Hindustan Oil Exploration Company Limited ($500186)

Ladies and gentlemen, good day, and welcome to Hindustan Oil Exploration Company Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference call over to Mr. [indiscernible] from EY. Thank you, and over to you, sir.

Thank you. Good day, everyone, and welcome to the Q4 and FY '26 Earnings Call of Hindustan Oil Exploration Company Limited. The company published its results and has uploaded the investor presentation on the exchanges earlier today. I trust all of you would have had the opportunity to review them. Before we start, a disclaimer. . 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 the actual results to differ from those anticipated. Such statements are based on the management's beliefs and assumptions made by information currently available to management. Audiences are cautioned not to place undue reliance on these forward-looking statements while making their investment decision. On that note, let me introduce you to the management participating with us in today's conference call. We have with us Mr. Baroruchi Mishra, Managing Director; and Mr. Allen Joseph Andrade, CFO. Without further ado, I'd like to hand over the call to Mr. Mishra. Thank you, and over to you, sir.

Thank you, Saurabh. Good morning, and [indiscernible] welcome to all our investors. I thank you all for joining us today for our earnings call for the quarter and year ended March 31, 2026. It's indeed a privilege to address you in my capacity as the Managing Director and the CEO of Hindustan Oil Exploration Company Limited. This is my first call with you, and I'm very excited about this session. Today, we see strengths such as pivotal inflection point in next journey. Over the past years, we have systematically built a diversified and balanced portfolio of producing development and exploration assets across Indian hydrocarbon basis. And as a result, we are uniquely positioned with a compelling and rare combination of 4 things: number one, established production and stable cash flows; number two, multi-year near-term development opportunities. as a very clear line of sight with significant upsides in the reserves. Our 3P reserves, and you will see those in the slides that have been sent to you are over 100 MMBOE and strong alignment to the India increasing focus on energy security. So our strategic priorities remain clear and unwavering. We want to maximize value from our existing [indiscernible] assets. And that is very important because a lot of that is low-hanging fruit and accelerate monetization of discovered resources. In that way, we also want to improve or enhance our operational efficiency through technology and disciplined execution. Capital efficiency is key for us. Before looking ahead, the next 3 years are expected to be [indiscernible]. We have an active pipeline comprising multiple drilling campaigns. So as you see, we would have 20 wells which are in various stages of being prepared for execution. The structural expansion initiatives and a product ramp of plants, our offshore and onshore assets. . [indiscernible] been professionally managed. What we have done today is we have [indiscernible] that competency to a new level where we have tried to get the industry best to be in our leadership team. So we have being joined by 3 very capable individuals. The first one is our CFO, Allen Joseph Andrade. He is the Chief Financial Officer with 40 years of experience across British Gas and Shell India and a deep expertise in oil and gas joint ventures. The second individual is Sanjay Kundu. He is the Head of our offshore operations with 30 years of experience, [indiscernible] U.K. and India, including [indiscernible] operations. And the third individual is Parthasarathy Bandopadhyay, he happen to reservoir consultants for the 30-year experience about [indiscernible] India, British Gas, TPV in Thailand and the World bank. And of course, we continue to have a very [indiscernible] individual, Krishnan Raghavan, who is our Chief Technology Officer and had a lot of experience across the globe, but also in [indiscernible] and will be [indiscernible] blocks in India. . So our immediate priority is to embed a high-performance execution culture, underpinned by strong governance, uncompromising safety standards and a disciplined capital allocation. Reflecting on the past year, FY '26 were both significant and challenging. And we are [indiscernible] from all the challenges, then we are in the process or we have overcome quite a lot of these challenges. On the positive side, we achieved continued production from our core assets or these that we had some upsets once in a while, but that is the nature of the beast. Meaningful progress in development planning, and advance into key drilling programs, and we'll talk about those when we talk about on the slides and strengthening of our technical organization, which you just saw, and we have a lot more at the next levels in the organization, where we have strengthened the capability and competency and progress our infrastructure and monetization initiatives. So at the same time, we faced a number of operational and commercial challenges. And I have a few that I'd like -- you probably would know but even so, let me draw your attention to a few of those. We have done in certain monetization initiatives, which essentially is willing wells, really workovers, et cetera. And that was driven by some of our ability to complete our commercial settlement. You see a crude, et cetera, and we'll talk a little bit about those because we have larger items. And if you start a constrained, especially in the East, pipeline infrastructure country. We are happy to talk about those as well. And of course, everybody has suffered with the global energy market. So the cost of running your operations, especially if you are relying on diesel and other stuff in the offshore, the prices of those commodities have really shot up. And therefore, you have to bear with some of these. There is a positive and this also because the oil and gas prices go up. But really, that is an area which you probably acceptably because the cost of rates and other things also go up. Importantly, these challenges have sharpened our focus on risk management, operational reliability and value maximization. We want to preserve value and increase value to view -- to get value essentially means creating higher up tonnes for our facilities. . We are emerging industry is stronger, more resilient and better position for our next stage of growth. With that background, I'll now take you through a brief overview of each of our blocks. The B-18 is one of our [indiscernible] blocks. It has seen a lot of ups and downs. But it continues to be our most strategically important assets. This represents a highly attractive offshore oil development opportunity with substantial remaining reserves. So just to put things in perspective, we have 2P reserves of 26 million barrels of oil equivalent in this field, out of which we have just produced one or thereabouts. And therefore, what remains to be done is wide intent of our eyes. And we will not be found wanting to go after this very important field to maximum potential. So what we are planning to do, therefore, is the seal is workovers. So the key existing wells for new workovers. We're also planning to do production optimization by making some configuration changes on the facilities so that we reduce our suction pressure on the facilities and therefore, are able to pull more gas from the wells -- gas and oil from the wells, we can flow with less of that pressure. So we're doing some changes in our compression and what have you. Additional development works will be drilling the, reservoir management improvements. And this is an area which [indiscernible] a lot of attention. And now we have to [indiscernible] sir, a global expert of reservoir management has joined us. and facility we won. So our long-standing -- so [indiscernible] has the potential to become a major long-term production and cash flow we generate a contributor for the company. and also offers significant attritional leverage because much of the core infrastructure is already in place, and that is very important to oil and gas development. This also do lend itself to supporting some of our other development programs like B-15 and we will evaluate the opportunities to see if we can bring a B-15 to B-18 and those kind of things. So the utilization of your structure for installation will try to flock to the maximum. So B-15 is the next 1 that was awarded to us by the government, and we'd like to thank the [indiscernible] for over confident in us, awarding this project this were to us. We are -- we have not lost time. We are on an SBP maturation path very quickly. And we're looking at picking out the long leads and impact. Let me take this above. We're trying to [indiscernible]

I'm sorry to interrupt, sir. Your voice is muffled. Can you come near to mic?

Can you hear me?. .

Still the same issue, sir. Can you come closer to the device, .

[indiscernible] in my hand.

I'm sorry, we are not able to hear you. Please, start speaking.

Okay. So I don't know where you lost me. I was saying about B-15. Were you able to hear that?

Yes. .

Okay. These B-15 represents an important seizure offshore growth project for us. And as soon as it was awarded -- was awarded, we have or even before, once it was told to us that you have -- you are the selected body for this, we have started the FDP process. We have looked at 2 or 3 different concepts. We are in the process of zeroing out on the concept that we will use. And then as a standard practice where you have very clear stage-gate deliverables identify assets, select, define and execute. So we will be getting the deliverables for the select phase, so we will have one d1 development concept select phase, and then we'll do the central engineering design for that, which is -- it will take us a few months, and then we will get into a and then execution. So in looking catalog, we are also looking at what are the long lead procurement required and working on the reservoir model for this. . Then we have PY-1. PY-1, as you all know, has been our development project for a very long time, almost 2 indicates now. And when it came on stream, it was -- it had 50 million [indiscernible] 5 million scraps of production daily. But then stuff happened the offtakes, et cetera, has become an issue. But now we are trying to work on it. [indiscernible] has an offshore platform facility. It has a 55 kilometers of [indiscernible] which comes to our onshore facility, onshore gas processing infrastructure and significant redevelopment potential. So we believe that by drilling new wells by the [indiscernible] activation, production optimization and by restoring meaningful gas production, we will realize full value from this project. Now this is not just our view. To be able to understand whether this is possible, we went to one of the entities who is producing from a similar basement reservoir, and that is PetroVietnam. And they are one of the largest producers. At one time, they were producing 100,000 barrels from the white cargo field. So we went to them and we had an assessment of what is the remaining potential in the field, and we have very positive results from that. So we are drilling planning to drill wells in PY-1 as well. Now Dirok is in Assam, and this is an area of high focus, especially now when there is a lot of shortfall of gas. So people are looking at why are we are producing from the. So when you have the capacity to do so, the field has very strong with IQ quality. It has 3 ways or 3 zones which is [indiscernible], and there's a lot of untapped potential there. We have established production facility, existing market demand, as you know, especially now, and there's significant upside and we'll be drilling wells there. One of the key areas there is the availability of evacuation pipeline infrastructure [indiscernible] with the government, with the other stakeholders to be able to work on a credible technical evacuation path, regardless of who all these facilities and those kind of things because India needs it. So rather than putting on an HOEC hat or an all India or any other company hat, we are together trying to see what is possible to do so that we can increase production from this. And as we speak, we have -- we are producing around 0.3 million to 0.4 million ton cubic meters per day. A few years ago, we were producing 1-plus million standard cubic meters from this, and we can still do that because those wells have been choked back. So with a very short period -- short notice, there is an opportunity to increase production from this field. When we have Kharsang. Kharsang has been good news for us. It represents one of the largest medium-term growth opportunities within the portfolio. We are -- we have drilled the 9 wells, and we continue to -- and we are planning to do 9 more. We found oil or the production from there has doubled, but what I said price is not a surprise from an oil and gas sense, but surprise from a commercial sense is that there's a lot of gas, and we have to figure out how quickly to evacuate that. And then we have the Greater Dirok and Umatara areas, and we are -- these assets have important exploration and appraisal upsides. The objective is disciplined exploration with focus on commerciality, infrastructure like monetization and capital fusion development parties which will obtain for any oil and gas assets that you would have, especially here because this is a remote area. So you have to be very careful about how -- what development concept tos. Cambay assets in Gujarat. So as you know, these have been with the company for a very long time. The company started in the garage actually 40 years ago. And we have to revisit some of the philosophies of operations there or philosophy -- development philosophies and the focus would be on workovers, production enhancement, secondary recovery and low-cost incremental production growth. So last, I'll have a few core important items that we'll talk about, and then we'll hand over to Allen to talk about the financials, and then we'll open the question -- open for questions. So on the reserves, one of the strongest indicators of HOEC's future potential is the reserve base. And that's a key thing for any oil and gas company. Our 1P and 2P reserves just being the reserves would stand at USD 3 billion to USD 5 billion depending upon what oil price we use. And there are substantial upsides become beyond the book reserve -- good results. 1P for people who are new to the oil and gas sector is [indiscernible], which is around 40 million barrels of all equivalent. [indiscernible] possible and probable, which is P50. And globally, all these project FIDs are taken on 2P and stress tested for 1P and 3P. So our 2P reserves are 60 million barrels. And then we have substantial upside for the 3P, which is the term reserves, which is around 109 million barrels of oil improvement. So importantly, this has been certified by independent agencies, global agencies. And management believes these opportunities will improve which will have a very high recovery factor across multiple assets. If we do the things right. We have to get it right. And that essentially means we manage our reservoir better. We have all the modeling and we understand that we do history match, and we really understand what is the optimum production profile those for these plays, and we have to continue to drill in west because if you do have good reservoir management, you know where are the areas of accumulated reserve and we can continue to grow. And then we have to optimize production from the existing wells by understanding what are the limitations, the return called to use the limits and people do these workshops to use the limited workshops and those are the kind of things we do. And of course, infrastructure announcement. So what are our production growth trajectory. So you will have a slide that you probably see on the growth trajectory. We have -- this is on Page 36. We currently are 1,500 barrels of oil equivalent, plus roughly 0.4 million, 1.6 million, 1.7 million barrels of -- 1,000 barrels of oil equivalent lock-in because we don't have the infrastructure. Our target is to get to -- by 2027, we want to get to 10,000 to 11,000 barrels and then by 2028, 22,000 and then by 2029, to 32,000 barrels of on equivalent. And we were backed by the drilling opportunities by the reservoir studies about the potentials. And we do hope that we will have support both from the investor community and from our stakeholders to help us realize these targets and we'll work together with all of them to be sure that we carry everyone along. And just the last bit, which is important that it must be on your mind, how will you fund all of this. So at this stage, allow me only to say that we will fund it both with our internal accruals and with facilities that we'd like to get from the banks to raise capital. But importantly, both of these activities will be underpinned by a very sharp capital discipline, and we will exercise flexibility so that we don't unnecessarily sort of value [indiscernible]. So with that, let me stop, and I'll hand over to Allen for the financials. Allen Andrade is our CFO, and he will walk you through quickly on the financials. Thank you very much, and I'll stay open for any questions that you may have after the Allen's short speech. Allen, over to you.

Thanks, Baroruchi. I think Baroruchi has done very well for me. It's a short speech. And what I'd like to do with -- do actually is -- can you go back to the second slide. HOEC at a glance. What I'd like to do is give you a brief of what the corporate structure is because this is the thing that determines our sources of income and our cost base. For instance, HOEC is the consolidated entity. It's also stand-alone in terms of owning participating interest in various PCs. HOEC has 2 100% subs. One is Hindage and the other Geopetrol international, which owns geopetrol, Mauritius. Mauritius owns geo petroleum, which has an equity stake in -- which has a PI in Kharsang. oilfield services owns the vessel in which a store. A quick recap on our financial performance, market cap, revenue, EBITDA, PAT are all in the negative this time, mainly because of a couple of key incidents that have happened during the year, underpinned by the fact that we had an HPCL issue where we had to account for a sale, which was made to HPCL and reserves. Should that sale has gone through our revenue would have been INR 559 million -- INR 559 crores. Our key return ratios continue to remain 4.5% and 2.5%, similar to what we did in the previous year. Can we go to the consolidated statement now. I'll run you through the P&L. Yes. So the consolidated basically reflects the income and operations of the entire group. Just one second. . I followed the [indiscernible] -- if you look at the year-end, '25, '26 and '24, '25. A few things that have impacted this performance related or related to the decrease in production and the fact that we acquired producing properties from an entity called Abdhoot, where we acquired the 40% share. As far as profit on -- profit before tax is concerned. It's again, reflective of the fact that the -- our net -- net income is lower because of the impact of the -- impact of the [indiscernible] sale reduction. . The next one is the balance sheet. Balance sheet growth is steady, again, reflecting the increase in the producing properties, reflects the acquisition stake in Abdhoot and the VAT increase in the participating in this. Everything else is more or less as per our operations defined mostly by the lower production that we've had this year. Next one. On a stand-alone basis, HOEC has INR 88 crores compared with INR 341 crores that we did last year. And the INR 280 crores after stripping all the unusual impact. So the net sales for the year is INR 274 crores. Our cost base continues to be strong. If you look at the lifting cost, it's $28 a barrel, $28.4 actually, which compares well with the previous year, which is again $28.6, talks of strong financial discipline that the company has exercised during the year. One impact that has gotten the year is the exceptional item, which is the result of the acquisition stake in the booking of the unusual profit of INR 32 crores. Again, the stand-alone asset and liability statement, nothing much to report except the fact that the acquisition assets have been added has increased the oil -- or the oil and gas property -- producing property base. And there's virtually no -- nothing unusual to report as far as the other assets and liabilities are concerned. Yes.

You see that in an customers. On that pot, we will open this for Q&A.

[Operator Instructions] The first question is from the line of Harshit Khadka from RoboCapital. .

Sir, just wanted to understand what is the target for net production in FY '27? And it will be really helpful if you could give the split by oil fields? And what will be the contribution from Kharsang, BAT-80 and so on? .

All of that, most of it is covered in the presentation slide that we have sent. We are targeting to get to 11,000 -- 10,000 to 11,000 barrels by June of next year. Now that is understood by our ability to drill a few wells in PY1, 2 wells and oil tube intervention, which is basically saying that you changed the production improvements and clean up the wall, et cetera. So PY1, 2 wells will do. And on B-18, we are wanting to do 2 workovers, many existing wells, we will reenter and change the oil and gas person zones to ones which are more prospective. And that would give us roughly 1,500 to 2,000 barrels of additional oil. And then we are also planning to do 3 wells. So that would again add to something around 15,000 to 2,000 barrels. If you are able to complete all of that by June, then you will be looking at 12 million to 15 million stops from and you would be looking at 4,000 to 5,000 barrels from B-18. But as I said, there is a lot that needs to be done especially from financing perspective and the weather perspective, the availability of the rigs because oil price is high, the rig or in shop supplies. Everybody wants to drill as much as they can. And then in Assam, we wanted to get to 70 millions. Right now, we -- our potential has 45 million standard [indiscernible] which we have been using only, let's say, 15 million because of the pipeline constraints. So we may not be going to well -- 3 wells in Assam until the pipeline is available, but we do hope that we will triple the production to 45 million standard cubic feet. And then in Kharsang, we would be from the 9 wells, and you might have noticed that I'm giving you a range, not an exact number, but that is how you would understand how oil and gas fields work. And in Kharsang, we will be drilling 9 wells. Currently, our gross production is 700-plus barrels or thereabouts, and you know our equity [indiscernible] Kharsang. So you'll be able to find that. So we will look to double our production in Kharsang again. We doubled it by the 9 wells that we grow, and we'll try and double that again by the campaign of 9 wells that we are planning to do in this year. So in term we are in the line of sight of getting to technically above 8,000, -8,000 barrels but our planning is to get to 11,000 so that is -- and I'm not differentiating that date of 31st of March 2027 because that is not how the oil and gas work and trying to tell you before June 2026 because the drilling goes on all the way up to May of the next year, June of 2027 because all the way of May next year, we go on. Does that answer your question?

0 Yes, sir. And what is our debt and EBITDA outlook for FY '27 and FY '28?

So at this stage, I would say let's leave it to understand a little more of how fast we will drill and those kind of things. And in the next quarter, will give you the details because otherwise, you and I was on the danger of us believing in a number and things might turn out to be slightly different. So let me do it next quarter. .

Okay, sir. And then the last question...

You may please rejoin the queue for follow-up questions. [Operator Instructions] we will take our next question from the line of Nehal Panjwani from 40cents.

Sir, by when will be able to get a decision on the HPCL revenues? That is my first question.

Do you want to go for your second question and then I speak or you want me to [indiscernible]. .

Yes, sure. The next question is about the connectivity, which is spending for a long time, almost every quarter of last conference -- every conference call of last 4 quarters, we have been getting -- we have been building to date that it will be done very soon, very soon. That's what we have been hearing so far.

Okay. No, noted. Thank you. So let me tell you talk about the [indiscernible]. So we have had very constructive discussions with HPCL and thank you to the management and the leadership of HPCL. We continue to have that engagement. And we are looking to -- I mean the solution or believe that because requires some processes to be followed for continuations and what have you. But we are on that path. As far as the crude itself is concerned, we have reserved the invoice. We have canceled the sale to HPCL, initially read between 2 parties, and we have resold our [indiscernible] to third-party buyers. They are all the in HPCL. And as we speak, we have trucks coming to pick up the [indiscernible] from HPCL. And we are realizing the sale of crudes, but SP1 To third parties not to HPCL. The only thing is because they are being rugged, the entire sales proceeds will not come to us in one go. So it will be over a period of 2 to 3 months. We are trying to do it ASAP. But given that there's a huge shortage on diesel, et cetera, it is becoming a little bit of a slow process, but we'll catch up person. So that is on HPCL. And number two...

Can i interrupt. What about -- when will we realize the revenues -- I mean...

We all started realizing. every week, there are number of 300 to 500 tonnes or in some investor also 700 tonnes. So every week, we have trucks coming in on some days, very mainly not at all. But every week, we have trucks coming in and we are picking up the crude from HPCL refinery, and we get advanced age. So my -- our best bet is 2 to 3 months, we wish were able to sell all the crude. The second question was on the pipeline. So may I draw your attention to the graph on Page 21, the pipeline [indiscernible] on Page 21. If you do you have the slides with you, gentlemen, I forget your name. Otherwise, yes, I can only say that the line -- the NPL line, which is 16 inch by 122 inch. That is the line which currently has explored roughly 1 million-ton outage of the capacity to go up to 2.5 million. So we are working with with the Assam gas company and with NRL and of course, it all India to figure out how that capacity can be utilized. Now in that GMPL line, there is a patch of 55 kilometers, which needed replacement because of asset integrating issues on that part time, maybe you been selling, et cetera. So that 55-kilometer pipeline has been made. Now that pipeline has to be connected back to the main line. So the line is complete, but it has to be connected to this line. Now there are 2 ways in which you can do it. In an ideal world, you will shut down, remove all the gas from that pipeline and other will breed of all the gas or use it and then there is when you push it and then you cut it and connect. But really, other options are also being seen so that NRL doesn't have to take is around but that is in process. But even that is the only thing. In the next few months, NRL will take the shutdown and then we'll connect that lineup. Once that line is connected back to the DMD or DM, we are done. Now there are 2 things there. NRL may still not be ready to take all the gas so their capacity increase. Therefore, we are also looking very actively and thanking to All India and NRL and the team. So they're all trying to see if they can have a short connection in their facility to get to the national gas grid. As you can see where it's a listing link for connecting [indiscernible] in a very short 300 and 400 meters line is already working on. We already have some connections. So that might be activated. And so long as NRL is not able to use the gas they might become a reseller. But I have to qualify this. This is my view. And the team is working on it. So this is not about the completion of the line anymore. It is just about how quickly we can tie the line that has already been laid the 55-kilometer. So that the bad patch in the GMD line has moved and we are able to flow the gas, yes.

So sir, when can we expect to sell from gas

Yes. So that is a question of which I might have an answer, but it may not satisfy you. And that is -- we are working with all our stakeholders to fast track it because this property does not belong to HOEC. But given what we have been that obligated to complete in 1 to 2 months, 2 month. But what is important is where we stand today as a country, there's a huge requirement of the necessity to get every molecule that can be produced to meet the requirements. And so everybody is well aware of that, and we are together working with a situation where we can unlock the potential of Dirok as much as is [indiscernible] pipeline, okay?

Next question is from the line of from Dhruv from [indiscernible] Partners. .

I have a couple of questions. My first question is, sir, by when do you expect the national rate connectivity for Dirok to be solved? And if that happens, what sort of production could we see from Dirok and what are the production levels as of now?

Good question. And let me take the next one, which is in my control. That is a controllable factor. So we have well potential to produce more than 1.1 million to 1.2 million standard cubic meters. We are producing 0.3 million to 0.4 million standard cubic meters per day. So -- and the well s which had produced 1.1 they are choked back. During the COVID times when there were shutdowns of some facilities of oil in India and other entities, we were allowed to produce 1.1 million, but now we are producing only 0.3% to 0.4%. Now that is on a gross level. And if we are allowed to -- we are allowed to get into that pipeline, theoretically, we can go to 1.1 million to 1.2 million. But my view is we might get 2.8 to 2.9 because that facility might also be shared by other loan long in production by other operators. We will gain my you, but that's why I need to qualify it. The second is when can this be done, as I said in my previous reply, there is a huge awareness that's the right word to use, and all parties that India, the country needs gas. So we all have to take away our individual company hats, we have to put on the India hat and make things happening. And we are doing that. We have multiple meetings with PNGRB, NRL, Oil India, [indiscernible] company, which obviously pipeline and with other operators. And everybody, the alignment of use is there, which is to get it done in ASAP, but I can't put a my thing that we are there -- are you hope in 1 or 2 months, we are able to start flowing -- all right. .

My next question is for B-18 revival.

I thought you already asked the second question. Okay. Okay. So was the question on B-18 revival? .

Yes. It's on the BAT revival and the production from that normalized production? And how do we see it going forward, specifically for B-18?

Okay. So B-18, we have proven reserves, as I said, of 26 million barrels of oil equivalent of which we had to use just 1. We have 2 subsea wells, which will need work over. And you should have been done last quarter, but because of financial constraints, INR 250 crores tied up in invoices for our proved sales, we can take that up. But post monsoon, we'll take up the workover of these 2 wells, and we have in plan to drill 3 more wells. The facilities are already there. The MOPU, which is the mobile offshore production unit, it can take all of that gas on oil. and [indiscernible] has sufficient to take all the production. So it is just about drilling the wells, how fast we can drill it. But that nature has to be kind and allow us to drill in November, and there has to be funds to do that. These are the 2 things. And with availability, which is the 3 things. But our target is to start working on this completely real largest and get everything -- the entire work program to be mitigated by June of next year.

Next question is from the line of Sangeeta Purshotam from Cogito.

My question has been answered.

Next question is from the line of Manpreet Arora from Arora Wealth Advisors. .

So first of all, very happy to make the [indiscernible] and very positive comments. Just a request in this is a cost interaction, if you can not limit the call.

So you are -- sorry, can you speak a bit slower and closer to the mic? .

Sure. Is it better now? .

Yes, slightly better, yes.

Yes. What I was saying was, sir, because first interaction, just a request that if we can have a longer call today, so that all queries are answered, but that's just a request. I understand there are other things you might be visit. So my first question is kind of on the crude sales. Now if you can explain a little bit more. So we have reversed the invoice like [indiscernible] now we are taking crude from their storage and selling it. Now the prices that we're selling it as of today's prices with the [indiscernible].

Yes. No. So it is definitely not today's price. It is prices of -- today's prices with significant discounts to the Brent. What almost to what we sold our Q2, but they realize that when there are transportation costs and other stuff. So definitely not the 100 barrels that you see today. There is a significant discount to that. For a period of time, it is a firm price and then we have looked to [indiscernible] so that we are fair to all the buyers. And there's a Brent minus x and let me keep that because it could be confidential. But we are near to what we have sold our crude be that there would be some additional costs, which will relate to high cost of diesel, et cetera. Well the buyers will bear, but we are aligned to a situation where -- there is a shortage of diesel. They have around 6, 7-kilometer long cues for diesel and those kind of things. So we work with our buyers, but we are near about in that ballpark. Now things might change going forward. But as of now, it's Brent minus x. Few weeks we were formed and that we had agreed in our cost with these buyers, and then it is brent minus x.

Yes. So just to follow up on that, sir. So -- do we have to do anything to that oil from a quality perspective because there have a question around contamination, and therefore, are we preprocessing selling it? Or is it being sold as is and there are no quality checks that need to be.

So we have taken the samples. The buyers have taken the samples. They have analyzed whether they can use the crude, and as of now, they have agreed to take it on an average various basis without any need for any party with meaning HPCL or us to do any processing. So this has been taken by the buyers. Now how the buyers use it, I would leave that for the buyers to decide. But essentially, one of the ways in which this kind of fluid is used by dilution or for -- or technically where you don't see very high temperatures and you do some straight cut products. But let me leave it at that, and that might be really technical. But long story short, the buyers have looked at the crude samples, have analyzed it by third bodies and the basis which the [indiscernible] has been signed, and they are picking up on an [indiscernible].

So my second question is on the...

I am sorry to interrupt Manpreet...

First one was a follow-up. This is my second question. .

Please continue.

Sir, on the FSO storage that we have of the oil. Now in the past, we have said that we will let it fill up to 450,000 barrels of then only sell it. But if you have to sell it like if it's half full or partially full, then we have to take a $2, $3 discount to the current growing prices. Now that the oil prices are so high, do we want to wait until it becomes full and sell it or rather take the $2, $3 discount now? And are we able to sell it now so that we are able to lock in these prices because by the time we wait for 450,000, we may not get the pipe business then. So is there a possibility there? And what's your thought process?

That's a very good question, and I get asked this question including my board. The issue is more technical than commercial. It we can be sold at brands. We don't need to discount it or -- the only thing is you might have to have a tanker which will take -- which will take the broader tanker might have to be you might have to pay some damage to the [indiscernible] for picking up a smaller cargo. And if you have a smaller volume there than the debt stock is become a concern and use. So typically, if we get to 100,000 to 150,000 barrels, it becomes a good parcel to sell being 150 plus it becomes a good important to sell. We are indeed looking at options to sell it even now as we speak. But then you have to get the right buyers and they have to arrange the right prices. Let me stop here.

[Operator Instructions] We will take our next question from the line of Manan Mundra, [indiscernible]

So my questions are more related to accounting. First of all, we had an exceptional gain this year, sales value gain of around INR 36 crores. While I was looking to the cash flow statement, the amount has not been added back -- sorry, renewed from the operational cash flow. So any are reason for that?

No. See, this is a result of the fair value estimate of the acquisition of the 40% share. It is based on the total estimated value of the share, the prospect of the field as well as the joint venture outstanding that was there in the books. So all of that is the netting of all of this has resulted in -- as you know, India requires us to sale the entire stake venue acquire when there is a business combination, okay? As a result of that, the amount of INR 32 crores has been booked in this quarter. So I don't know if I have answered your question. But there is no cash flow. This is a valuation gain, which has resulted in an exceptional item, which is posted to our P&L.

Okay. No, my question is related to cash flow. I know it's not a cash flow transaction. So that is why it should have been reduced from the profit before the starting line items of the cash flow but it has not been reduced. If you -- even if you look at the September '25 statement, it has been reduced from the profit in the cash flow from operating activities.

Okay. I don't know what the disclosure principle was at that time, but we took a view this time while disclosing we've had a fresh look at the valuation. We looked at the reserves. We've looked at the future estimate of the valuation and have arrived at this, which has been taken as an exceptional item. I think in our previous disclosure, also, we have included that amount as an exceptional item. Yes. Like I said, if there is no exchange of cash the valuation difference is in noncash -- noncash profit --

Yes, exactly. Yes.

I would suggest at this stage there is -- you are very free to ask this question in more detail offline because that was the happy to explain -- it's a discussion we've had with our with our auditors, to P&G as to the exact nature of the disclosure. And after a lot of technical discussion, the disclosure has been made appropriately.

Yes. Okay. Okay. And my second question is, we have a closing crude oil price, which is the standard practice -- funding practice that we use for the stock that has been reversed from the sale that has been ever -- so my question was, when we have we decided anything with HPCL regarding compensation since the oil prices have changed considerably from the time that we have sold it to HPCL.

, no, I think that's part of the commercial transaction, which Baroruchi can explain best.

Yes. So look, we have -- the moment we reversed our invoice and we gave them a credit cost. There is no further commercial interaction with HPCL. Of course, we have to get into a conciliation process, which is as per the [indiscernible] because it was a dispute and it has to be closed out properly. Now what comes out of that conciliation process is something to be seen. And in the next few months, that will be sorted. But as it stands now, there is no use by anybody's -- any party on. Going forward, we'll see what comes out in the consolidation, and then we'll take a call on that basis.

Thank you. Next question is from the line of Shashwat Jalan from NBL.

So I just wanted to give some understanding if you can help in bridging the gap between the current production and the production that we are targeting. I think we already mentioned that one of the major pipelines will be from a PY field, if you can expand more on that. I'm talking more from a horizon of 3 years pipeline that we have mentioned in the presentation. What is the potential we can see from there? Secondly, if you can expand more on B-18 and the [indiscernible] and so if you can partly -- if you can answer partly from the perspective both of near-term FY '27 or maybe FY '28 and a longer-term perspective, how each fee you can see your ramp up and what we can see that production coming is. Currently, the visibility that we clearly have from their own topline facility is cleared. Outside of that, I just wanted to get breathing how that has is

So I've already answered the first part up to June 2027, what we will do and what is our target. And when I say target, I'm qualifying it all dots living in a row, will get to that. And we've already said that long term, let me answer Dirok the B-15 because B-18, we've already answered. But let me rehash it once again for you, 3 wells to work over from B-18 and that could get to a range of 5,000 barrels and $10 million of debt of cash. of 7.5 million to 10 million barrels of gas -- million scopes of gas for B-18. For B15, the development plan is underway. We will have to take a call on how much -- we produce the in-place reserves of 16 million barrels of oil equivalent. We have 3 to 5 wells that we might have to drill. but that is in the concept stage, and we'll get back to you at the right time. We are targeting to 4,000, 5,000 barrels from that seen as well and roughly 10 million stops. Now on [indiscernible] is 60-plus or 50 kilometers from the existing facility. So various options will have to be seen, whether we can tie back to the existing facility. Or it has to be a separate export to export time and those kind of concepts are being talked about. On Dirok, our current line of sight is 70 million subs. Our ability or the potential today is 45 million stocks of gas. We have to do 3 more wells, and we'll get to 70 million stocks. But that we will only do if you can see in the chart on Page 21, this DFL to [indiscernible] 175-kilometer line in 2 to 3 years because that will then provide the complete capacity pipeline capacity to evacuate the additional 35 million standard to receipt of gas that we could get from [indiscernible] what is being done now, but we can do more. And then, of course, we have North Dirok where we will do an exploration well, very high potential there. And I think very I have to qualify it because we are in an oil and gas, but what we have seen is, once we do we have 4 to 5 1,000 meters well, we'll get to a very good oil and gas bearing structure and should be able to produce that. So that will also add to Dirok could be 10 million stops. 10 million to 15 million , but that has to be done only after exploration. I'm just giving a number which is based on our initial understanding. I'm sure you will not hold me to that because that well has still to be drilled. And then you have Greater Dirok, which is the next on the where we will be drilling wells and will expand in. So there is -- a Greater Dirok is 100% us. So there is an opportunity to drill more wells. So Dirok potential, let me put it this way. The existing potential is 45 million cups on a gross basis and it can go to 3x if all these wells are drilled at the right time. But again, the key dependency there is the existing -- is the pipeline is our Croatian network, and that will be there truly and completely in 2 to 3 years' line when that bottom line that I told you has built, and then we are continuously in the game.

So I wanted to tell you about -- so if I can just ask a second question. In terms of the split between gas and oil. So just my understanding is Dirok and Greater Dirok, there's also something that will be dominating on the gas side and the crude target that we have mentioned in our presentation as well -- it will be largely led by B-18 and PY fees or if there's any correction on this increase?

Largely, you're correct. But look, when you produce gas well, you also have associated the liquids. So in Dirok, when we rental when you are producing 15 million stocks or thereabouts, the 0.3, 0.4 MCM, we are producing around 200 to 250 barrels of condensate is the word that we use for the liquids that come out of the gas. So when we go to 45 million scopes, our -- we would be getting around 900 barrels -- 700 to 900 barrels of condensate, and that is on a gross basis. So it will be material. It is not that you have only gas and nothing else. Cargo of crude that we sold was at $109 per barrel. So although the volumes are now, there definitely will be contribution to the liquids from the gas fees as well.

Sir, if I can just add a follow-up on this. What is your pipeline priority in terms of drilling as far as the PY is concerned, in terms of number of wells that we want to achieve by FY '27 in drilling. And if my understanding is correct, the numbers that we have shared is something that is achievable FY '28, not March '27.

[Yes. So the 2 fields will our initial understanding or initial planning is will have 2 rigs drilling on both sides. There could be an overlap, but we will have 2 rigs drilling on both sides. And that will then offer an opportunity to drill in fast, because also the mobilization and demobilization from -- mobilization from 1 fleet to other -- those will take 25 to 30 days, and that is not any commercial service that anybody will have. So we have 2 different -- and this is again subject to the funds position and all of that. But currently, we are planning 2 wells by rig and quality intervention with the quality unit, which is a small job. And on B-18, we'll have another rig, which will be going through workovers and 3 interventions. You are absolutely right. March could go to March to May. That's why -- as an oil and gas professional. I'm not too worried about what Allen thinks about the financial year. I'm worried about when will my rig not be able to deliver. I will not be able to drill or it has to get down and get pulled away, otherwise, the insurance for insurance expires, and that is by May. Therefore, by May of next year, my hope is that we will have done 3 wells on VAT and 2 workovers.

Next question is from the line of Anubhav Goel from Cosma Ventures.

Sir, you mentioned in terms of funds, we are looking at internal accruals and bank loans. But at some point, it would be likely be raised funds from shares too, right?

That is a question that I may not be able to answer now. But what I have to say here is whatever makes commercial sense for the management and for the Board and for the shareholders, we will definitely do that. But I will have exceeded my brief here where, if I told you and also from my ignorance of what equity sales, et cetera, could bring. At this stage, we are looking at internal accruals and raising debt in the market from the institutions from the banks, et cetera. Allen, you would like to say something else?

Yes. At this point, we are looking at various proposals with people to try and organize for the immediate front for our CapEx program. Remember, our operations are run on our cash. And to a great extent, our limited CapEx has been funded internally by cash generation. But like Baroruchi mentions, we do have advance to access them at some point, the bank loan or the bank facilities to try and take forward our drilling program.

Yes. So on a one-to-one, we can talk in more detail about some of these because that will give you a good understanding of what are our capital raise plans, being very assured that we have thought through all of these, but I'm constrained by my ability to say more at this stage.

Okay, sir. And sir, even before the war broke out, I think we were facing an issue on sourcing rigs and the right equipment for B-18 drilling. So if you can just elaborate more on the challenge we have on both these trends in terms of availability and costing and how this can constrain us? And can these challenges delay in lines and drilling time lines for 3Q and 4Q, by say, 3 months or 6 months. Just want to sense on how firm are these drilling [indiscernible]?.

See drilling of the wells so let finance of the workovers. I think workovers are always a challenge, but we will properly plan for it. The trees which are on the wells they will need to be pulled out and we have the original equipment manufacturers or the bodies who will do all of that. So there is always a risk in well intervention. But at this stage, I can't put a number to it or a number of days to it. But all I can say is we'll go fully prepared with all uncertainties that you would see in our workover of a subsea well, including whether the adjusting [indiscernible] will work? Can it be used again? Or do you need to backup subsidy and those kind of things. So we'll be looking at all options, and be prepared with the plan A, plan B, plan C. So let me leave it at that. But your question helps me clarify my thinking, and so thank you. The bottom line is the team is very clearly aware of all the aspects and we'll plan accordingly.

Okay, sir. And just 1 quick question, sir. So assuming when is the pipeline is connected and the refinery restart, so my thinking is refinery will consume it internally gradually over a period of time as the utilization goes up, last other operators also may get preference it's a capital -- so it would be fair to assume an increase from 15 to 45 for Dirok would be gradual and limited, right? Because if you go to 45, that would imply bulk of the extra 1 million, which the NPL will provide will be provided by us.

Yes. So I have to be a bit selfish, I want all of it, but you are absolutely right. There would be other [indiscernible], and therefore, it will be up to Assam gas company linked holds the pipeline to tell us what is our in our proactive portion. But we do hope that we would be able to put at least 0.4 million to 0.5 million more than the 1.5 million additional capacity that the pipeline has. But you're right. It is not in my gift to be able to say that I will go to 45 because that's what I want. It is dependent upon what capacity we get. Let me stop there.

Sir, just confirming 0.4, 0.5, we can sort of expect out of 1.5 million being added. That is a reasonable assumption?

So I'll tell you what, [indiscernible] charge charge you $100 per barrel for asking so many questions, but realize this, this is -- our capacity is 1.1. We can go to 1.1, which is 45 million scraps. And we hope in various discussions that 0.4 to 0.5 could be given to us. But I will not hold anybody to the [indiscernible] if they say, why , you are not getting 0.5 or you're getting 0.4 and those kind of things. So that discussion is going on, and we will get to a point and you will know it as soon as we have

Ladies and gentlemen, we will end the call exactly at 12 pm. [Operator Instructions] We will take our next question from the line of Manan Mundra, an individual investor.

My question is related to the DSL to Balayan pipeline that is still in progress, and it will take another 2 to 3 years. So I wanted to make a perspective once this line is completed, how -- I mean what will be the capacity at which we'll be able to export the gas.

I've said that already, the target would be 70 million stops, but there are upsides from North Dirok and from Greater Dirok.

Next question is from the line of Vibhor Talreja from Nest Amplify.

[indiscernible] we have valued the inventory as of March 31, and we are selling it as of today when prices are lower. So is there a loss that has to come in accounts as we saw this as we see this in the next couple of months. Also linked to it is the fact that the Q4 [indiscernible] INR 9 crores that includes INR 13 crores due to the recognition of HPCL revenue because we have valued the initiate a particular price. Without that, we would have had a loss in Q4 despite higher prices. I just want to make sure that my understanding is correct. I'll let you answer this and then I ask the question.

On the HPCL realization, as I said, it is linked to Brent. Our initial few weeks, we had a firm price. But after that, it is linked to Brent. So we'll let the year play out or the quarters play out to understand as I said, 2 to 3 months, and we will know whether we are booking a loss or we are just about getting able. -- realize though that the buyers are going through a situation where they're not getting diesel and transporting and trucks, et cetera. So there is a level of pain in that exercise also, which might show up and some costs, et cetera, which we'll have to talk about. But let this quarter get over and we'll have a better understanding of what kind of realization we are getting. Let me stop there. So that was the first question. What was the second question, sir?

On the first, the future realization [indiscernible] can period, the action was more to the CFO, that when we have valued the inventory as of March 31, we all know that that back down is a very high.

Yes, yes. So let me just pick that up from where Baroruchi left. Methodology that we have used is discount to brent, and we have put in a downside. So the downside risk has been covered. And we don't be -- as far as we are concerned, we have made a reasonable expectation of what the value of crude will be. So I think we are protected on that front.

[Operator Instructions]

But we can take your questions off-line. Look, we are very keen to interact with the investor community and then because we are in service of you all, you are shareholders. It would not be proper that we don't take the question. So you are very welcome to reach out to us, and we will be able to

In touch. But here's the feedback that you are trying to be open and transparent. And as you would have seen that there are 15 questions with respect to HPCL. So maybe the CFO, you can cover that in your initial commentary itself because that is a material event for the company. Then the question would automatically reduce and we had time.

Next question is from the line of Uday, an individual investor.

So just wanted to know on PY1, what are the upside potential on further exploration? Are there any further exploration planning over there? Because I think the PY has been in nonproduction state or long while, are we planning for further exploration in that block?

Yes. Very good question. So indeed, we are. The answer to your question is we have one well, which we will be drilling for exploration. And totally, we have 4 wells and one sits between -- midway between exploration and appraisal because we have a lot of data. 2 wells for his firm and then 1 exploration well is there and 1 well that we are planning to do, depending on the results of the first 2 wells. In this campaign. So that's the expectation. But yes, exploration upside will be explored, and we have in plan to do 1 well definitely.

Just a follow-up on that...

I am sorry Uday, you may rejoin. Next question is from the line of Raghav [indiscernible] from Lindsay Securities.

Oil India had its Investor Day and there were some comments made that they do not expect that BNPL pipeline will become a common carrier and only Oil India gas will flow through. So will we be allowed as part of being a joint venture or a stakeholder or Oil India in our gas field that our gas will be allowed to go through that line? .

So I'll tell you what. This is the thing that I answered right in the beginning. We are meeting as individual entities to try and see how best we can use the capacity that is there. It is no more -- given the circumstances that we are in today as a country, the paucity of gas needs to be overcome. And therefore, whoever has gas and there is a credible technical path for flow of that gas molecules -- those gas molecules regardless of who owns it the export. And all parties are working towards that. Indeed, it will continue to be a line which is owned by Assam Gas Company, of which Oil India is a major stakeholder and it would be dedicated to NRL and all of that. Our only submission or tiers while NRL is revving up capacity by doing upgrades, et cetera, if there is a knowledge in that pipeline, others should be allowed to use. So who owns it is not of immediate concern. Even if it is for a short period, that capacity should be completely utilized.

Next question is from the line of Nishant Maheshwari, an Individual Investor.

My first question is related with the rig requirement. Actually, ONGC has floated a tender where they are willing to sell the rig. Are we looking for that rig to buy. I mean, I will -- we will be participating in that tender. And the second question is what is the cost of production related with the gas and oil both offshore and onshore? And last question is 11,000 barrels which we have projected by 2027, it is inclusive of gas, I mean that the gas has been converted in barrels?

Yes. So the last one is exactly right. It is [indiscernible]. I mean the OE basis, gas equivalent of oil. So that is right. Now I am -- about the rig, see, owning a rig is only commercial sense you have hundreds of wells, et cetera, and you are continuously using it. So right now, no, we are not looking at buying rigs, et cetera. For offshore, now the cost of production of onshore and offshore -- our total OpEx is around 28%, and there's a target we will work and try and optimize that further. Offshore is definitely more -- lifting cost of offshore crude is more, but then you have also higher volumes if you get things right. And onshore is a lot less. Assam is one of our lowest OpEx for barrel production

And estimated cost of production per barrel. I think $41 say, $16. What what is the ...

So our current OpEx on a company-wide basis is $28 per barrel of equivalent. Onshore is a lot less, but let me -- there are other dependencies, et cetera, and we have to take a weighted average. But let me stop at this. Current and some of it is controllable, some of it are uncontrollable. So the cost that we pay for the MOPU, I mean, the running costs to the MOPU, they're running cost of the tankers, et cetera, the rentals, et cetera, albeit that they are all within the company, they are uncontrollable.

Okay. How much we have realized...

Please rejoin. Ladies and gentlemen, we will take our last question from the line of Nirbhay Mahawar from N Square Capital. .

Would it be fair to assume that there is no issue with the reservoir quality of B-18 because whatever continuation has happened, would it be fair it happened during the transit of on? .

I cannot say about the second part. But the first part, every second week, we have taken sample in the last or third week in the last few months. And we have established that there is 0 contamination from the wells. .

Okay. So the existing inventory we have got for the new oil we are producing it will be sold at -- the rent almost in the brent. Would it be fair to say that? .

I hope that Brent plus, but definitely renter we go through an auction. And on that basis, we sell our pro.

Just 1 more thing. Whenever we get better hang on our CapEx program, we would like to have more clarity. One, on the offshore, onshore mix? And second on, how will it pan out in terms of oil and gas production?

Well, certainly. We'll talk about that, but whether we'll be able to talk of all of it because there are some other aspects or there just CapEx of drilling wells, et cetera. But I'll give you some line of sight on this next year -- I mean the next quarter. But for now, I think we can sort of agree to end the call because folks are looking at doing and saying order have started [indiscernible]

Thank you, and all the best for a wonderful work here. .

Thank you so much, ladies and gentlemen, on the call. It's always a pleasure. And we stay in hot standby to answer your questions whenever you have them. Thank you.

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