The numbers that we have indicated as a total for both wells put together is somewhere
between 7,500 to 8,000 barrels of oil equivalent. Out of that, the oil component was
somewhere between 4,500 barrels to 5,000 barrels and the gas component constitutes the
2,500 in terms of oil equivalent.
and the price holding it, we would be able to have a cash flow, which is in the order of around
Rs. 500 crore
The statement above is from the latest conference call transcript. 
Disc: invested
Has the company clarified anything on the quality of their crude??
They have mentioned the quality of gas as excellent from B80. They haven’t mentioned specifically anything on the quality of oil. However, The transcript link is below:
Regards,
Raj
@raj1968 , can you please clarify what will be Govt share from B80 ? In the transcript there is mention of 22% or higher. Could not understand. Was not aware of this. In such a case, earnings will reduce.
@Prabhat_Mohanty, Revenue share increases with an increase in revenue. On top of revenue share, there is a royalty of 10%. At $95-100 oil price, total revenue share + royalty comes to around 42%. The broad numbers are that at ~$80-85 oil price, B80 should generate 400 cr+ cash flow.
Dirok and other fields used to generate a total of 100 cr profit. Post Dirok phase 2, this number should again be 100 cr+.
So, a total profit of 500 cr+ is likely after B80 stabilization.
@raj1968 please correct me if your estimates are different.
Can you let me know at what price what royalties the company has to pay, just as you mentioned at $95-100 oil price, total revenue share + royalty comes to around 42%?
Revenue share is based on daily revenue. They have shared the formula in their Q3 presentation.
This 40-45% range was mentioned in the concall.
As per management commentary this will be cash flow not profit.
You have to look at their investor presentation. Go to slide number 26. There will be a range of outcome based on the production volume. HOEC management wants to cap the production volume so that there revenue share doesn’t exceed more than 30%.
Does anyone have any idea how much royalty or revenue share companies in USA and China pay to the government?
Thank you @raj1968 . I had seen their presentation, but there were several types of models e.g production sharing model, revenue sharing model across different locations. Now I understand why they want to limit production from B80, so that they don’t have to share more with Govt. Another factor noticed is the wide difference in Gas prices today. Govt has fixed it @6.1US$/mmbtu till 30.09.22.Today spot price in India was Rs690/mmbtu. But HOEC has contracted @ 26US$/mmbtu, if avg crude @120 in previous month. This is mind-blowing number. With rupee depreciation, Company is tipped to be a goldmine, if (big if) present price prevails and production is upto mark.
Govt has imposed fresh excise duties on oil production as well as on export.As per report in financial dailies, Govt is expected to mobilise 67000 cr per annum by this exercise.Though it is a temporary exercise to be reviewed every fortnightly, it will be a game changer. As per my understanding, this amount is to be contributed by ONGC, Oil India, Reliance and Essar Refinery. This is huge.
I do not know the implications on HOEC. Also gas price has not been affected. But this exercise is a big negative for the sector. May I request experts to present detail exercise for others benefit?
Any one attended AGM? any updates on B80 field?
Price of gas increase by 40 percent… now almost 8.5… from past year 1.9… hopefully B80 come up soon and their other plants run in full capacity
@raj1968 Can I request you to post your observations after concall. I found several ambiguities. Income has gone up but revenue sharing has gone up more , this reducing profit. It is very difficult to analyse result without details, which only will be cleared after concall/ presentation.
I did go through the conference call. B80 issues are still far from over. Though gas has started flowing, prices have fallen by almost 40%. In December they would put a fix for D1 issue but they do not sound confident that it would work. They are going for a fund raise as their anticipation of a bonanza from B80 is taking time and debt and working capital issues have come up.
The above observations are based on my limited understanding.
Regards,
Raj
PS: I did sell my position some time back and waiting on the sidelines for the time being.
Thanks for your observations. I also appreciate your candour declaring your investment status. Very praiseworthy transparency.
I am very much interested in HOEC as I expect the Crude and gas basket will harden soon. Also HOEC has proved itself as probably only performing private sector company in this sector. But it is difficult to decide amongst ONGC, OIL and HOEC. ONGC and OIL are definitely better if someone wants to play long in crude strategy. But the imposition of windfall tax has queered the pitch. One doesn’t know what benefit will accrue at what level of crude. And windfall tax rate changes would be acting as a democle’s sword hanging. Would love to know expert’s opinion on this sector.
Poor results and disclosures. All the risks playing out. Exited post recent results.
