Hindustan Oil Exploration Company (HOEC) expects to produce gas from its Assam field in the last quarter of this financial year. The company’s Managing Director, P Elango, believes that the quarter will mean a decisive turning point for the company, whose revenues fell from a high of ₹328 crore in 2010-11 to ₹37 crore last year.
Indeed, in the first quarter of the current year, the company made more net profit than it did in the full year 2015-16 — ₹9.3 crore against ₹8.2 crore — but that was due to a windfall of income tax refunds. The company recently got back around ₹100 crore of dues from the IT Department and the interest portion of ₹11 crore was recognised as income in the statements for April-June 2016.
While the spike in profits of the quarter is a one-off event, the big story of the year is the production of gas from the Dirok field in Assam (AAP-ON-94/1), in which HOEC has a 27 per cent interest. Public sector oil majors Indian Oil and OilIndia have the rest.
Elgano says the field will produce 20 million cubic feet (600,000 cubic meters) per day of gas and 100 barrels of condensates (liquid similar to crude oil). In contrast, the current production is 2 million cubic feet a day of gas and 100 barrels of oil.
The fall in fortunes HOEC was founded by HT Parekh, the founder of housing finance company, HDFC, which incidentally holds 11.36 per cent in the company. During its best days of 2010-11, HOEC had two assets — PY-1 and PY-3 — in the Bay of Bengal.
The latter, in which the company has 21 per cent interest, was producing around 10,000 barrels of oil. PY-1 was producing some gas, but showed promise. However, due to technical, legal and financial reasons, PY-3 shut down in July 2011; PY-1 proved tough to tame because they had to drill through rock.In late 2014, the biggest shareholder with 47.18 per cent, Burren Shakti, part of the Italian ENI group, decided it had enough. In February 2015, it handed over the company’s management to Elango and Ramasamy Jeevanandam — once colleagues in ONGC, Chennai — giving them stakes in the company. Burren, which had spent $200 million in PY-1 and had nothing to show for it, began divesting. Today, it has 16.28 per cent. Bulk of the shares was picked up by Ashok Goel of Essel group, who today has 14.15 per cent.
The turnaround “When we looked at the company’s assets, we realised that the Assam field was the closest to production,” says Elango. Also, it had two strong partners. Under a $100-million development plan that is underway, they would first convert three well once drilled for exploration, into producing wells and drill two more producers. A plant for separation of gas and condensates has been outsourced to UK-based Expro, who will own and operate the plant for a fee for 10 years. A pipeline is being laid to bring the gas to OIL’s group gathering station. IOC and OIL will take their share of the gas and buy HOEC’s.
The Dirok field is good for 15 years. “With stable cash flows, we will begin to develop other assets,” says Elango.