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HOEC Q1 FY27: Fixing B-80, unlocking Dirok, and managing a crude dispute

Hindustan Oil Exploration Company Limited (HOEC) entered Q1 FY27 with a clear operational message: execute, optimize production, and protect capital allocation discipline. The quarter’s reported numbers reflected both progress and friction.

On a consolidated basis, revenue from operations for Q1 FY27 stood at INR 124.01 crore, with net profit of INR 6.24 crore. Standalone revenue from operations was INR 117.45 crore, with standalone net profit of INR 12.54 crore. Management repeatedly highlighted that the prior quarter comparisons were distorted by a reversal linked to the HPCL crude sale dispute, which is also why Q4 FY26 shows negative revenue from operations in the company’s statement.

The operating narrative was dominated by three themes: the path to normalizing B-80 crude sales after the HPCL dispute, the technical plan to lift B-80 production after higher water cut, and the continued constraint at Dirok where evacuation infrastructure is limiting output.

B-80: crude resale, water cut, and the next drilling campaign

B-80 remains HOEC’s flagship offshore asset, fully operated with 100% participating interest. The company reported Q1 FY27 production of 605 BOEPD and disclosed reserves of 35.48 MMBOE as of July 1, 2026.

Two operational threads ran in parallel.

First, the HPCL dispute. HOEC stated that in August 2025 it supplied about 417,000 barrels of crude to HPCL. After processing, HPCL raised concerns about the presence of organic chlorides in the crude stream. HOEC described it as a single cargo event. The company has now agreed to cancel the invoice to HPCL and resell the same oil to third parties. In the investor presentation, HOEC said sales revenue of about INR 260 crore had been held up due to the dispute, and as a result, investments to ramp up production had to be deferred.

Management’s current expectation is to complete the resale by end October or early November 2026. They also acknowledged that the offtake pace has been slower than expected and indicated potential resale losses linked to Brent price movements, noting losses incurred so far on the partial volume already sold.

Second, production and remediation. B-80 production in Q1 was impacted by higher water cut from one producing well. Management described a compressor configuration change on the MOPU to enable operation at lower suction pressure, aimed at supporting flow even as well pressures decline. The company also pointed to facility actions such as switching generators to gas to reduce diesel usage and creating 4 to 5 days of storage on the MOPU to sustain production if monsoon weather impacts the SPM.

The major technical intervention is the planned workover of two subsea wells (D1 and D2) in Q3 FY27, followed by drilling of three new wells in Q4 FY27. In the presentation, the estimated FY27 capex for this program is USD 45 million, and management stated the company is engaging with various entities to raise funds. The call also made clear that the B-80 development plan is expected to rely on debt funding.

Dirok: strong reservoir, weak evacuation, and a December target

Dirok, in the Assam-Arakan basin, remains one of HOEC’s most strategically important assets because it combines high pressure, meaningful reserves, and near-term ramp potential if evacuation improves.

HOEC holds a 27% participating interest, with Oil India (44%) and IOCL (29%) as JV partners. The company reported Q1 FY27 production of 15.424 MMSCFD of gas and 280.32 barrels of condensate per day. Reserves were disclosed at 226.04 BCF (6.403 BCM) as of July 1, 2026.

The constraint is not wells but evacuation. Management said current production is only a fraction of potential due to evacuation route limitations. The company described the DNPL pipeline being made a common carrier by PNGRB and explained that degraded sections had reduced capacity, with work underway to restore capacity through replacement segments and hot tapping.

Management’s expectation is that the work enabling higher capacity could be completed by December 2026, supported by the move to hot tapping which avoids a refinery shutdown. HOEC also stated it is supporting stakeholders with vendor and technical input for hot taps.

In parallel, HOEC said the revised FDP has been approved by MoPNG, securing the block for 10 years till 2035. PSC extension signing is under final review with DGH/MoPNG and is expected around August or September 2026.

Kharsang: oil growth delivered, gas upside waiting for pipes

Kharsang, also in the Assam-Arakan basin, continues to be the company’s onshore oil workhorse. HOEC has a 35% participating interest alongside Oil India (40%) and JEKL (25%). The presentation indicates production of 655 BOPD in Q1 FY27 and remaining reserves of 3.21 MMbbl.

Execution has been visible here. HOEC said it drilled nine development wells during FY25-26 (six oil and three gas wells), raising gross production from 325 BOPD to 726 BOPD. The company also carried out workovers on multiple wells after the drilling program.

The next phase includes drilling nine additional development wells in FY27, with the rig contract award described as imminent. However, management highlighted that gas monetization is currently limited because the gas evacuation plan is still under discussion. Wells with good gas potential have been kept shut-in.

On the call, management described the start of a route survey tender for a 24 km pipeline to connect to Oil India’s network, while flagging that forest clearances could create regulatory complexity.

East Coast and Gujarat: selective interventions and pilot technologies

On the Cauvery offshore side, PY-1 is a smaller producing asset in current terms but has clear operational milestones. The presentation reported Q1 FY27 production of 61 BOEPD and reserves of 10.38 MMBOE, with PSC extended to October 5, 2030.

HOEC said it engaged SLB for a rigless well intervention job to revive gas production in PY1Earth-St2A, including installation of a velocity string and well clean-up of two other wells, with a mid-October target completion. The company also placed an order for a booster compressor to address back pressure issues on the GAIL line, targeting installation in October 2026.

In Gujarat’s Cambay basin, HOEC discussed production enhancement initiatives across North Balol and Palej.

At North Balol, a pilot project was initiated using Crude Oil Lifting Technology (COLT) belt technology in well NB-11. The company said brine is currently knocked out and the main crude lifting phase is expected to start by mid-August.

At Palej, HOEC said wells are under-producing and that a technical evaluation with simulation studies has been completed. It cited a production assessment pointing to about 600 bopd by FY27-28 with drilling and workovers. The company also expects SRPs to materially lift per-well output from about 20 to 30 bopd to about 200 bopd, with procurement initiated and a pilot targeted by FY27. The facility thermic heater installation was said to have already increased production by 20%.

Financial snapshot

The reported financial statements provide a concise picture of the quarter while also reflecting inventory and prior-period distortion from the HPCL reversal.

Other income was meaningful in the quarter. Management said standalone other income included release of an escrow balance linked to cost recovery, an insurance claim admitted by the insurer, and a topping up linked to the Adbhoot acquisition as at March.

What matters next

HOEC’s near-term investor focus points are not subtle. They are operational deadlines.

The first is closure on the HPCL crude resale process, which management expects to complete by end October or early November 2026. This is important not only to normalize reported revenue but also because management explicitly tied the cash flow delay to deferral of drilling investments.

The second is delivery of the B-80 workover and drilling campaign. The company described the intervention sequence clearly and highlighted a FY27 capex estimate of USD 45 million. It also acknowledged that execution and offshore uncertainties remain.

The third is Dirok evacuation improvement. Management’s stated target is December 2026, supported by a common-carrier DNPL framework and hot tapping plans. If capacity restoration plays out as expected, Dirok has the potential to meaningfully lift gas sales relative to current constrained levels.

Across these, the company’s message is consistent: reserves exist, but monetization depends on execution, infrastructure, and counterparties. Q1 FY27 showed steady profitability but also made it clear that the next phase of value creation will be driven by how fast HOEC can convert operational plans into sustained production and cash flows.