We are confident about the reserves and resources in our existing blocks and our forthcoming drilling program will add to the results by testing hydrocarbon to the surface. For this quarter, our consolidated turnover is INR 156 crores compared to INR 100 crores in the previous quarters. And our profit before tax for this quarter is INR 52 crores compared to INR 13 crores in the previous quarter. Our net debt is 0. This volatility in quarterly results is due to factors beyond our control, such as weather, price and the demand. We will continue our efforts to maximize the value of underlying assets, both onshore and offshore. Now, Senthil, our CFO, will update on the financial results. Over to Senthil.

Thanks, Jeeva. Good morning to all. Stand-alone revenue for this quarter is INR 72.46 crores compared to INR 51.85 crores in the previous quarter. The increase in revenue is mainly on account of B-80 field continuous production and improved offtake in Dirok. B-80 revenue for the current quarter is INR 35.52 crores for gas sales compared to INR 16.96 crores in the previous quarter. Oil in stock is adjusted in the operating cost. Price for the current quarter for B-80 gas is USD 10.78 per MMBtu compared to USD 9.89 per MMBtu in the previous quarter. In the case of Dirok, revenue for the current quarter is INR 34.76 crores compared to INR 32.33 crores in the previous quarter. During this quarter, 436 mmscf of gas was sold compared to 369 mmscf of gas sold in the previous quarter. Similarly, 7,499 barrel of oil was sold in this quarter compared to 5,858 barrel of oil sold in the previous quarter. Field operating expenses for this quarter in the stand-alone accounts is INR 71.92 crores compared to INR 49 crores in the previous quarter. Other costs, including depreciation, depletion and amortization, finance costs and others is INR 11.57 crores for this quarter compared to INR 10.34 crores in the previous quarter. Out of the total operating cost in the current quarter, credit adjustment for oil stock is INR 29.47 crores, whereas it was INR 13.6 crores in the previous quarter. The increase is mainly due to continuous production of oil from B-80 blocks, which is 52,844 barrels for the current quarter compared to 35,344 barrels in the previous quarter. Stand-alone EBITDA for the current quarter is INR 15.59 crores compared to INR 9.73 crores in the previous quarter. Profit after tax for the current quarter is INR 4.93 crores compared to INR 1.11 crores in the previous quarter. In consolidated accounts, the revenue from operations for this quarter is INR 156 crores compared to INR 100 crores in the previous quarter. Total expenses in the consolidated accounts for the current quarter is INR 97.73 crores compared to INR 86.17 crores in the previous quarter. The increase in cost is due to increase in field operating costs in B-80 field as production days increased in the current quarter. In the consolidated financials, EBITDA for this quarter is INR 77.69 crores compared to [ INR 36.47 ] crores in the previous quarter. Consolidated operating profit before tax is INR 52.47 crores against INR 13.41 crores in the previous quarter. Profit after tax in the current quarter is INR 43.32 crores compared to INR 10.81 crores in the previous quarter. As on 4th February 2025, the term loan outstanding is about INR 91.25 crores and the net debt is 0. We have A rating with positive outlook for INR 500 crores loan by India Ratings. With the current cash position and with the continued production, we will meet all our obligations, including the planned capital program for the coming 3 years. Thanks, and back to Mr. Jeeva.

Thanks, Senthil. We can now open the forum for questions.

[Operator Instructions] The first question is from the line of Riddhesh Gandhi from Discovery Capital.

Just had a few questions. With regards to actually the B-80, how much is the inventory we are holding right now? And how much do we need to actually close the oil sale? And do we like cover our exchange rate or this sale we do will be on the existing dollar exchange rate?

Riddhesh, thanks for the question. B-80, our current stock is 3,17,000 barrels. And our offtake, we plan to do the offtake before 31st March of this year. And so we don't hedge either the oil price or the exchange rate. So we would be looking for a better price to carry out the offtake before 31st March of this year.

Got it, sir. Sir, and just to understand, you have mentioned in the presentation that you have cleared off all of the blockages in the new hawser and all has been installed. Has that all happened in Q3? And were there any shutdown days? And if so, how much is the existing run rate of production from B-80 compared to what we had in Q3?

See, I think we don't expect any more work to be carried out in the fourth quarter. So we believe that if any unfortunate events happen, then we have to take into consideration.

In Q3, did we have any issues where we had offtake?

No, no.

Okay.

No, no. The entire 92 days were fully operational. And Q4 also, we are expecting the same line, except a couple of days, some changes are something which we would like to do with.

Got it. And with regards to Assam and Dirok, we had earlier spoken about potentially actually the incremental exploration happening after the connectivity happens. So is it that we have the visibility on the connectivity now, which is why we're going ahead and drilling incrementally? And is there any sense on actually how advanced it is and some idea on the time lines?

We expect it should get connected and there should not be any demand constraint for our volume of gas by end of this financial year. So -- but anyhow small bits and pieces works are being carried out, and it will take -- the time line given by them is somewhere around 31st of this -- 31st March of this year. But this is not in our direct control, and we cannot commit to that date.

Of course, of course. It is -- but effectively, what they are saying, and I understand that there could be slippages that by -- hopefully, by 31st of March, we should have the connectivity to the national grid.

You are right.

Got it. Sir, and the last question is that we were the only bidder for the oil block, which you mentioned, which we have on in the auction. Just to understand, is there any reason why others hadn't bid and what did we see in that in terms of the opportunity? Or is it because we already have assets which we can leverage, we were the only people with space. Well, just wanted to understand the rationale behind the new bid.

So the rationale behind this, our [ J&P ] team has evaluated the block. And we have got an 342 square kilometer area in the discovered one. We believe substantial potential exists in the field. That is our basis for bidding on it. And second thing, it is a shallow depth. It is a 40 meters water depth, and we can bring some innovative technology in such a manner, we can drill the wells faster and put it on production. And even with the existing discovery, we can make money out of it. That's the reason we went away.

The next question is from the line of Rishikesh from RoboCapital.

Yes. Sir, I would like to know what revenues can we do in FY '26? Would it be fair to say that we can do INR 1,000 crore revenue and on that what kind of EBITDA margins can we do?

Yes, if you've seen, our EBITDA margin is somewhere a little over 50%, around 50%, if you knock out all our other costs. So that's the reason when our top line is doing better, then we can get the margins of INR 250 crores should be an easy target for us to spend per annum.

And we should -- and would it be fair to say that we can do INR 1,000 crores revenue in FY '26?

See, we will be reaching the revenue of INR 1,000 crores. If you look at assets, our consolidated revenue is in the order of about [ INR 500 crores ] right now in up to 9 months. So we will be somewhere around INR 800 crores. And with the full potential of the Dirok field and the continuous production of the B-80 and we are getting some more wells drilled in Kharsang, we will be able to reach the revenue level by the next financial year. That's our wishful projection.

The next question is from the line of [ Ajit Sanjay from Nizar ] Enterprises.

Yes. Sir, I just wanted to have an understanding on time line of the Northeast gas grid pipeline. You just mentioned it. But in the last call, you mentioned that the GAIL pipeline is expected to be completed by December. So sir, is it completed or what is that...

Yes, GAIL line up to Guwahati is completed and that is ready. From Guwahati to Numaligarh is under commissioning. And that's what we -- when we discussed with them, this is what we understood. And the DNPL line is getting decided and so the DNPL line connection also expected by end of 31st March. This is what is the plan at the moment by the respective authorities who are handling this issue.

Okay. And IGGL pipeline, sir?

IGGL Line is already there up to Guwahati to Numaligarh. And once the DNPL line becomes the common carrier or if there is any arrangement between IGGL DNPL, now IGGL line from Guwahati to Numaligarh, from Numaligarh to Duliajan would be there under their control. And they are laying another line, which has been already approved by the government of India. That will take a little more time. So till the time this DNPL line will increase the demand as such that will meet our requirements.

[Foreign Language]. So for us, DNPL line is important and not the IGGL, right?

IGGL line, it is important in the sense when we go a ramp up to 70 million cubic feet of gas per day.

The next question is from the line of Amit from RoboCapital.

Congratulations on good set of numbers. My first question is on CapEx. So we had earlier guided about INR 1,000 crores of CapEx split over 3 years. Could you add more color to that? Are we on track? What is the plan now?

See, actually, if you could look at actually this year, we are not able to spend some money. We could have done some wells in the Kharsang and some wells in the North Balol, but that didn't happen actually. But we did a workover that has taken about some INR 20 crores. And total, our CapEx plan in the current year is not up to the mark. And this is all linked to the regulatory clearance as well environmental clearance and others. Now we are having all those clearances in place. Our capital spend on drilling will get a momentum from '25, '26 onwards. Then after that, whatever the EBITDA we generate, most of the money we'll be spending on growth of the company by drilling the wells.

So is it fair to say that next year, we'll spend about INR 300 crores, INR 350 crores or that ballpark like INR 300 crores a year, provided all the production assets stay as they are now?

That's right. See, whatever the cash generated from the company would mostly like to go into the CapEx of this.

The next question is from the line of Nirbhay from N Square Capital.

Yes. Congratulations for the great work you're doing in this...

Sorry to interrupt, sir. I would request you to please use your handset.

Yes. Congratulations for the great work you are doing.

Thank you.

Sir, for the INR 1,000 crore CapEx we are doing, could you give us the breakup of how much would be on the onshore and how much would be for the offshore?

See, if you look at our major expenditure in the North is about INR 250 crores and about INR 50 crores to INR 60 crores on the Western region. The balance, most of the things will go for offshore wells.

So [ 700 and 300 ], so [ 300 ] onshore and...

2/3 goes to offshore, 1/3 goes to onshore.

Fair enough. And on the Kharsang, sir, could you give us more color on -- in terms of time line of when we can hit production and what kind of incremental output can come?

See we are -- currently, it's about 360 barrels on production, okay? We will be starting the shallower wells on the Upper Girujan sand. It is all shallow depths, which is around less than 1,000 meters, 1,200 meters type. We have already finalized a drilling rig, which will get mobilized now. Civil works are in progress. Our first well will start -- we expect it to start by 15th of March, plus/minus 1 week. So from there, we're continuously drilling 9 wells. So this 9-well program, if we expect reasonably about 100 barrels each well, then we will surpass 1,000 barrels -- 1,200 barrels. And even we get into the lower estimate we look at, we will be reaching at least 1,000 barrels in the next financial year.

Okay. So 1,000 barrel plus 300 additional current, so 1,300 will be the total?

1,200 barrels you can safely assume on it.

Fair enough. And for the evacuation infrastructure and all everything is in place, right, sir?

You saw the facility up to 5,000 barrels.

The next question is from the line of Darshika Khemka from AV Fincorp.

Firstly, I missed the product...

Sorry to interrupt, ma'am. I would request you to please use your handset.

Am I audible now?

Yes, ma'am.

And firstly, I missed your -- the production number that you had given for B-80. It would be great if you could repeat that. Secondly, the last time around or the previous quarter, you had mentioned that the net realizable value for the closing stock of B-80 was $73.69 per barrel. What was the rate this time around? And what was the inventory gain that we have been able to do?

So you wanted to know the production numbers.

Yes.

Production numbers based on the current quarter is 88,000 barrels of oil, and 692 mmscf of gas, say, 0.69 Bcf of gas.

0.69 Bcf of gas, all right. And the net realizable value for the closing stock, sir?

Closing stock valuation is done at $73.5 or something, $73.32. And now it...

I was expecting it to be a little higher than the last quarter.

Because this is mark-to-market on the date of closure of the books, right? So that should be the price on that date. So we have to take that. What is accounted is based on the $73.32 per barrel. But we endeavor to sell it only at $80, not lesser than this.

Okay. So we did not have an inventory gain, is it this time around?

No, it is not -- no inventory gain because it is almost similar size.

The next question is from the line of Shaurya Punyani from Arjav Partners.

So I just missed you earlier. So what did you said about FY '26 revenue projections?

See, it's not proper in this industry to give any guidance. Okay. That's not fair also because either way, I'll be incorrect. So it is -- you can say the reference, we'll be doing a little better than the current year.

Okay. And current year, where should we close at, like in 3 -- in 9 months, we have around INR 380 crores types of revenue.

Yes.

So where can we close FY '25?

We'll be doing better in the fourth quarter if everything goes well. So we will be somewhere a little lesser than the previous year and somewhere closer to the -- better than the current quarter.

The next question is from the line of Gautam Rajesh, who is an individual investor.

I had 2 questions. My first question was when is the pipeline connectivity expected to be established for Dirok? From which month can we roughly start seeing a ramp-up of the gas volumes from Dirok?

See, we have a 18-inch line is getting connected with the Oil India line for 15 kilometers. Then the Oil India line will take it up and that will go up to Duliajan. From Duliajan, it gets into the DNPL line that comes to Numaligarh. From Numaligarh, it gets into the IGGL line, that goes to Guwahati. This is what is that. So once the DNPL and Numaligarh -- up to Numaligarh, it get connected and upgraded, then that's the starting point for us. So which we expect should be by end of this financial year. But that is not in our hand. If everything goes well, from '25, '26, there should not be any demand constraint. That's what we believe. But again, it is not in our hands. That's what I can repeat it.

Okay. My next question was for the B-80, will we continue at current levels? Or is there a scale-up expected or the -- over the next few quarters without taking any additional wells? Or will the next scale-up happen only when new wells are done?

The next scale up will happen with drilling a new well. So we are looking at internally discussing whether to advance the drilling. That's what we plan.

The next question is from the line of Manpreet Arora from Arora Wealth Advisors.

Yes. Sir, would you be able to help us with understanding this APM pricing versus PPAC pricing? So my understanding is that because of the KP, the Kirit Parekh Committee, there was a floor price that was -- floor and ceiling that was applied to the APM, which was $6.5 the ceiling, but that was supposed to increase every year. And so will that increase happen this year? And then does that impact the PPAC pricing as well? Is there a formula linking the APM and PPAC pricing? Like, for example, it is $6.5, then PPAC will be at least $1 above, et cetera. Just if you can help understand how these work.

PPAC price is linked to the crude price, imported crude basket of India. That is about 10% of the price. Suppose the crude average price is, say, $80, our PPAC price would be $8. But there is a ceiling for that in that case for the nominated blocks, the blocks which have been under nomination to Oil India and ONGC, predominantly most of them, that would be a ceiling price of $6.5. There also, they have given a leeway to them. If the new production, they will get some additional premium on it. In a way that we are in a -- I think the market is in a process of getting to the discovered price by market rather than by the administered price, either the PPAC price or by the price fixed by the government, right? So if the market is -- now the freedom is existing actually, so we will go for new options. We may get a better price if the demand exists. But we are not willing to sell it below the PPAC price. That is what is there in the Western -- in the Eastern region. But the Western region, we will be selling more than the PPAC price because there is a demand exist.

Okay. Okay. So sir, if it is 10% of oil, which means if the oil prices come down, then let's say, it hits below $70, then the PPAC price will be around $7. And sir, if I look at the PPAC website, the notified prices for the last quarter for PPAC were below $8 for the 3 months. But we have the average price realized at $8.25 for the previous quarter.

PPAC price is based on the gross calorific value. But when we process the gas is sold, it gets into net calorific value. So 10% premium is -- get added therein.

All right. And sir, on B-80, I think a previous participant also asked, so the current flow that is happening of gas of 7.52 mmscfd and the barrels oil at 957 barrels, is this a steady state for, let's say, till the next 6 months before monsoon hit?

See, I think we expect the same level will continue.

Okay. And sir, you mentioned that you're looking to sell this oil not below $80. And so is that under our control or that is also market-driven?

See, it is actually not the price in the market, what is the quoted price in the Brent price moves, then that's the time you can plan it to sell. So your total time taken for offtake will not be more than about 10 to 15 days. So that is the reason we are targeting in such a manner, we get a better price at the point in time we will offload. But otherwise, we'll have a storage capacity up to 900,000 barrels.

Okay. So if the price is not under -- or price is not favorable, then we will store it.

Yes. But we have that leverage with us because of the excessive storage capacity.

Okay. But we don't have a hedging policy where we would like to lock in the price.

Generally, we go for a natural hedging in the sense both the dollar as well as to the price.

[Operator Instructions] The next question is from the line of Manan Patel, who is an individual investor.

Congratulations for improved set of numbers. Sir, the first question is regarding PY-1. So PetroVietnam will help us in drilling or it's just affirmation of where we want to drill the wells? And by what time lines can we expect to start drilling, because we were expecting in Q1 FY '26. So what is your updated view on that?

See, Manan, that PY-1, it is a complex -- it's a complex geology. It is a granitic basement. Now we have to find out a person who knows the full knowledge on that. In the whole world, the best knowledge emanates from the PetroVietnam because these guys are producing from the basement reserves. So that is why it's being a government company, it took a longer time to get in touch with them and get the contract finalized. Now we finalized the contract with them, and we are sharing the data with them. So it is like a specialist doctor to instead of going for a general physician, you go for a specialist doctor to get the full review done. So that is what we are in the process at the moment. So they will be not only reviewing our 3 locations, so they will be reviewing the entire field potential. So that would be a good beginning for us. And with that, we'll be spending the capital judiciously. That's what it is.

Okay. But so have we contracted them also for the drilling part or drilling, we will do?

No, no, no, no. Drilling and all this can be done by ourselves. There is no need. But only the evaluation and the geological model review and any other suggestions they give how to drill and where to drill, that becomes important.

Got it. Got it. And that should take like 3 to 4 months before...

Yes. They have -- they will be giving a report to us within about 90 days. So we have started uploading the data. Now once the data set is also a big volume where -- because Chinese New Year is over now. So probably they will start work from next week onwards.

Got it. Got it, sir. Sir, the second question is on the Dirok. So like from what I understand, there are other players also waiting for the same pipeline to get online and start maybe drilling or additional production, a lot of small and big players there. So like once that pipeline comes online, do you think like it will have the capacity to absorb all the production apart from our production as well?

See, our production is current. The others production as expected. That is the difference.

Okay. But -- so we can ramp up very fast. But once that other production also comes online, maybe 3, 6 months down the line, then can it be absorbed fully or then again, we'll have the demand challenge?

Then there is about 4.5 million line, IGGL line gets ready.

Okay. Okay. So by the time everything comes online, the bigger line will also get ready. Hello?

Yes.

Okay. Sir, last question on the B-15 and B-80. So does this INR 1,000 crore CapEx include B-15 CapEx as well or that will be additional?

That is not for B-15. B-15, we have not factored. It is for our -- the program of about 3 wells in PY-3 and about 3 wells in [ B-80 ]. And B-15, we'll figure out a way.

Okay. And sir, lastly, on B-80, so we mentioned -- so is it about -- the increase in production is only about -- is the factor of drilling wells or we'll have to add additional evacuation infrastructure and other infrastructure for us to bring other wells on production for the existing...

We don't -- Manan, we don't add anything on the production facilities that will take up to 10,000 barrel comfortably and about 20 million cubic feet of gas processing facilities. And then the export line will take care of the transportation and sorry -- for moving the oil from the [ KGP ] to FSO. From FSO facility is about 900,000 barrels. So that should not be any constraint on this. But what is the requirement is how do we drill the additional 3 wells, whether we go through subsea or through a [indiscernible] or some new ways of getting a structure and making these wells are surface wells. That's our idea. So that is what we're discussing...

And we have engaged some experts to do that as well or that is the internal process?

No, no. We will be going with an external experts and our in-house team is also strengthened. So we will be taking a full thorough review of basic engineering and as well as a detailed engineering before we embark on it.

Got it, sir. And last question, sir, when will this B-15 announcement will be made and when will we start process of approvals and all this?

We have been waiting for the last 3 months. We will know only when it is announced.

Okay. Okay, sir. And the new policy recently last quarter, it came about that helping companies in terms of better, faster production and all. Does it help us or how -- what is your view on that?

So it helps, actually you have to go, and we can't say it's not helping. Any of that improvement is done by the [ DJs ] in the ministry that helps us to faster it and fast track it. And they are helping wherever they could. That's what it is.

The next question is from the line of Sanjeev Damani from SKD Consulting.

Sir, actually, last time I had inquired about B-80, where you had said that we have enough storage capacity offshore also. And now are you meaning to say that you have onshore facility of 9 lakh liter -- 9 lakh barrels of petroleum, which is produced from these wells?

No, no, it is only an offshore facility we have. The system is totally offshore. That is a floating production system, both on process as well as on storage. The FSO is having the capacity of 900,000 barrels. So it will be transported from FSO through a saddle tanker that will move out.

Okay. And now this -- there is a exporting facility pipeline has been set for export also. So this is a new facility we have created now? If I've understood it right?

No, there is no -- nothing, no new facilities.

[Foreign Language] It's not a new facility. So when you say this that we can export also, so means we can sell to our Indian companies like earlier you had sold to IOC.

No, you have wrongly understood the export. I mean the export means the process is exported to the FSO in the sense it is being transported to FSO. So nothing got import and export and more than that.

Okay. Okay. Export is from the oilfield to our storage facility, something like that.

Yes. Yes.

Okay. Okay. Now my question is that, sir, we are producing some 957 barrels per day from this facility in last quarter. So what is the current running rate? Is it same or it is higher now? Hello?

Yes, sir, the management is connected. Sir?

Okay. Okay. Should I speak? Hello?

Yes, sir, please continue with your question.

Sir, am I audible, sir, again? Hello?

Yes, sir, you are audible.

But I think management is not responding. I'm not able to get their voice. Sir, are you there?

Sir, they are connected.

I'm so sorry. My question is about B-80 only. In last quarter, we have produced, I think, 957 barrels per day average. So what is the production -- current production run rate? Is it higher or lower in this quarter?

Ladies and gentlemen, we have lost the management connection. Please stay connected while reconnect -- please stay connected while we reconnect them. [Technical Difficulty] Ladies and gentlemen, we have the management back on call. Sir, please continue. We have lost the connection of the current participant. We will move on to the next participant. The next follow-up question is from the line of Nirbhay from N Square Capital.

Yes. Another follow-up on the CapEx only, sir. This INR 1,000 crore CapEx, we'll be able to do it without taking any significant debt?

Yes. This is -- we will be -- we will not be taking any debt for this.

So we'll be maintaining this net debt -- net cash status in the next 2, 3 years?

Yes, that's right. So our EBITDA will support this. So we'll be able to do without any debt.

Fair enough. And sir, this currency depreciation straight away flows to our PBT? Or there is any cost element which hits us...

Which one? I couldn't get you, the question.

Currency depreciation straightaway flows into our bottom line?

Yes, yes, that's right. That is a noncash item gets into the balance sheet -- gets into the income statement.

The next question is from the line of Amit from RoboCapital.

Sir, my question is on the 9...

Sorry to interrupt Mr. Amit. I would request you to please use your handset.

Hello? Am I audible now?

Yes, sir. Please continue.

My question is on the 9 new development wells that we are planning to do for Kharsang. So just wanted to check the time line on that. When do we expect -- which quarter do we expect those to be completed and the revenue flowing to P&L?

So we will be starting the first well around 15th of March current year. So each well will take about 20 to 22 days. That's what it is. So most of the 9 well drilling will get over on the next financial year. And as soon as the well got connected, so we'll be hooking upon production. So every well once drilled within about 10, 15 days, we'll be -- put it on production. That's the way it will be working.

Okay. Sure. Great. And what is the CapEx? I don't know if I missed earlier, but for Kharsang in particular, what is the CapEx for the 9 wells?

Total CapEx for the 9 wells and all the [ small bus ] is about some $25 million. So our share should be about $8 million.

Okay.

35%, $8 million to $9 million.

[Operator Instructions] The next question is from the line of Rushabh, who is an individual investor.

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Sorry to interrupt Mr. Rushabh. I would request you to please use your handset. Your audio is not very clear.

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[Foreign Language] it should be from first quarter.

Sorry.

First quarter of the next year.

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Yes.

[Operator Instructions] The next question is from the line of Santanu from indianpetroplus.

No, I was just wondering, you get gas from different fields. So what kind of pricing regime do each of these gas production come under? Could you just explain it to me? I'm a little confused on that front.

Okay. So what is happening is, see, the marketing freedom exists for all the private companies in India. So what is -- if you have the demand is there, then the price is determined by the demand and supply, right? So there are 2 benchmarks are in India exists. One of the recommended price by the government of India, that is PPAC price. That is 10% of the crude, right? But if the demand is more, you can sell it at a premium there on to it. And if the demand is less, you can sell it at a discount there on to it. But in case of a nominated blocks, which is with only Oil India and ONGC, the ceiling price is fixed at $6.5, okay? Similarly, they get a floor price also. So for us, you can look at what is the market, what is driven by the market, that's the price.

So your entire gas production is market-driven essentially?

Yes, that's right.

Okay. That's all. And also, I was wondering -- sorry for this confusion again. When exactly are you going to start drilling in your B-80 field?

So B-80 field, we plan for '26, '27. So we may advance it. So that's what we are internally discussing it to ramp up the production.

So are you going to involve a consultant to a pre-feasibility study and feasibility then basic engineering, detailed engineering? How do you intend to go about it step by step?

No, we wanted to get into the basic engineering by our in-house team. Then we'll go for a detailed engineering from an external expert.

Okay. So you understand the substructure very well. So you don't really need any help in determining where exactly the location of the wells, et cetera.

We are strong enough. We don't need any support.

Okay. So the only support that you're requiring then from an expert would be basically after you've done the basic engineering and detailed engineering, if there is any problem?

That's right.

Yes. So in terms of -- you said that in terms of drilling platforms, you are looking at different kinds of platforms. So what kind of platforms are you looking at? What kind of options do you really have?

See, we have to look at the water depth and the stability. Based on that, we are looking at different models, [ tripod or tetrapod ], whatever it is suitable to us, which is a low-cost one to facilitate this marginal field production.

So you're looking at drilling platforms essentially, what kind of drilling platforms you'll have?

That's what.

Okay. That's what. And what is the cost per well you think? It's going to be, as you said, 1 -- 3/4 of your INR 1,000 crores is going to be offshore. And then, of course, you have other offshore establishments as well. So in this one...

We have an onshore program about INR 350 crores and onshore -- offshore is about INR 650 crores.

Yes. So in B-80 per well, how much do you think roughly the spend is going to be?

So we have to look at actually whether we are going for the subsea wells or to the platform wells. So if it is platform wells, it will be cheaper. It's $8 million to $10 million. If it is subsea wells, it will cost more.

Okay. So the other thing is that these 3 wells that you are drilling, is that going to be a full drilling program for the foreseeable future? Or do you expect more from the reservoir that you have right now?

We -- see we are looking at -- you look at the field is about 56 square kilometers. And the well intensity is much less. So we have to increase the well intensity. So we expect at least 6 wells will do the plot.

Okay. So that will tap the reservoir, right, 6 more wells?

Yes, that's right.

Okay. So then you have a fair amount of -- so this is -- this B-80 is coming from 1 well right now, right?

Two wells.

Two wells. So proportionately, you could have a similar expansion in production spanning over 6 wells over a given period of time in the future when you would have tapped the entire reservoir properly and get a certain amount of capacity of production out of that well -- out of those fields. So are you looking at a 40% extraction ratio? Or are you looking at a higher ratio than that? Or is it going to be lower than 40%?

No, no, we wanted to go to the -- we don't want to spoil the reservoir, and we're looking at an optimum flow from the wells for longer duration.

Okay. So long duration in these kind of wells like in Mumbai, they've been running it for decades. So you could look at about maybe 20 years or something?

Yes, yes. We have a contract for 20 years. So we should look at it.

So 20 years is a long period of time where you could get a lot of production out over 6 wells.

We have to flow the wells just like that actually. We have to flow the well according to the reservoir pressure.

Yes, that's right. And then, of course, you will have IOR/EOR programs also to be able to push up production, I'm sure. So that's a lot of money you're going to earn over 20 years, right?

Yes.

It's true. But Dirok won't have that kind of upside, right? That's limited.

See, you look at actually all the wells are having in all the blocks which are having an upside potential, which has not been fully tapped. So we'll be drilling more number of wells depending on the demand is a concern there in Dirok, we'll be drilling more number of wells there.

That's right.

And if any surprises comes in offshore, we will handle it. So there is no...

That's true. So you have this INR 1,000 crores for your own CapEx, but you have the expertise now in India, onshore, offshore, everywhere. So -- and there are a lot of these new chaps who've come in with OLP blocks, small private operators who are struggling, probably lack of knowledge, probably lack of capacity, internal capacity or resources. Are you looking at any kind of acquisitions also?

See, we are always open to buy it at a price and sell it at a price.

Meaning you are willing to consider acquisitions as well?

Always, it is our strategy. We'll buy it at a cost and sell it at a price.

Okay. So you can sell it at a price as well, yes. So is it possible that you might just sell out one day if you get a big guy coming in and cash out.

Obviously. See, whatever our expectations meet with us instead of waiting for 10 years, we'll do it right now.

Yes. So then what will you do eventually if you just sort of...

We'll go for another 1 year. See, there is no depth of opportunities in this country as well as outside, right?

Yes. Yes. So essentially, it's the rate of return. Wherever you get more money, more buck for your -- more bang for your buck, you're going to go that way. So it's a different picture entirely. I think it's all theoretical.

[Operator Instructions] The next question is from the line of Dhruv Rawani from Shreeji Finserv LLP.

Congratulations for the great set of numbers. I just had a couple of questions. One being for the next year, financial year '25, '26, the volume triggers will be from which all fields do you feel?

See, the volume trigger as per our program should be on the Dirok and then the Kharsang.

Okay. Anything on B-80...

[Technical Difficulty] will come from the Western region.

Okay. Anything from B-80, you expect volumes to go up?

I don't think so because unless we drill additional wells.

Okay. And the drilling of additional wells for B-80 will only be in '26, '27?

Yes, that's right. And that we will be advancing or something, we are internally deliberating on it.

Okay. Okay. Understood. And on the [ B-51 ], what would be the time lines once we get the approval from the government? Like can you just guide?

Okay. Once we get an approval, our endeavor is we have to put the field on production within 24 months.

Okay. So I think that is still very far away. I think in '27, '28 is when we can expect it to flow to profit and loss.

That's right. But no field can be developed less than 2 years. That is also a fact.

The next question is from the line of [ Abhilesh V ] from -- who is an individual investor.

Am I audible?

Yes. Yes. Please.

Yes, sir.

Sir, a couple of quarters ago, you had mentioned that there is an ambition to get into oil and gas service hard assets also. So where are we in that journey?

So we are mostly using it for the captive. When we -- whatever the assets we plan for it, we'll be using it for captive. We have not done anything so far on that. We will be looking into it. We have got our hands full at the moment. So next year, we will be trying to look at some smaller assets like some coil tubing unit and other slickline unit or something like that in a smaller capital one to meet our own purposes. And if any left out, time is available, it can be serviced to others. That's what we plan for it. We don't want to get into a full-fledged service company.

The next follow-up question is from the line of Rushabh, who is an individual investor.

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Sorry to interrupt, Mr. Rushabh. I would request you to please use your handset.

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Sir, I would request you to please repeat your question.

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Sorry to interrupt, Mr. Rushabh. Your voice is not clear.

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Mr. Rushabh, your line is not very clear.

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Mr. Rushabh, your line is not clear. Due to no response from the current participant, we will move on to the next participant. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

Thank you for all. We focus to complete the drilling of wells in both onshore and offshore to increase the production as well as increase the reserve base of the company. This will reduce our dependence on 2 major assets, B-80 and Dirok. Our committed in-house team with the support of external experts will ensure our growth targets. We once again thank you all for joining us today. Thank you.

Thank you. On behalf of Hindustan Oil Exploration Company, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.