Hind Oil Exploration - First gas from Assam in FY17 will play a crucial role in HOEC’s growth: P Elango
• The steep decline in gas production from HOEC’s flagship PY-1 field led to erosion in value and management uncertainty. Company reported Net loss of Rs 1220cr in FY15 on account of one time exceptional writeoff of Rs 1163cr related to four fields (PY-1, PY-3, CB-OS 1 and CB-ON 7 fields).
• Current strategy is to focus on onshore assets in Assam and Gujarat, build a strong geo-technical team to revive the offshore assets
o Assam field, which recently got FDP approval, is estimated to hold 130 billion cubic feet (bcf) of recoverable gas reserves and can sustain a daily gas production rate of 20 mmscfd for 15 years. Total investment required is Rs 500cr to lay gas processing and pipelines and expect project to get completed within 12-18months and targets first gas by the end of FY17. Fund will be put up by JV partners (Oil India) on proportionate basis and is highly profitable project with IRR in excess of 50%.
o In Gujarat, company operates three marginal fields—Asjol, North Balol & CB-ON-7. Together, these fields contribute about 150 boepd. Operating margins are high due to super-efficient and low-cost operations and company has initiated environment approval process to acquire new 3D seismic data over these matured oilfields
• Balance Sheet strength: HOEC is debt free company currently, after ENI (one of the promoter) wrote off its Rs 1000cr loan, and now is capable to meet operating expenses with operating revenue and is capable of generating operating cash surplus to add to cash-on-hand.
• In FY15, Company had average daily production rate of 650 boepd. The next big jump will occur once company delivers the first gas from Assam, which has the potential to double the operating revenue of HOEC. Company expect to deliver a double-digit CAGR growth over the next five years.
• Key Management Change: P Elango Ex-MD of Cairn India joined to turnaround HOEC in late 2014, SV Nair ex-Cairn India Project Director of Mangala Oilfields is now Project Head of Assam Project.
Background: P Elango, who spearheaded Cairn India and made it touch a peak output of 2,00,000 barrels per day (bpd) at India’s biggest onshore block—Barmer in Rajasthan—left the Vedanta Group company in late 2014. In February this year, the 54-year-old took up a challenging assignment to turn around Hindustan Oil Exploration Company (HOEC). Incorporated in 1983 and backed by Rome-based ENI, the firm has stakes in both onshore and offshore assets. Until now a small player in the hydrocarbons sector, Elango—as the managing director—and his team are drawing a new beginning for the firm.
Vision by the new management: The vision is not to grow big overnight, but to grow steadily, by taking prudent steps in this volatile price environment, which not only protects the interests of our shareholders but also creates value.
At CMP of Rs 33, Mcap Rs 430cr and Ev Rs 395cr. Stock trades at PBV of 1.53x.
Detail Transcript can be find on the following link:
looks interesting post management change....20mmscmd gas for 20 years/or 130bcf