HOEC Q4FY26: A year shaped by execution wins and a crude sales dispute

Hindustan Oil Exploration Company Limited closed FY26 with a clear contrast between operational progress and financial disruption. Consolidated revenue from operations for FY26 came in at INR 301.29 crore versus INR 459.12 crore in FY25. EBITDA was INR 124.5 crore and PAT was INR 62.8 crore for the year. The company also reported a Q4FY26 quarter that was heavily distorted by the crude sales dispute at its flagship offshore asset B-80, with revenue from operations shown as negative INR 190.57 crore in the consolidated profit and loss.

Even with that noise, the presentation shows a company actively building its next phase. HOEC increased its offshore footprint in Mumbai High, completed a rapid drilling campaign in Kharsang, progressed approvals and extensions in Dirok and Cambay, and refined its Cauvery offshore plan with external validation from PetroVietnam studies. The strategic message is straightforward. HOEC wants to convert a reserve base of 40.6 MMBOE 1P and 62.3 MMBOE 2P into a multi year production ramp, while tightening commercial processes after a single cargo issue led to a major receivable blockage.

FY26 in one frame: strong asset activity, weak reported numbers

On paper, FY26 profitability compressed sharply. Consolidated profit before tax and exceptional items fell to INR 32.06 crore from INR 149.95 crore in FY25. Reported consolidated PAT was INR 62.75 crore versus INR 147.20 crore in FY25. The company also recorded exceptional items of INR 32.52 crore in FY26. Return ratios were modest, with ROE at 4.5 percent and ROCE at 2.5 percent as of March 31, 2026.

The more important context is that the year included a material commercial interruption at B-80. The presentation notes that sales revenue of around INR 260 crore was held up due to the dispute with HPCL on crude sales, and that this forced HOEC to defer investments in well drilling plans intended to ramp up production. That decision is visible in the way the company frames FY26 and early FY27. operational capability remained intact, but the cash conversion cycle was hit, which matters for a company that is trying to fund a staged development program across offshore and onshore assets.

Balance sheet signals also reflect a year of change. Consolidated equity increased to INR 1,384.71 crore from INR 1,321.26 crore. Long term borrowings reduced to INR 13.33 crore from INR 47.64 crore. The company states a long term loan of INR 20 crore is being liquidated via internal cash flows, with gearing at 0.04.

B-80 and B-15: Mumbai High becomes the center of gravity

HOEC is leaning heavily into Mumbai High. In FY26 it took two decisive corporate steps. It was awarded DSF Block B15 and it acquired AEPL’s 40 percent stake in B80, taking ownership to 100 percent. That simplification matters, because B-80 is already producing and it holds 35.53 MMBOE of reserves as of April 1, 2026. FY26 production at B-80 was 1,103 BOEPD.

But B-80 is also where the year’s largest uncertainty sits. In August 2025, HOEC supplied about 417,000 barrels of crude to HPCL. HPCL later raised concerns regarding the presence of organic chlorides in the crude stream, which HOEC describes as related to a single cargo event. The company says it is working constructively toward an amicable commercial resolution through a structured reconciliation and settlement process. It has initiated a conciliation framework and has also initiated resale of treated crude volumes to alternate buyers. Importantly, it states there is no operational impact on production capability of the B-80 field.

Operationally, the focus at B-80 is monetization and reliability. The company highlights that only around 1 million barrels of the total P2 reserves of 26 million have been produced so far, emphasizing the remaining runway. For near term performance, it is modifying compressor line up on the Mobile Offshore Producing Unit to reduce suction pressure, upgrading a fuel conditioning skid to use vent gases for fuel, and executing asset integrity upgrades to reduce unplanned downtime. It also cites repairs and inspection work on the Floating Storage Offshore unit Prem Pride, including replacement of chafe chain and hawser and in situ diving inspection of hull and machinery.

The production trend in the quarter was softer. Average daily production in Q4FY26 was 377 barrels of oil and 2.8 mmscf of gas versus 497 barrels and 4.57 mmscf in Q3FY26. Inventory at quarter end was 93,792 barrels.

The drilling plan is the lever that can change the story, but it depends on capital and cash conversion. Under the field development plan, B-80 has five wells planned, with two wells already drilled and three in the pipeline, expected in Q3 or Q4FY27. HOEC plans workover of two existing subsea wells in Q3FY27, followed by drilling of three new wells in Q4FY27. Estimated FY27 capex is USD 30.5 million.

B-15 is the next Mumbai High option, but it is still in planning. It has 16 MMBOE of reserves as of April 1, 2026, under a Special DSF 2024 regime. HOEC obtained a petroleum lease in March 2026, is progressing technical studies for the field development plan, and expects drilling to commence in FY28.

North East onshore: Kharsang and Dirok show the limits of infrastructure

If Mumbai High is about offshore scale and monetization, North East is about repeatable onshore drilling and pipeline constraints.

At Kharsang, HOEC’s FY26 execution was strong. The company completed a nine well campaign in a single financial year and states oil production ramped up by two times, with higher gas potential than anticipated. In the detailed Kharsang update, it reports that nine development wells were drilled in FY26, including six oil wells and three gas wells. Gross production rose from 325 BOPD to 726 BOPD. Three wells tested gas ranging from 3.4 MMSCFD to 8.6 MMSCFD, but the gas evacuation plan is still under discussion and those wells are currently shut in.

For FY27, HOEC plans to drill an additional nine development wells, listed as four firm plus five to mature. A separate exploratory well is also under discussion. The quarter ended with 16,650 barrels of stock at Kharsang.

At Dirok, the presentation captures the classic upstream challenge. reserves are meaningful, production is stable, but evacuation limits prevent full value capture. Dirok has gas reserves of 226.04 BCF as of April 1, 2026 and is producing 14.12 MMSCFD. In Q4FY26, average daily production was 13.43 mmscfc of gas and 251 barrels of condensate, slightly above Q3FY26 levels of 12.83 mmscfc and 226.93 barrels.

Still, HOEC says Dirok production continued at about one third of production potential because the pipeline was not made available, with discussions ongoing. The company also references National Gas Grid connectivity constraints more broadly.

Regulatory and project progress at Dirok was positive. A revised field development plan has been approved by the Ministry of Petroleum and Natural Gas, securing the block for 10 years till 2035. PSC extension signing is under final review with DGH and MoPNG and is likely to be signed by July 2026. Cost recovery of an 18 inch pipeline and associated facilities beyond HMGPP has been approved by DGH and MoPNG. The next catalyst is drilling. Civil work for exploration well ND-1 is in progress, likely to be spud in Q3 or Q4FY27. Land acquisition for development drilling of three wells is also in progress.

The pipeline map provides a timetable that investors will likely watch closely. It notes DNPL commissioning by June or July 2026 after pending replacement of 50 km of pipeline. It also highlights that the Moringa gas pipeline section includes a 17 km non forest stretch yet to be laid, and that the Duliajan feeder line under IGGL is targeted for completion by FY 2028-29. For Dirok, that timeline influences not just volume growth but the reliability of cash flows.

Cauvery and Cambay: smaller volumes, but clear technical next steps

In the Cauvery offshore region, PY-1 stands out as a differentiated asset. It is described as the only offshore production platform in Cauvery Offshore, with a unique gas bearing offshore fractured granitic basement reservoir. PY-1 is 100 percent owned, under a pre NELP regime, with reserves of 10.38 MMBOE as of April 1, 2026. FY26 production was 62 BOEPD.

The company’s near term focus is on debottlenecking and incremental drilling. It plans four wells as per the early development plan, with two wells already drilled and two in the pipeline, expected in Q4FY27. Average gas production was 0.26 MMCSF in Q4FY26 versus 0.42 MMCSF in Q3FY26. A coiled tubing intervention is planned on one well to increase production, targeted by H1FY27. HOEC has also placed an order for a booster compressor to increase sales because GAIL line back pressure cuts back production on multiple days. Installation is targeted for October 2026. In parallel, PetroVietnam studies confirmed HOEC’s geology and geophysics findings and recommended drilling two directional wells targeting the fractured basement reservoir.

PY-3 remains a non operating complication. HOEC holds 21 percent participating interest alongside ONGC, Tata Petrodyne, and Hardy Exploration and Production India. The presentation states the asset is currently in arbitration.

In Cambay, HOEC is pursuing life extension and selective workovers. It notes the extension of Block CB-ON/7 in Gujarat has been admitted with final processes in progress. Two wells drilled in North Balol were described as partial success. At North Balol specifically, HOEC obtained RFDP approval relating to PSC extension beyond March 2027. It produced 50 barrels of high viscous oil from well NB-11 via hot water circulation, and a trial run of crude oil lifting technology belt technology has been planned for continuous artificial lift.

At Palej, the company is explicit that wells are under producing, but it also lays out a path to improved output. Technical evaluation supported by simulation studies has been completed. Full production assessment indicates about 600 bopd by FY27-28. It plans to introduce sucker rod pumps to lift per well output from around 20 to 30 bopd to around 200 bopd, with procurement initiated and a pilot well targeted by FY27.

Reserves and the growth plan: ambition meets dependency

HOEC’s reserve base is material for its size. Net balance reserves as of April 1, 2026 show 40.6 MMBOE of 1P and 62.3 MMBOE of 2P, with upside 3P resources shown as 103 plus MMBOE. The largest contributor is B-80 at 35.5 net, followed by Dirok at 9.6 and PY-1 at 10.4. The company notes that B-80 and Dirok reserves are third party certified by GCA London.

The company’s internal production trajectory aims for step change. It frames current net production at about 1.5K BOE per day in 2026 and targets about 11K in 2027, 22.5K in 2028, and 32K in 2029. The staged delivery plan across assets gives a clearer sense of the dependencies.

Kharsang’s program is the most visible in the near term, with continued development drilling and eventual gas monetization. Dirok’s upside is tied to facility expansion, new drilling, and the North East gas grid reaching a point where evacuation supports higher throughput. B-80 is tied to workovers and drilling, with a stated peak of 5,000 BOPD by 2028-29. PY-1 depends on directional wells and compression to push sales volumes, while B-15 remains a longer dated option with first drilling expected in FY28.

The key investor question is less about whether the reserves exist and more about sequencing and cash funding. FY26 illustrated how a single commercial event can delay drilling even when the subsurface case remains intact.

What to watch next

HOEC ends FY26 looking like a company in transition, not in retreat. It changed leadership, adding a new Managing Director and CEO and a new CFO, and added several recent additions to its technical and operating team. It also tightened its balance sheet with lower long term borrowings.

But the near term narrative depends on three visible milestones. First is resolution of the HPCL crude offtake dispute and normalization of cash collections from B-80. Second is tangible progress on gas evacuation, particularly for Dirok and potentially for Kharsang’s shut in gas wells. Third is delivery of the FY27 work program, including B-80 workovers and drilling, ND-1 preparation at Dirok, and the compression and intervention work at PY-1.

If those pieces move in parallel, HOEC’s multi asset plan can start to look less like a target slide and more like an investable growth path. FY26 showed the operational base is active and the reserve base is substantial. The next year needs commercial clarity and infrastructure follow through to convert that base into stable production and reported earnings.