The Hindu Business Line : Hindustan Oil Exploration jumps after IOC shows interest in its fields

THE Hind Oil Exploration (HOEC) stock continued to move up on the bourses. The stock on Thursday finished 11.8 per cent higher at Rs 59.6 on BSE after touching its 52-week high of Rs 61.2.

After IOC decided to acquire stake in HOEC's two oil and gas fields in offshore Tamil Nadu for a consideration of $112 million, interest in the counter has gone up, according to market analysts.

IOC is also to acquire 50 per cent equity in development block PY-1 for a consideration of $104.15 million, of which $12.54 million would amount to a premium. In addition, $8.44 million has been estimated as the past cost, $5 million as the carrying cost and $86.61 million as the development cost.

For 40 per cent in another exploration block CY-OSN-97/1, IOC will pay $7.81million, including a premium of $4,00,000 and $1.08 million carrying cost.

On the BSE, 17.56 lakh shares were traded in the counter today, out of which, 27 per cent (4.76 lakh) were marked for delivery. At today's closing price, the stock traded at 15 times its FY04 earnings of Rs 3.8 per share.

According to Mr Devarsh Vakil of Anagram Stockbroking, the stock is likely to be aggressively re-rated considering its improvement in its financial performance and the recent initiatives to increase production, development and exploration.

Of late, production from its PY3 block has increased substantially. The PY-3 (Cauvery Offshore) Consortium has drilled and activated well PD-3-S replacement well for PD-3-RL. Initial oil rate has been observed to be around 3,000 barrels of oil per day. The company holds 21 per cent non-operating participating interest in the block.

It has two blocks (Asjol, PY-3) under production, two blocks (PY-1& North Balol) have proven their reserves, while two blocks (CB-ON-7 & CB-OS-1) have reported potential commercial discovery.

HOEC is reportedly in talks with BG Group for acquiring their 62.64 per cent stake in block CB-OS/1 located offshore Gujarat. At present, partners in the Block are BG Group as operator (62.64 per cent); Tata Petrodyne (10 per cent); ONCG (10 per cent) and HOEC (17.36 per cent). The company also submitted a competitive bid for acquiring the entire share capital of Tata Petrodyne.

The company has exercised its preferential purchase right under the respective production sharing contracts and the joint operating agreements to acquire 53.85 per cent participating interest along with operatorship held by Mosbacher India LLC (MIL) in Block PY-1 and 50 per cent participating Interest held by MIL in Block CY-OSN-97/1.

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