hindustan oil exploration company ltd share price Management discussions



Climate events oven the last few decades have made it clear that the world needs a more balanced energy system. Nations need an energy mix that has lower carbon content, is secure and affordable. Experts call this the Energy Trilemma.

In 2022, the oil market continued to rebalance, with the global oil consumption increasing by 2.37%, the global oil production increased to about 100 million barrels/day.

The market witnessed a substantial increase of about 42% in the oil price during 2022, when compared with 2021 and the average brent crude price for 2022 surpassed Rs.100/barrel. The Price reached a peak of Rs.112 / barrel in June 2022, but later declined to US Rs. 79.77 / barrel in March 2023.

The current geopolitical situation is adversely impacting the global economy. The industry outlook continues to be uncertain, caused by disruption of energy markets due to the Russia-Ukraine war, inflation worries affecting the global economy and increasing interest rates.

Oxford Institute of Energy Studies(OIES) estimates that oil demand from India and China is expected to account for nearly half of global demand growth in 2023 and 2024. Indias oil demand (including oil imported for refining and re-export) is set to grow from 5.2 million barrels / day (in 2022) to 5.6 million barrels /day in 2024. India continues to rely on imports to meet over 85% of its domestic demand. The Government remains focused on introducing policy initiatives to strengthen its commitment to increasing domestic production of crude oil and natural gas, thus reducing import dependance.

In a major decision, the Government accepted the recommendations of Parikh Committee and implemented the following revised gas pricing policy:

• The revised domestic natural gas pricing guidelines for gas produced from nomination fields of ONGC/OIL, New Exploration Licensing Policy (NELP) blocks, and pre-NELP blocks, where Production Sharing Contract (PSC) provides for Government approval of prices, have been announced.

• Under this price natural gas will be 10% of the Indian Crude Baskets monthly average, and it will be announced monthly.

The price shall be subject to a floor of Rs.4/mmbtu and a ceiling of Rs.6.5 / mmbtu for APM gas. This new regime will be effective from 08th April 2023.

This policy measure will benefit the oil and gas sector as it sets a reasonable floor price for all the domestically produced gas.

As a result of successful e-auction in the Northeast for the first time, HOEC was able to discover a premium price (> Rs.1/mmbtu) that the buyers were willing to pay in addition to the government notified price. Like this, HOEC conducted an e-auction twice for B-80 gas, linking the natural gas price to the increasing brent crude price. In addition, leveraging the growing popularity of Indian Gas Exchange (IGX), HOEC sold surplus volume of B-80 gas on spot market basis ensuring continuous offtake of the growing gas production from B-80.

Global Oil Price

Crude Oil Prices (Brent) decreased from US Rs. 107.14 / barrel in April 2022 to US Rs. 79.77 / barrel in March 2023.

Indian Gas Price

The price for domestic natural gas (derived from a cocktail of gas prices prevailing in multiple global gas markets) notified by the Petroleum Planning & Analysis Cell (PPAC), Ministry of Petroleum &Natural Gas (MoP&NG), Government of India increased from US Rs. 6.10/MMBTU during April 2022 - September 2022 to US Rs. 8.57/ MMBTU during October 2022 - March 2023.


Rising oil and gas prices, soaring inflation levels, tightening monetary policy conditions, the Russian -Ukraine war and Covid -19 contributed to slower global economic growth in CY22. Global oil production increased by about 5%. Global oil supply chain was disrupted and realigned as Russian oil shipments were redirected from Europe to China and India, and India commenced a growing export of petroleum products to Europe. Similarly, the loss of Russian pipeline gas to the EU in 2022 equivalent to 20% of EU gas consumption in 2021, drove European gas and Asian LNG prices to record levels. This resulted in increased imported LNG prices in India, in turn triggering fuel switching in the price sensitive Indian Gas Market that witnessed reduced gas consumption.


At the COP-26 summit in November 2021, India pledged to achieve net-zero carbon emission by 2070. This will require consistent and substantial reduction of the transport, industrial and power plant emissions in the country. As India is considerably dependent on fossil-fuel based power generation, it plans to gradually switch to non-fossil fuel. In August 2021, as part of the National Solar Mission, the centre set a target of achieving 300 GW of solar energy in India by 2030. In addition, there is a strong policy push to promote use of Electric Vehicles. Natural gas has been tipped as the transition fuel for industries and residents. The government has set ambitious targets to enhance the share of natural gas in the primary energy mix. Given Indias focus on net-zero carbon emissions and innovative partnerships with international organisations and countries, the steps taken towards energy transition should lead to a greener future for the country.

HOEC Vision

HOEC is Indias first private E&P company and has decades of experience operating multiple fields, both onshore and offshore in leading producing basins. Energy security being a strategic priority for the country, HOECs business is, therefore, linked with the National Priority. We will continue to work closely with all stakeholders to explore, develop and produce hydrocarbons in a safe and responsible manner.

Our passion is to find, develop and deliver oil & gas that everybody in our country needs. We believe talent and technology are the key ingredients to building and sustaining a successful E & P business.

Our vision is to establish and transform Resources to Assets to create value for all stakeholders and Grow Responsibly. We seek to realize our vision by.

• Exploring for Oil & Gas.

• Execute to transform Resources to Reserves; and

• Enhancing value for all stakeholders by converting Reserves to Revenues.

HOEC Business Strategy and Values

HOECs strategy is focused on delivering growth in the Companys core business, while enhancing profitability through:

• Establishing and sustaining low-cost operations in all our assets

• Rapidly developing the discoveries through innovative models of development

• Identifying and developing low risk, short cycle projects for rapidly increasing production

• Improve value maximization by increasing realized price & by increasing production through optimizing existing facilities.

Our near-term focus is to secure the best possible value from the excellent set of opportunities presented by our portfolio of discovered resources along with prudent capital allocation and carefully planned market strategies.

Values of HOEC

Honesty We believe in honesty and are committed to conduct our business ethically and transparently.
Ownership We are One Team and hold ourselves personally accountable for our decisions, actions, attitudes and results.
Entrepreneurship We are entrepreneurs at heart and are passionate about adding value to make a difference to all our stakeholders.
Care We care for each other, the communities, and the environment in which we operate.

HOEC believes that securing and maintaining the social licence to operate through good environmental, social, health and safe performance is an integral part of our business success.

We conduct our business with respect and care for our communities and the environment in which we operate. We will be a good corporate citizen of India, and will maximise utilization of local talent, services, and equipment. To sum up, HOEC business strategy is to continue to invest in low risk and short cycle projects & to remain focused on innovative management of cost and speed of execution to create value for all stakeholders and Grow Responsibly.

Our core focus during FY 2022-23 has been to execute the B-80 development project during the weather window in western offshore and to safely continue the operations in our producing fields amidst the unprecedented challenges.

Key operational highlights are:

• Despite the challenges posed by a greenfield off shore development project, operations continued by following adequate precautions.

• In B-80, Full Offshore Systems installed, Integrated and Process plant commissioned, and gas production commenced. Commercial Gas Sales to GSPC started in June 2022 and commercial oil production commenced in December 2022. Cumulative gas production crossed 2 BCF and cumulative crude oil production crossed 200,000 barrels.

• E-auction for gas sales was successfully conducted to ensure that full gas production from B-80 is sold to consumers at market determined prices. Dirok Field has completed 5 years of successful production and is consistently producing. Our HMGPP has crossed 1844 LTI free days and we have achieved a milestone by producing more than 50 BCF of gas and 1 MMBBL of condensate. In FY 2022-23, the average field gas production is about 30.695 mmscfd. For Dirok Phase-II execution, priority was assigned to the critical forest segment of the pipeline project and construction activities commenced after securing required regulatory approvals.

• In Cambay assets, preparations are ongoing to undertake the next development campaign.


Our business strategy is to develop discovered resources following a fast-track model focussing on short capital cycle. All of our development projects / portfolios are designed to withstand the cyclical nature of the oil and gas industry. By increasing production and contributing to import substitution, the company is able to demonstrate the efficacy of this strategy.

Corporate Responsibility

Safety First Never put any person or asset in an un-safe situation
Environment Friendly Not to harm the environment
Regulation Compliant Compliant with applicable laws all the time
Optimum Cost (US Rs./bbl) Complete the development in a cost and time effective manner
Investment Prudence Not to take risk beyond the means and to prioritize the opportunities in our portfolio on risked expected monetary value in any given year.

HOEC is committed to operate and grow its business in a socially and environmentally responsible way with a vision to transform the quality of life in all its operating areas. We strive to demonstrate the highest standards of corporate behavior towards all stakeholders and the local communities in which we operate.

In pursuit of its business strategy, all the projects are rigorously and consistently assessed for technical and economic feasibility. We use our in-house geoscience expertise and third-party independent specialists to identify, evaluate and prioritize the opportunities.

As an Optimum Cost Operator in the industry, we scrutinize every value proposition to derive excellence in execution. When cost does not cause value to be sacrificed in the E&P company, it is seen as an aspect to be controlled.

Our objective is to provide a consistent compounded annual growth rate to our shareholders, commensurate with the risks in this business.

Operations Overview

1. North-Eastern Assets

I. Dirok

On a single day Dirok field and facilities delivered 1.2 MMSCMD of gas. Field crossed cumulative Condensate production milestone of 1 MMBBL in Nov 2021 and cumulative Gas production milestone of 50 BCF in May 2022.

II. Kharsang

In a major breakthrough all outstanding cost recovery related issues have been either resolved or referred to Dispute Resolution Committee paving the way for PSC extension and next phase of development

III. Umatara

Block awarded under DSF Bid Round 2019 with 33.43 Sq. Km and HOEC is holding a participating interest of 10%. Jointly operated by IOCL (as Lead operator) & HOEC.

IV. Greater Dirok

Block awarded under OALP Bid Round 2019 located in Tinsukia District of Assam and HOEC has 100% Participating Interest.

2. Offshore Assets

I. B-80

Two subsea wells drilled and are on production mode now. Cumulative gas production crossed the milestone of 2 BCF and cumulative crude oil production crossed the milestone of 200,000 BBL.

II. PY-1

Unique, gas-bearing and the offshore fractured granitic basement reservoir in India covering an area of about 75 sq.km with 100% participating interest. Only offshore platform in Cauvery Basin with 8 slots & four wells drilled.

3. Cambay Assets

I. Asjol

The Asjol Petroleum Mining License Block lies 25 km South-West of Mehsana town in Gujarat State covering area of about 15 sq.km. HOEC has 50% Participating Interest and PSC extended till 01 February 2030.

II. North Balol

North Balol block is a gas field which is located 16km west of Mehsana town, covers an area of about 27.3 Sq.km.

III. Palej

The Palej Block is located on the eastern flank of Broach depression in the Jambusar Broach tectonic block & is situated between Dabka and Gandhar fields to the north & north-west and Ankleshwar field

to the south. HOEC holds a participating Interest of 35%. Small volume of Associated Natural Gas (ANG) sale commenced to achieve zero flaring.

With the completion of the transformational B-80 development project, our near-term focus would be to undertake short cycle projects that will increase production from all of the above three core clusters.

Product - wise Performance

The Companys aggregate production during the FY 2022-23 was 1.04 million barrels of oil equivalent (MMBOE) (Crude oil: 0.18 million barrels; Gas: 4.59 BCF) as against 0.84 million barrels of oil equivalent (MMBOE) (Crude oil: 0.08 million barrels; Gas: 3.39 BCF) during the previous year.


As of March 31, 2023, the in-house estimates of Proved and Probable (P+P) reserves on working interest basis for the Company were 40.64 MMBOE.


Upstream oil and gas companies by the very nature of their business are exposed to multiple risks both at surface and subsurface levels.

A risk management case study by Institute and Faculties of Actuaries for Oil and Gas industry; prioritised the risks using a set of objective criteria.

Category Risk Description Impact Mitigation
Economic Commodity Price Volatility and decrease in oil or natural gas prices leading to worsened operating results and future prospects. The companys revenue is directly dependent on the annual average level achieved selling the oil and gas. These are actively traded commodities, and their price fluctuates depending on a large number of factors. Price fluctuations may be significant and are typically and actively managed using financial instruments and hedging techniques. HOEC has not used any hedging instruments to manage its oil and gas revenue. However, HOEC continues to focus on cost optimisation to protect its margins at different price points.
Environmental Natural Disaster Natural catastrophe leading to interrupted or reduced production or industrial accident. The companys operating offshore assets are exposed to wea ther related risks. Major events are infrequent but possible. Event impact would be reduced with adequate insurance coverage. • HOEC carries out pre - monsoon preparations and maintains its facilities regularly to withstand normal weather variations. In addition, it carries out regular mock drills and has a robust Crisis management system in place.
• Appropriate insurance coverage to protect properties are in place.
Operational Industrial Accident Major accident or oil spill resulting in loss of life, environmental damage, regulatory fines, civil liability, loss of licence to operate and reputational damage. This could be a catastrophic risk that threatens the viability of company, which emphasizes need for risk management and process safety • Increased focus on health and safety
• Inspections and process assessments
• Communication assessments
• Emergency response preparation
Resource Resource availability Material change in estimates regarding oil and gas reserves or development potential. There is potential for the new projects to yield significantly lower production volumes than initially estimated. • Direct resources to lower risk projects
• Invest in best available technology
• Ensure high standards of risk analysis before committing resources

Apart from above risks, there are many other risks such as foreign exchange, insurance risk, joint ventures, competition, credit risk, transportation infrastructure, general protection safety, legal and regulatory requirement etc. that a typical oil and gas industry needs to deal with.

HOECs main source of revenue is the sale of the oil and gas it produces. Should the Company fail to achieve the planned production, this would have a direct impact on the Companys revenue.

The company now operates offshore oil production facilities both in Eastern and Western offshore India. The extraction of oil offshore is an inherently complex and hazardous process that has the potential for disaster if not managed closely.

HOECs business, financial standing and reputation may be impacted by various risks and uncertainties, not all of which are within its control. Our Company identifies and monitors the key risks and uncertainties affecting our operations and runs the business in a way that minimizes their impact where possible.

HOECs level of risk and its management approach is discussed and reviewed by the Board, Risk Committee and Senior Management. The principal risks and uncertainties facing the Company and the actions taken to mitigate these risks are as follows:

Strategic and Operational Risk

Description of Risk Mitigation
Business Model Our Board Members along with Management team periodically reviews the Companys business model to revise it if economic circumstances so demand. The Board has constituted a Risk Management Committee under the chairmanship of Mr Pronip Kumar Borthakur, a Non-Executive Independent Director (former Director Offshore, ONGC). This committee met 2 times during FY 2022-23 and reviewed the B-80 development project execution
Portfolio Mix The Company maintains a diverse portfolio of oil and gas assets across a range of sedimentary basins and at different project life cycles to minimize exposure to geographical, geological and commodity market risk.
Health, Safety and Environment. Oil and gas operations by its very nature carry a potentially high level of safety and environmental risks. Before commissioning of production installations, HOEC carries out HAZOP, HAZID, SIMOPS and Safety Integrity Level (SIL) studies to mitigate process hazards with respect to safety, environmental impact and maintains risk register and Emergency Response Plan in all operating installation. The Company has devised a comprehensive policy on Health, Safety and Environment outlining organizations commitment and approach to manage Health, Safety and Environment in the workplace.
The Company also complies with the guidelines of various regulatory authorities of the Central and State Governments and compliance audits are conducted. The Company commences operations only after the Environmental Impact Assessments are prepared and approvals from authorities are secured. A robust HSE management system and processes being followed in all the HOEC installations. As on 31 March 2023, Hollong Modular Gas Processing Plant achieved 1844 LTI free days since commencement of process operations at Dirok. B-80 offshore installation KGBOI has achieved 483 LTI free days. A specific Crisis Management Plan (CMP) was prepared, and Crisis Management Team (CMT) was formed to ensure safe operation in a tough offshore environment.
Exploration Geological and Reservoir Risk Exploration is inherently a risky business, with statistically only a relatively small proportion of exploration wells resulting in commercial discovery. Systematic geo-scientific workflow is pursued by HOEC under internal technical stewardship and peer reviewed by third party experts to minimise geological and reservoir risks and maximize opportunities. To independently assess the resource base of its new core asset B-80, post successful two well drilling campaign HOEC engaged the services of world-renowned reserves auditor.
Reserves Estimation and Recovery Risk Numerous uncertainties are inherent in estimating crude oil and natural gas reserves. Reservoir engineering follows a subjective process of estimating underground accumulations of crude oil and natural gas. Reserves estimations involve a high degree of technical judgment, and it is a function of the quality of the available geological and reservoir data. For these reasons, actual recoverable reserves may vary substantially from original estimates.
Community Relationship Continuous engagement exists between the Company and its stakeholders, which is central to harmonious operations. A robust local content policy is being implemented. Local personnel are employed wherever possible, and Company helps in developing skill sets of such personnel.

Financial Risk

Description of Risk Mitigation
Commodity Price HOEC is exposed to volatility in the oil and gas prices since the Company does not undertake any oil price hedge. This risk is mitigated through Low-Cost operating model. The impact of a falling oil price is however partly mitigated via the production sharing formula in the PSCs, whereby our share of gross production increases in a falling oil price environment due to cost recovery mechanism.
Foreign Exchange Exposure and Interest Rate Risk HOEC enjoys a natural hedge to a certain extent as its receivable and significant expenditure are denominated in United States Dollar (US Rs.).
Cost Inflation impacting both Goods and Services HOEC pursues structured planning processes which allow sufficient time for procurement of services and tracking the critical path activities. Company maintains past procurement cost data and constantly monitors changes in market.

Compliance, Ethical and Governance Risk

Description of Risk Mitigation
Legal, Regulatory and Litigation HOECs activities are subject to various laws and regulations. Regulatory changes may impact the value of the Company. Risks are mitigated by proactive assessment and ensuring compliance. The Company is party to various ongoing litigations, which if decided against the Company, may have an adverse impact on the financial position of the Company.
Ethical Conduct HOEC recognizes the importance and maintains transparent and responsible relationships with all its stakeholders and has a robust Whistle Blower Policy wherein the employees have a direct access to the Chairman of the Board.
Corporate Governance HOEC recognizes the importance of maintaining strong corporate governance procedures and processes. The Company has a robust governance framework in place. The Board reviews compliance with the applicable regulatory guidelines and best practices.

Insurance Coverage

Our business is subject to varied risks. As protection against financial loss resulting from some of the operating hazards, we maintain insurance coverage for all operated and non-operated assets, for physical damage, control of well, seepage and pollution and employers liability, third party liability, goods in transit and comprehensive general liability insurance.

The coverage is subject to customary deductibles and recovery limits. We maintain insurance at levels that we believe are appropriate and consistent with industry practice. We regularly review our potential risks and the cost and availability of insurance and accordingly revise our insurance program. The Company also procures directors liability insurance covering the cost of legal representation.


The revenue for the current year has increased to Rs.38,104.82 lakhs from Rs.13,050.47 lakhs in the previous year (standalone basis). The average price realised on sale of crude oil for current financial year is US Rs. 76.43/bbl and for gas is US Rs. 9.91 per mmbtu against US Rs. 75.99/bbl for crude oil and US Rs. 2.75 per mmbtu for gas in the previous year. The Companys production on working interest, on a standalone basis during the year is 10,39,297 boe (3,647 boepd) and for the previous year was 8,43,317 boe (2,310 boepd). Other income for the current year stands at Rs.2,790.85 lakhs as against Rs.1,680.41 lakhs in the previous year, which includes interest income and income from financial investments. This increase is primarily for reasons as detailed in the section Operational and Financial Discipline of the Managements Discussion & Analysis Report.

Operating Costs

During the year, the cost towards production expenses has increased to Rs.16,951.92 lakhs compared to Rs.2,225.18 lakhs in the previous year. Other expenses have increased to Rs.1,759.62 lakhs from Rs.667.62 lakhs in the previous year. The increase in expenses is mainly on account of cost towards B-80 Opex.

Finance Costs

The Company has incurred interest or finance cost during the financial year 2022-23 to the tune of Rs.2,423.15 lakhs in addition to the finance cost on unwinding of decommissioning liability.

Net Profit/Loss

On a standalone basis, the Profit-After-Tax is Rs.16,366.73 lakhs as against Rs.3,582.51 lakhs in the previous year. The increase in profits is mainly due to revenue from B-80 fleet and better realization from Dirok.

Cash Flow

The Operating profit before exceptional items and tax is Rs.16,366.73 lakhs in the current financial year against Rs.7,019.04 lakhs in the previous year. Operating profit before the working capital changes is Rs.20,158.47 lakhs in the current financial year and for the previous year is Rs.8,099.21 lakhs. The exceptional item for the current year is nil and for the previous year was Rs.(3,436.53) lakhs. The net increase in cash and cash equivalents during the financial year is Rs.12,539.58 lakhs. The effective cash and cash equivalents of the Company at the end of the financial year is Rs.13,866.98 lakhs as against Rs.1,327.40 lakhs in the previous year.

Ratio Analysis

The key financial ratios are as follows:

Particulars FY 2022-23 FY 2021-22
Debtors Turnover Ratio 13.49 times 6.27 times
Inventory Turnover Ratio 10.02 times 48.91 times
Current Ratio 1.45 times 1.27 times
Debt-Equity Ratio 0.31 times 0.33 times
Interest Coverage Ratio 7.54 times 3.97 times
Operating Profit Margin 43% 54%
Change in Return on Net Worth 17% 5%

Companies (Indian Accounting Standards), Rules 2015

In accordance with the Companies (Indian Accounting Standards), Rules 2015 of the Companies Act, 2013, HOEC has followed the Indian Accounting Standards (Ind AS) for preparation of its financial statements.

Critical Accounting Policies and Estimates

The preparation of the financial statements requires the Companys management to make several estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. When alternatives exist among various accounting methods, the choice of accounting method can have a significant impact on reported amounts. The following is a discussion of the accounting policies, estimates and judgment which management believes are most significant in the preparation of the financial statements.

Oil and Gas Properties

We account for crude oil and natural gas properties under the Successful Efforts Method (SEM) of accounting. Under the SEM, costs to acquire mineral interests in crude oil and natural gas properties, to drill and equip exploratory wells that find commercial quantities of proved reserves, and to drill and equip development wells are capitalized. Proved property acquisition costs are amortized by the unit of production method on a field- by-field basis, based on total proved developed crude oil and natural gas reserves, as approved by the Management Committees of the respective Unincorporated Joint Ventures. Costs associated with drilling successful exploratory wells and drilling development wells are amortized by the unit of production method on a field-by-field basis. These costs, along with support equipment and facilities, are amortized based on proved developed crude oil and natural gas reserves. Survey and seismic acquisition costs are expensed.

Besides being the recommended method under the Guidance Note issued by the Institute of Chartered Accountants of India, we believe that the SEM is the most appropriate method to use in accounting for our crude oil and natural gas properties because it provides a better representation of results of operations for a Company of our size.

Site Restoration Liability

Our site restoration liability consists of estimated costs of dismantling and abandoning producing well sites and facilities, site reclamation and similar activities associated with our oil and gas properties. The recognition of Site Restoration Liability requires that management make estimates, assumptions, and judgments regarding such factors as estimated probabilities, amounts and timings of obligation. The corresponding amount is added to the cost of the producing property and is expensed in proportion to the production for the year and the remaining estimated proved reserves of hydrocarbons based on latest technical assessment available with the Company. Any change in the value of the estimated liability is dealt with prospectively and reflected as an adjustment to the provision and the corresponding producing property.



At the yean end, HOEC had cash and cash equivalent of Rs.13,866.98 lakhs. Cash surplus is placed in debt oriented liquid funds and bank deposits as approved by the Board. HOEC manages its short-term liquidity to generate returns by investing its surplus funds, while ensuring safety of capital.

Capital Requirements

The Company has capital requirements to implement its business plans and to continue the development of B-80, Dirok, PY-1and other marginal fields at Cambay in the immediate future. The Company has a successful track record of raising capital in the past and the Company will raise financial resources as and when needed to develop the blocks in the existing portfolio and for any inorganic opportunities.


Based on our business plan to convert the discovered resources in our portfolio of assets, our outlook remains positive.


The Company maintains a comprehensive system of internal control. This comprises the management systems, organizational structures, processes, and standards that are implemented to conduct our business operations. The Company has a proper and adequate system of internal control commensurate with the size and nature of business. These systems provide reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the company, and ensuring compliance with corporate policies.

The Company also conducts periodic evaluations, mainly through its Internal Audit and statutory audit, to determine the adequacy of its internal controls system.

The Company has appointed M/s Guru & Ram LLP, an independent firm with expertise in internal audit and assurance, which inter-alia ensures the adequacy of the procedures of recognizing and managing risks applied by the Management, the effectiveness of the Internal Controls System and the quality and reliability of the information given to the Management with regards to the System of Internal Controls. The adequacy of the Internal Controls System is monitored by the Audit Committee, through reports submitted to it. Reports by the Management and the Internal Auditors include assessments of the major risks and the effectiveness of the Internal Controls System in addressing them.

Systemic weaknesses identified, if any, are incorporated in the reports, including the impact they had or could have had, as well as the actions of Management to correct them. No significant control failures were reported during the year.

As part of the Companys internal control process, any transactions with related parties are approved by the Audit Committee and Board of Directors, and appropriately disclosed in the financial statements.

The Companys Information Technology (IT) Department provides the required tools and solutions to all employees to manage the operations with support of IT systems and applications efficiently using internal and external resources.

The Company has internal controls regarding fixed assets, inventories, cash, and bank checks, etc., such as physical security, inventory counts and reconciliations of physically counted quantities with the recorded ones. Further, the Company has a schedule of quarterly inventory counts to confirm inventory levels as per accounting records. The Company also has a list of delegated authorities and responsibilities, which depicts assigned authorities to various Company executives, to conduct certain transactions or actions (e.g., payments, receipts, contracts, etc.).


The Company has a robust whistle-blower policy in place. A copy of the policy has been made available on the website of the Company at https://www.hoec.com/wp-content/uploads/2022/08/whistle-blower.pdf All employees, contractual persons, consultants, vendors, and customers of HOEC can raise concerns about possible wrongdoing by contacting the Ombudsperson (Chairman - HOEC Board) in a confidential manner


Our stated business goal is to Transform through Talent and Technology. We have focussed building a world class talent in our core competent area of Exploration, Drilling and Development, while outsourcing the routine operations and maintenance with reputed Oil Field Service providers with scale, size and systems to support. HOEC provides a robust platform for talented people to develop ideas, work as a team to create value and make a difference to all the stakeholders. Our ability to create sustainable stakeholder value is linked with our ability to recruit, motivate, and retain top talent. Accordingly, technical talent pool is being strengthened continuously both by engaging experienced experts on full and part time basis. For example, company engaged multiple subject matter experts to implement the complex development project in B-80 field in western offshore.

HOEC strives to ensure a caring and energised work environment, where employee engagement is high. This is sought to be achieved by empowering employees and encouraging innovation and ownership. Being a small team helps in seamless communication, where relationships amongst our employees are cohesive and team spirit is high. We value work life balance and gender diversity.

HOEC values all employees for their contribution to our business. We are committed to develop and deploy people with the skills, capability and determination required to meet our business objectives. Opportunities for advancement are equal and not influenced by considerations other than performance and aptitude. Employees are motivated to develop within a flexible framework and are encouraged to provide feedback on their expectations.


We believe that "All Lives Have Equal Value" and nothing that we do can be more important than ensuring safety. We are committed to making a positive contribution to the protection of the environment in areas in which we operate and to do everything possible to minimize any adverse effects of our operations.

HSE statistics with leading and lagging indicators are generated for each operational sites every month to monitor HSE performance and compliance. Company ensures conduct of Environmental Impact Assessment (EIA) studies to analyze the environmental and social implications on the surrounding areas like ambient air, ground water, surface water, soil quality & emissions etc for securing approval from Ministry of Environment and Forest.

HOEC has a robust Emergency Response Plan (ERP) for production operations, drilling campaigns and project execution activities to respond swiftly during any emergency and are verified by conducting mock drills every month.

HOEC continued to maintain a sound health and safety record in FY 2023. As always, special skills training on Job Safety Awareness (JSA) and Risk Assessment and several HSE awareness campaigns have been conducted in our operating sites and best practices have been felicitated by HSE Awards Program.

The Key Performance Indicators (KPIs) related to HSE are as below:

KPIs statistics FY 2022-23 FY 2021-22
Fatalities Accident Rate (FAR) 0 0
No. of LTIs 1 0
Days since last LTI 315 1,939
Oil Spill Incidents 0 0
Fatal Accident Rate 0 0
LTI Frequency 0.01 0.01
LTI Severity 0 0

Corporate Social Responsibility

HOEC believes that its License to Operate is to be earned from the local community around its operations and it is keen to leave a positive economic and social impact through its operations and make a difference to the quality of life of its local stakeholders. Promoting local content in all our operations is at the core of our CSR policy and accordingly, Company has rolled-out a local content policy for our Northeast Operations.

Our CSR Policy and Programmes seek to:

• Promote local content by developing entrepreneurship and local enterprises.

• Upgrade infrastructure in local areas

• Enhance the quality of education in our operating area.

• Promote personal safety, environmental and technology awareness.

• Support promotion of local culture and sports

During FY 2022-23, HOEC has expedited the execution of CSR projects approved by the Board for multiple Financial Years to ensure full compliance and has completed the following projects:

Board approved Projects for FY Projects Sector Location
20-21 Construction of WBM & paver cement block roads in different locations at Makumpathar Gram Panchayat Rural development Assam
20-21 Setting up of open gym in two different locations Margherita subdivision Rural development Assam
20-21 Distribution of Agriculture tools to Gram Panchayats Rural development Assam, Tamilnadu
21-22 Construction of Paver cement block roads in Kamarapatty Gram Panchayat Rural development Assam
21-22 Installation of 50 Nos of solar streetlamp in Margherita subdivision Rural development Assam
22-23 Construction of paver cement block roads in different locations at Makumpathar Gram Panchayat Rural development Assam

KEY STRENGTHS OF HOEC Quality Asset Portfolio

• Portfolio of discovered resources - all blocks with discoveries producing or ready to be developed.

• Diverse geographical footprint - Presence in 4 out of 7 producing basins in India.

• Balanced portfolio - Offshore/Onshore & Oil/Gas

• Upside potential for exploration within portfolio with infrastructure for rapid monetisation

• Operatorship in majority of blocks to drive value creation.

• Improved focus on Offshore Blocks that is material to leverage HOEC" s unique operating experience in both East and West coast of India.

Strong Organization

• Indias first private E&P company with decades of experience

• Professional management with proven industry experience

• Technical talent with global experience

• Delivered leading HSE performance with strong focus on safe and sustainable operations.

• Superior technical capability across the E&P value chain

• Proven experience in fast-track development and low-cost operations, both on-shore and off-shore.

• Recognised as a partner of choice to develop and maintain social and regulatory license to operate.


In preceding sections of this Annual Report, in particular the Boards Report, and the Managements Discussion and Analysis Report:

[a] previous year figures have been re-grouped to conform to the current year presentation; and

[b] figures have been rounded off.