HOEC expects Assam block to help turnaround

Set up by HDFC founder, the company is yet to make it big

Hindustan Oil Exploration Co Ltd (HOEC) is making its latest comeback attempt with the Assam gas block, which is likely to go onstream later this month.

“We expect a bottomline of Rs 50-60 crore in the next financial year and we are targeting a topline of Rs 100 crore,” said P Elango, managing director, HOEC.  In 2015-2016, the company had a net profit of Rs 6.56 crore after posting losses in the previous two years.

Elango is confident of posting an operational profit in 2017-18 on the back of the company’s Assam block, which likely to start production in March. A full ramp-up is expected in four months.

The company’s performance took a dip as gas discoveries from its sole operational block PY-1 started declining. The Assam block, which HOEC holds in partnership with Indian Oil Corporation (IOC) and Oil India Ltd, will become the company’s second operational asset. Currently, it holds stakes in 10 blocks.

Rating agency ICRA noted the company’s progress in the Assam block was a positive for HOEC. 

“The rating reaffirmation considers the progress made in the development of the gas field in Assam, which includes award of contracts and mobilisation of materials, downward revision in project cost by adoption of modular gas processing technology, and steps being taken for early monetisation of gas,” the agency said in its July 2016 note on the company.

Elango added the company continued to remain debt free with over Rs 150 crore cash on its books. HOEC’s debt-free status is largely because Italian oil major Eni waived a $125 million loan extended to the company. Over the last two years, Eni has exited most of its 47.2 per cent holding in HOEC, but continues to be classified as the company’s promoter with a small shareholding of 5,745 shares. 

Eni’s exit has opened the path for new investors, including Elango and the company’s chief financial officer Ramasamy Jeevanandam, each holding a 4 per cent stake in HOEC. Ashok Goel and Rohit Dhoot also acquired more than a 16 per cent stake in the company in their personal capacity.

Elango added there was unlikely to be a change in the company’s equity structure. 

HOEC was incorporated by late HT Parekh, founder of HDFC, in 1983. HDFC still holds an 11 per cent stake in the company. HDFC refused to comment on possible plans to alter its holding in HOEC. 

“Most likely, the investment made then would have been with an idea that HOEC would grow. That has not happened. A reason the company did not attract major buyer interest and Eni sought an exit is the lack of in-house speciality and capabilities,” said an oil and gas consultant.

The company also won two marginal fields in the latest NELP round, in Bombay High and Assam. 

“We have four years to start production from the Bombay High field and three years to start production from the onshore field. We are confident we will reduce the time for each by a year. We will be sharing the production sharing contracts for these fields in the next two months,” Elango said.