Gujarat Natural Resources Ltd Management Discussions

The oil and gas exploration industry operates within a three-tier structure—upstream (exploration & production), midstream (transport and storage), and downstream (refining and marketing) — where upstream players carry the exploration and drilling risk to discover viable reserves. This segment is undergoing transformation driven by digitalization, with tools like AI, big data analytics, IoT sensors, and automation optimizing seismic analysis, drilling precision, and real-time monitoring. Companies increasingly favor collaborative and flexible business models, including joint ventures and strategic alliances, to share risk and leverage specialized capabilities. At the same time, exploration activities are expanding into deeper offshore and challenging unconventional reservoirs, backed by cutting-edge tech and advanced recovery methods to sustain production in mature basins. The evolving landscape also features heightened environmental scrutiny, stringent regulatory oversight, and growing emphasis on sustainability and ESG performance as integral to operational and strategic decisions.

The Company is engaged in the business of Oil & Gas exploration. Currently the company is carrying on its business of Oil & Gas exploration through its wholly owned subsidiary and step down subsidiaries.

The step-down subsidiary GNRL Oil & Gas Limited has participating interests in 6 producing blocks in Cambay basin. GNRL Oil & Gas Limited is also operator in five of these blocks.

On 10^th October 2024, GNRL entered into a Carried Interest Agreement and a Deed of Assignment and Assumption. Under these agreements, GOGL will transfer 50% of its participating interest in the operator role of the Allora, Dholasan, North Kathana, and Unawa oil fields to GNRL. As consideration, GNRL will finance the capital expenditure and development costs on behalf of GOGL. Terms governing cost recovery, revenue sharing, operations, and management are outlined in the Carried Interest Agreement.

On 20^th March 2025, GNRL, GOGL, and GNRL Oil and Gas (I) Private Limited executed a Supplemental Agreement whereby GOGL will share up to Rs. 2 Crore annually in revenue with GNRL. These payments will be made quarterly until GOGL receives final approval from the Government of India for the transfer of the participating interest portion.

GNRLs entitlement to receive revenue is tied to funds it has already provided—via loan— to GOGL through GNRL Oil and Gas (I) Private Limited (GOGIL) to support GOGLs operations.

OPPORTUNITY & THREATS:

> Geopolitical realignments & growth markets unlock new exploration opportunities— emerging regions often hide rich, untapped oil and gas reserves.

> Strategic alliances & joint ventures with established industry players extend operational reach, share expertise, and provide smoother navigation through complex regulatory environments.

> Industry dynamism rewards companies that innovate and adapt, giving those with agility and foresight a competitive edge.

> Commodity price volatility, influenced by global market trends and geopolitical upheavals, can severely disrupt revenue forecasting and financial stability.

> Geopolitical instability in frontier markets—including political unrest, shifting fiscal policies, or legal uncertainties—can stall projects or diminish their viability.

> Rising exploration costs and competitive pressure—particularly in deepwater or emerging basins—drive up capital requirements, while competition from national oil companies and tighter regulation may squeeze margins.

> Crowded playing field: The industry features legacy global firms, ambitious independents, and powerful state-backed entities, all vying for a share of exploration opportunities.

> Technology & capital edge: Established international players typically lead in deploying cutting-edge drilling, seismic imaging, and financial muscle—allowing them to operate efficiently in difficult terrains.

> State-backed expansion: Nationally-owned companies with secure access to reserves and government support are increasingly investing overseas to support domestic energy strategies.

> Two-front competition: Success now depends on balancing tech-driven global operations with the political and resource advantages of state-sponsored networks.

RISK AND CONCERN:

> Significant ecological threats: Spills, leaks, and emissions can trigger severe regulatory penalties and harm corporate reputation through ecosystem damage.

> Rise of sustainability pressures: As the industry transitions toward cleaner energy, the longterm viability of traditional fossil fuel ventures is increasingly scrutinized.

> Need for integrated strategies: Firms must balance current operations with future-facing initiatives—such as carbon reduction, environmental remediation, and renewable integration—to stay ahead.

> Risk management priorities: Stronger safety protocols, advanced spill-detection tech, rigorous environmental planning, and ESG compliance are essential to safeguard assets and support sustainable growth.

During FY 2024-25, the Company, along with its step-down subsidiary GNRL Oil & Gas Limited (GOGL), initiated a strategic 7-well drilling campaign with an estimated investment of Rs. 69 crores (~USD 8 million). The campaign targets the Kanwara development block (3 wells), with additional wells in North Kathana, Dholasan, Alora, and Unawa blocks.

Drilling commenced in March 2025 using two rigs to ensure completion ahead of the monsoon. On 25^th March, 2025 drilling began at Kanwara-12, followed by Kanwara-13 in early April. The campaign aims to enhance the Companys proven reserves, currently targeting an upgrade of over 20 million barrels of oil equivalent.

Kanwara-12 achieved both its development and exploration objectives. It encountered a 20m oilbearing zone in the EPIV reservoir and discovered wet gas in the Cambay Shale section. Initial testing of this new zone yielded 18,000 SCMD of gas and 5 m³/day of oil condensate. The estimated in-place gas reserves are approximately 40 million cubic meters over an area of 1.6 sq. km.

The campaign is ongoing, with further wells being drilled in Kanwara and North Kathana fields. The Company remains focused on increasing its production potential and strengthening its reserve base across its Cambay Basin.

The oil and gas exploration sector is navigating a period of significant transformation. While conventional energy sources continue to play a vital role in meeting global demand, the push for cleaner, more sustainable alternatives is accelerating. Driven by international climate commitments and evolving regulatory frameworks, this shift is reshaping the industrys future. For exploration companies, it signals a need to innovate—by embracing cleaner technologies and expanding into low-carbon energy segments—to stay relevant and capitalize on emerging opportunities.

Our Companys internal control systems are well-aligned with the nature, scale, and complexity of its operations. A robust framework is in place to ensure that all assets are adequately safeguarded, and that transactions are properly authorized, accurately recorded, and promptly reported. These controls are designed to prevent unauthorized use or disposal of the Companys resources.

Adherence to established policies and procedures forms a key part of our ongoing management oversight. The effectiveness and adequacy of the internal control mechanisms are regularly assessed by the Internal Auditors in accordance with a defined audit plan. In turn, the Audit Committee closely monitors the internal control environment, reviewing audit findings and ensuring timely implementation of recommendations, particularly those aimed at enhancing the Companys risk management framework and control systems.

Our Human Resource Management function plays a vital role in guiding and supporting all people- related matters across the organization. By fostering a strategic and people-centric approach, HR enables employees to perform effectively and contribute meaningfully to the Companys overall growth and the achievement of its goals.

Human capital continues to be a key pillar of our business success. The dedication and capability of our workforce have been instrumental in ensuring smooth manufacturing operations, driving market development, and supporting expansion efforts. Despite changing market dynamics, the Company maintained strong collaboration across all levels, cultivating a performance-driven and engaged work environment through effective communication and employee involvement.

During the year under review, industrial relations remained harmonious, reflecting a stable and positive workplace culture.

Our people are our most valuable asset, and their safety, health, and well-being are of utmost importance. The Company is committed to providing a safe, supportive, and enabling work environment by adopting proactive measures to ensure employee welfare and minimize any risk of injury or harm.

Various initiatives have been undertaken to promote physical and mental well-being, along with fostering a culture of safety and care. In line with our commitment to sustainability, the Company continues to adopt environmentally responsible practices, guided by the belief that nature is a shared heritage that must be preserved for future generations.

Mr. Shalin Shah, Managing Director and Mr. Hitesh Donga, CFO have given certificate to the board as contemplated in SEBI Listing Regulations.

Operational performance viz. total revenue during the year stood at Rs. 314.68 Lakhs as compared to Rs. 225.14 Lakhs in the previous year and the Company has earned profit of Rs. 18.36 Lakhs as compared to loss of Rs. 513.86 Lakhs in the previous year. Cash and cash equivalents at the end of the year stood at Rs. 46.23 Lakhs.

The improvement in the Companys return on net worth is primarily driven by enhanced operational efficiency and effective cost management.

The Company operates in single segment. So segment wise reporting is not applicable.

The statements in the "Management Discussion and Analysis Report" section describes the Companys objectives, projections, estimates, expectations and predictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. The annual results can differ materially from those expressed or implied, depending upon the economic and climatic conditions, Government policies and other incidental factors.