Assam field a 'new growth opportunity': HOEC

Approval for the AAPON 94/1 gas field in Assam will boost revenues, P Elango, MD Hindustan Oil Exploration Company Limited (HOEC) told CNBC-TV18.

The company is the operator in this 130 bcf gas reserve and has partnered with Indian Oil Corporation (IOC) and Oil India, he said.“What we expect to achieve is a production profile of 20 million cubic feet of gas per day which is roughly equivalent to about USD 1,25,000 of gross revenue for the whole joint venture as a whole,” Elango said.

Below is the edited transcript of P Elango’s interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18. Sumaira: First I want to talk to you about your topline. What is the reason that we are seeing this consistent fall or the de-growth in your topline?A: We are dealing with offshore field where we had some issue, there has been a decline in gas production from this PY-1 field but what we have focused since we took over is to really look at a new growth opportunity by securing the field development plan approval for the Assam gas development, we have achieved that.So, looking ahead now-to us this is a first milestone in terms of turning around the company. We have secured this approval, field which is in Assam with good access to the market side. The gas that will be produced in this field will be sold and that will kick off a new stream of cash flow to the company and we see that as a positive sign where from now onwards the company could take small steps of growth.Reema: Would this plant, the one which you are talking about this field in Assam be this AAPON 94/1 for which you got the approvals recently?A: Yes.Reema: Can you tell us about this plant, what will be the kind of revenues as well as margins you can generate in FY16 and FY17?A: This is a 130 bcf gas reserve. We are partners with Indian Oil Corporation (IOC) and Oil India; we are the operator. What we expect to achieve is a production profile of 20 million cubic feet of gas per day which is roughly equivalent to about USD 1,25,000 of gross revenue for the whole joint venture as a whole.Our net revenue would be, net of all cost, will be about USD 25,000 per day which is roughly about USD 10 million per year. I think the company continues to be a very low cost operator and this revenue stream will almost double the current revenue profile. We achieved a total revenue of roughly Rs 48 crore this year. Once we commence the production and achieve the plateau, we would be doubling the revenue stream. The most interesting thing is, this is expected to sustain at the pleateu level for 15 years. So, the company will come out of all the issues that it faced in the past with this new scheme of revenue. Sumaira: What is the total number of blocks that you have and how many are operational? A: We have got totally 10 blocks. Out of this we have got a very good mix offshore, onshore as such. Plus the mix includes couple of exploration blocks in Rajasthan and three-four producing blocks – three of them in Gujarat and one in PY-1 offshore. There is another producing block PY-3 which remained shut down and we are not the operator for that block. Then we have got another block in Andhra Pradesh which is more in the exploration side. So, basically we have got three exploration blocks and about five production blocks and couple are under development. Where we are really focusing the company is to at this current price environment, it makes a lot of sense to focus on the onshore block. Our focus is primarily on the onshore level and in that effort this is a very good beginning for the company. Reema: Let me come back to that block in Assam. You said that it will help you double your revenues. How much time will that take?A: We are looking at executing this project within about 18-24 months. The next milestone to be achieved for the project is securing the environmental approval which we expect to get by the last quarter of this year. In fact the public hearing date will be fixed by the district collector sometime in June-July.Sumaira: For FY15 your depreciation is Rs 370 and if I compare it to a year ago it was Rs 103 crore. What is the reason that it is so high in this year?A: Overall this year what we have done is, our approach was to basically clean up the balance sheet. Our promoter, ENI, has been very generous in writing off a Rs 960 crore loan that they had lend which was their external commercial borrowing that has been written off. We looked at the current price environment, some of the offshore assets carried values have been written off. So the company today is a debt free company with a clean balance sheet and presents a good opportunity to creating new streams of revenue. The numbers that you see this year are reflection of this exceptional write off that has occurred.