Good Results.
Sales: 36.62 vs 25.61 cr (Mar-2018) (43% QoQ growth)
36.62 vs 8.2 cr (Jun-2017) (346% YOY growth)
Net Profit: 23.33 vs 16.45 cr (Mar-2018) (42% QoQ growth)
23.33 vs 12.93 cr (Jun-2017) (696% YOY growth)
1 Like
Second Quarter Results Declared -
Sales - 66.47 Crs.
Net Profit - 42.81 Crs.
EPS - 3.28
HOEC-Signed-results.pdf (320.8 KB)
Would appreciate your thoughts on the results
Hi Manohar,
The results are great. The Assam blocks have started contributing in a big way to the profits.
Quarterly profit is at 42.81 crores against the guidance of 36 cr. Itâs a positive surprise for the street. Hopefully, the price will react in a positive way as well.
Tomorrow is the conference call, Iâm looking for revised future management guidance and status on their different blocks.
FIIâs have also been increasing their stake continuously.
1 Like
Why are they not paying tax ?
Hi Avneesh, Did you or anyone else attend the conference call? I am not able to find the recording on researchbytes. Would appreciate if anyone has captured insights from conf. call.
Cheers
-Manohar
Hi Manohar,
I am also waiting for the research bytes to upload the conference call. If someone else has attended the call, they can share their notes.
@mohdrehan1 As far as I remember in one of the conference calls they have mentioned about the 10 year tax break for their Assam block. Will have to check it again.
Call transcript attached. A few points Iâd like to highlight:
- Run rate PAT now at 132Cr. Kharsang adds another 13Cr which they are not counting. So total 155Cr. Stock trading ~ 11x.
- CFO is comfortably higher than accounting earnings.
- Gas price on Dirok gas going forward will be higher by 10%.
- Guiding higher to 200Cr form 140-170 for this year itself. Does not include Kharsang. (Personal opinion - likely under-guiding yet again.)
- Kharsang potential is 3-4x higher than what they are getting currently.
- B-80 will likely contribute another 100Cr. Will take 18 months to develop.
- PY-3 and Cambay fields pure upside (unaccounted for lottery tickets)
- Preparing for second round of DSF. No outside funding to be raised for that (Capex requirement is rather low for DSF).
- Kharsang/Jubilant stake of 25% sub judice but likely comes to HOEC.
This one comes down to whether you believe in Elango being able to execute or not. His incentives are clearly aligned without much scope of corp. governance hanky-panky. His track record speaks for itself. Declared 2P reserves will easily last them 7+ years. This doesnât account for Kharsang, B-80, PY-3 etc. This used to be a one asset play but is de-risking fast through diversification. Accounting remains conservative.The company has a history (albeit short) of underpromising and over delivering.
Hereâs hoping it doesnât dig too many dry holes.
Enjoy the transcript.
HOEC Q2 2019 call.pdf (202.5 KB)
Diclosure: Long
6 Likes
Crude price has gone down by 30% and Gas price increased by 10%. As they have 90% gas and 10% oil, impact of crude coming down is negatedâŚhttps://twitter.com/CNBCTV18News/status/1075678191107239936
HOEC declared Q3 numbers. There is a significant increase in the royalty cost. Not sure if this is going to be reoccuring at this extent or it is appearing as higher due to retro payment and would normalize in subsequent quarters.
@sajijohn, your views on number would be very useful
Disc - Invested
I think the royalty payment is going to be a recurring payment. It used to be paid by the initial allottee of the block(ongc). This article explains it https://timesofindia.indiatimes.com/business/india-business/govt-notifies-incentives-to-oil-psus-in-pre-nelp-blocks/articleshow/65413874.cms. The results are in line with the management commentary. Let us wait for their con call.
1 Like
Acquiring assets? https://www.bseindia.com/xml-data/corpfiling/AttachLive/666d7317-7068-417a-9b35-a68dbe7fc0da.pdf
http://otp.investis.com/generic/regulatory-story.aspx?cid=44&newsid=1308822
From Hardy website. Has more details.
Disclosure: Invested - My clients as well as personally.
Looks like the deal wonât go through https://www.morningstar.co.uk/uk/news/AN_1563210940611938300/hardy-oil--gas-receives-higher-bid-for-troubled-indian-unit.aspx
Conference call Notes June 2019:
Regarding slow quarter:
A rare event where customers from both PY-1 and Dirok, were on a shutdown. Currently, Dirok is back to normal volumes. PY-1 is seeing an off-take of 50%. PY-1 will restore fully in September. They are not expecting any revenue loss in the September quarter.
They are also building a 38 km pipeline that will deliver gas from Dirok field directly to big customers (as compared to delivering to Oil India currently). They can also charge premium pricing for the gas. The pipeline will be delivered in next FY.
Regarding HEPI bid loss:
Adhering to their philosophy of being a debt-free company, they were not ready to overpay. (An organisation should know how to say âNOâ â P Elango)
B-80: Project is on track to deliver oil in June 2020.
PY-3: Operatorship has shifted to ONGC. More information will be available in next con-call.
Whatâs the growth avenue beyond B-80?
-
Received FDP approval for Kharsang, Dirok-II and Cambay basin fields.
-
A lot of inexperienced companies who got fields in DSF rounds are looking for experienced partners.
-
They will also bid in upcoming DSF rounds.
Technically, stock is testing the support of 100.
For py- 1 there is a long term contract with GAIL for offtake of whole production. During last 2 qtrs there was significant reduction in offtake from PY-1 due to some plant shutdowns ( some fertilizer plants).same was evident from GAIL results too.Do you have any idea as to which plants they supply??Is there any penalty that they have paid to hind oil due to reduced offtakeâŚAlso GAIL has also mentioned that take or pay clause kicks in 2019 in many of their arrangements âŚIs their any such clause b/w GAIL and hind oilâŚGAIL was mentioning arrangement with their customersâŚ
Hi Jose,
I have stopped tracking HOEC.
Started investing in this company around November 2017 when Dirok started production. There were some stellar quarters that ensued, with Dirok increasing production and PY-1 also contributing. By Q3 18 when revenue was still increasing , the royalty issue propped up and EBITDA margin decreased. In a country like India where gas and crude oil are deficient, my only concern was production, even I wasnât concerned about the prices as about 40% of the consumption of gas was met through imports in FYâ17 that too at a premium to the gas produced domestically. The percentage of imported gas stands at approximately 52.7 % as of FY20. My ideas failed miserably as from Q1 2019 when offtake of gas issues started . In Q1 â19 revenue started deteriorating due to customer shutdowns while the gas prices increased to $3.69/mmBTU. In Q2 19 Dirok started delivering again , however there was no offtake from PY-1 due to customer shutdown. The gas produced from PY-1 is tied up with GAIL under a long term purchase agreement at a price of 3.66 $/mmBTU. From what I understood from various disclosures Hind Oil was supplying gas to PPN power generating company. However, there is not much news available about the company after 2013. No idea why they are not buying gas now and when the issue will be resolved. Or whether there are any other consumers. The offtake from PY-1 was not normalized even in Q3 FY 20 followed by limited offtake from Dirok due to local CAA agitations le. This was when I understood the importance of geography and availability of infrastructure so that the produce reaches the customers seamlessly .
The companyâs major project right now is to start production from their DSF-1 block B-80. The company was targeting first oil production by June 2020. They are aiming for a production of 5000 bopd and 15mmscfd in Phase 1. With B-80 production the company has forecasted net output to grow by 50 % during FY20-21 and the share of oil from 13% now to 37 %. The gas produced at B-80 has marketing and pricing freedom and as per the projections the gas at MOPU will be evacuated through ONGC pipeline to Hazira plant. Gujarat has a well developed gas market which makes me believe that the offtake can be sold out easily. And as per disclosures made to exchange on 24/02/2020 and 29/04/2020, Testing of wells was done and the average production is expected to surpass the management expectation and may go above 8000 bopd.
Negatives
1.The covid19 crisis played spoilsport. Due to oil glut caused by tariff war by Saudi Arabia and Russia and the very low demand , due to lockdown in many nations pushed the crude prices to a decade low. The Govt reduced gas prices to 2.39 $/mmBTU the lowest level in last 5 years(no idea of rates before 2015) for the period from April to September 2020.
2.Continued reduced offtake from PY-1 and Dirok due to covid19 crisis
3. US has brokered a deal between Saudi Arabia and Russia , and crude production , after which the crude price have started to stabilize. Going back on the deal by any country can cause crude prices to nose dive again
Key monitorables
1.Company in its Q3 FY19 presentation has informed that they have signed an MOU with a private company for offtake of PY1 gas on a fallback basis. Developments in this regard needs to be monitored.
2. CAA agitations and other issue seems to be over in Assam, as such updates and offtake from Dirok in Q4.
3. Company is on the process of developing a 35 km pipeline between their gas processing plant and Dulaijan which is expected to be completed by Q1â21( which may ensure offtake of production later on).
4. Centre has set up a panel to review production sharing contracts to spur investments in oil and gas industry. Implementation of any reform like removal of cess can be a positive
Company is debt free and is available at 1.09 times book value , Market cap of 671 crores , cash equivalent and receivables at around 100 crores and the company is showing good execution and capital allocation skills
Invested and my views are biased
3 Likes