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Directors Report of Hindustan Oil Exploration Company Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in placing before you the 31st Annual Report on the business and operations of the Company and the audited accounts for the Financial Year ended 31 March 2015.

1. FINANCIAL HIGHLIGHTS

(INR Million)

Particulars Standalone

2014-15 2013-14

Turnover 404 569

Other Income 75 58

Revenue 479 627

Earnings / (Loss) before Depreciation / Depletion /

Amortization / Taxation / and

Exceptional items (117) 100

Less: Depreciation / Depletion / Amortization / Exploration write-off 459 1,477 Exceptional Items — Impairment and additional depletion 11,634 —

Profit / (Loss) Before Tax (12,210) (1,377)

Less: Provision for Tax — (129)

Profit / (Loss) After Tax (12,210) (1,248)

Profit / (Loss) brought forward (3,825) (2,577)

Profit / (Loss) available for

Appropriation (16,305) (3,825)

Balance carried to the Balance

Sheet (16,305) (3,825)

Particulars Consolidated

2014-15 2013-14

Turnover 595 756

Other Income 74 56

Revenue 669 812

Earnings / (Loss) before Depreciation / Depletion /

Amortization / Taxation / and

Exceptional items (95) 116

Less: Depreciation / Depletion

Amortization / Exploration 460 1,477 write-off Exceptional Items — Impairment and additional 11,634 depletion (12,190) (1,361) Profit / (Loss) Before Tax 6 (124) Less: Provision for Tax (12,196) (1,237) Profit / (Loss) After Tax (3,755) (2,518) Profit / (Loss) brought forward

Profit / (Loss) available for (15,951) (3,755) Appropriation

Balance carried to the Balance Sheet (15,951) (3,755)

figures have been rounded off.

* During the year, your Company produced 0.25 million barrel of oil equivalent (mmboe) of crude oil and gas (previous year 0.37 mmboe), the main reason for the decrease is decline in production and inability of downstream consumer to offtake PY-1 Gas for 41 days due their shut-down / limitation.

The lower production has resulted in a Turnover of INR 404 million for the year (previous year INR 569 million), a decrease of 29% over the previous year. The total revenue for the year was INR 478 million (previous year INR 627 million) and the decrease is mainly due to the reason as stated above.

On a standalone basis, the Loss-Before-Tax was INR 12,210 million (previous year INR 1,377 million). This is mainly due to the impairment of producing assets PY-1 and other offshore assets CY-OS-90/1 (PY-3) and CB-OS/1. This impairment is necessitated consequent to the re-estimation of recoverable reserves in PY-1 due to poor reservoir performance. The other offshore assets PY-3 and CB-OS/1 are not economically viable to develop at the current oil prices and need to be impaired. In addition, the exceptional items include the write-off of exploration costs and additional depletion due to the reduction of PY-1 Reserves.

During the year under review, the deferred tax asset of INR 4,478 million has not been considered as uncertainty exists over its recoverability. Accordingly, the carried forward business losses and unabsorbed depreciation to the extent of deferred tax liability as at 31 March 2015 stands adjusted.

During the year under review, your Company had a Loss-After-Tax of INR 12,210 million (previous year INR 1,248 million) mainly due to exceptional write-off as stated above. Your Company had borrowed from ENI Lasmo Plc for the development of PY-1 and as the PY-1 assets were impaired, ENI Lasmo Plc has waived off the entire outstanding loan of INR 9,608 million with no further obligations. This waiver of the loan of INR 9,608 million is transferred to Capital Reserves.

On consolidated basis, the total revenue has reduced from INR 818 million to INR 669 million a reduction of 18%, loss after tax has increased from INR 1,237 million to INR 12,196 million for reasons as stated in the Standalone accounts.

2. DIVIDEND

In view of the Loss-After Tax during the year, the Directors have not recommended any dividend for the Financial Year 2014-2015.

3. CAPITAL EXPENDITURE

During the year under review, the company incurred capital expenditure aggregating to INR 114.59 million towards exploration and development program in its existing portfolio of assets.

4. BRIEF DESCRIPTION OF THE COMPANY'S OPERATIONS DURING THE YEAR

Operations review has been provided in the Management Discussion and Analysis Report, which forms part of this Annual Report.

5. MEASURES TAKEN TO IMPROVE THE OPERATIONAL & FINANCIAL PERFORMANCE

The Company has initiated measures to achieve improvement in operational and financial performance by focusing on cost optimization in existing producing fields. In order to monetize the existing discoveries the Company has focused on achieving the approval development plan for the Dirok discovery which was obtained in May 2015. To put the field on fast track development, various environmental, forest and wildlife clearances are required which are being processed.

6. NO CHANGE IN THE NATURE OF BUSINESS

There is no change in nature of business being carried out by the Company.

7. OUTLOOK

The Company has capital requirements to implement its business plans and the development of Dirok discovery in Assam in the immediate future, which can be met through the internal accruals and the existing working capital. The Board recognizes that the Company has a successful track record of raising capital in the past and the Company shall raise financial resources as and when needed to meet its discretionary spending for any potential growth opportunities. Accordingly, the Financial Statements have been prepared on the basis that the Company is a going concern.

8. CREDIT RATING

ICRA has accorded a long term stable rating of (ICRA) BBB for the line of credit of INR 100 crores on 15 May 2015.

9. WAIVER OF LOAN BY ENI LASMO PLC

During the year, consequent to the impairment of carrying value of PY-1 asset due to the reduction of recoverable reserves, Eni Lasmo Plc has waived the outstanding loan obligation of INR 9,608 million vide the deed of termination dated 3 December 2014 with no further future obligation towards this loan.

The Company had adjusted the waiver of the loan to Capital Reserves as it is a capital receipt akin to promoter's contribution.

10. SHARE CAPITAL

The Company has not issued any shares with differential rights as to voting, dividend or otherwise. During the year, based on the approval of the Members at their 30th Annual General Meeting held on 26 September 2014, the authorized capital of the Company has been increased from INR 200 Crores to INR 500 Crores.

11. PROMOTERS

Eni UK Holding Plc, Burren Shakti Limited and Burren Energy India Limited (referred to as "Eni Group") collectively hold 47.18% of the paid-up capital of the Company. Eni Group, the promoters have declared that they have not pledged any of their shareholding in the Company.

During the year, the Company has received a request for excluding their names as promoters as they have only two nominee non-executive directors in the reconstituted board of directors which has six directors and their holding is only 47.18% of the diluted share capital of the Company. It is further stated that they do not control the management / policy of HOEC and neither do they have the ability to appoint majority of the directors to the Board. This request was considered by the Board for declassifying them as promoter to public shareholder. However, the stock exchanges stated that the current regulatory framework does not allow such declassification and therefore the status quo is maintained.

12. HOEC BARDAHL INDIA LIMITED (HBIL), WHOLLY OWNED SUBSIDIARY OF HOEC

At the Board meeting held on 14 February 2015, the Board of Directors nominated Mr. P. Elango and Mr R. Jeevanandam to the Board of the subsidiary and noted the resignation of Mr. Manish Maheshwari, Non-Executive Director / Chairman of HOEC Bardahl India Limited.

The Consolidated Financial Statements presented by the Company include financial information of the subsidiary HBIL prepared in accordance with the Companies Act, 2013, and the relevant accounting standards.

Pursuant to sub-section (3) of Section 129 of the Act, the statement containing the salient feature of the financial statement of a Company's subsidiary i.e. HOEC Bardahl India Limited is given as Annexure-IV and this forms part of this report.

Further, the Annual Accounts and related documents of the subsidiary company is kept open for inspection at the Registered Office of the Company during normal working hours. Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company in this Annual Report include the financial information of its subsidiary.

13. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Accounting Standard (AS) 21 and the Listing Agreement entered into with the Stock Exchanges, Consolidated Financial Statements for the Financial Year 2014-2015 are appended to and form part of this Annual Report.

14. COST ACCOUNTING RECORDS

The Company is required to maintain cost records and get them audited in terms of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014.

Board appointed Mr. K. Suryanarayanan, a Cost Accountant in Practice as cost auditor of the Company for the financial year 2015-2016 at a fee of INR 2,00,000 (Rupees Two Lakhs only) plus applicable taxes and out of pocket expenses subject to ratification of the said fees by the shareholders at the ensuing Annual General Meeting.

The cost audit report would be filed with the Central Government within the prescribed timelines.

15. AUDITORS' REPORT & DIRECTORS EXPLANATION

In response to the specific observation in the Auditors Report, the Directors explanation is as hereunder:

Auditors have made an observation under heading "Basis for qualified opinion" in their report that "The attached financial statements include Company's share of current assets / (liabilities), non-current assets / (liabilities), expenses and cash flows aggregating to INR 829, 974 / INR (79,685,217), INR 310,586,199 / INR (331,065,000) INR Nil and INR (1,924) respectively as at or for the year ended 31 March 2015 in respect of two of its unincorporated joint ventures ('UJV's) not operated by the Company, the audited accounts which are not available with the Company. The financial statements have been incorporated based on the un-audited financial information detailed in note 28 (b) of attached financial statements. In the absence of audited UJVs, we are unable to comment on the adjustments that may be required to be made in these financial statements."

In this regards the Directors have to state that:

1. In case of unincorporated joint ventures the due date for submission of the accounts do not coincide with the accounts of the Company. The due date for submission of accounts for the block CB-OS/1 is 30 June and for CY-OS-90/1 is 30 September of the respective year whereas the due date of Company's audited accounts is 30 May of the respective year. It is therefore imperative to carry out the verification of material adjustments by following alternate procedures and it may not always be possible to obtain the audited accounts of the unincorporated joint venture before 30 May of the respective year

2. Current Assets INR 829,974 relate to the CB-OS/1 based on the billing statement for the current year received from the Operator of the block. Out of the total liability as stated INR 79,685,217, an amount of INR 43,661,684 relates to CB-OS/1 and INR 36,023,533 relates to CY-OS-90/1. In case of CB-OS/1, an amount of INR 34,560,505 relates to the period up to 31 March 2014 which has been audited and the balance INR 9,101,179 was based on billing statement received for the current year. In case CY-OS-90/1, no expenditure was authorized beyond 31 July 2011 and the provision for liability accounted INR 36,023,533 is based on the last relevant audited accounts for the financial year 20112012.

3. In case of Non-current asset, INR 310,586,199 relates to the Site Restoration Deposit made with the State Bank of India (SBI) for the block CY-OS-90/1 (PY-3) and the bank confirms the balance. Non-current liability of INR 331,065,000 relates to the provision for site restoration liability estimated by the Operator for PY-3 block. This block has been shut-down since 31 July 2011 and the last relevant audited accounts for the block are of 2011-2012. In this case the Non-Current Deposit is certified by the SBI, Chennai and considering the current downtrend of the costs, the non-current liability estimated for the site restoration does not require any upward revision.

4. It is stated in that the cash flow movement of INR 1,924 relates to the difference in bank balances of audited accounts of 2013-2014 and the unaudited accounts of 2014-2015 and it relates to the block CB-OS/1.

Auditors in the emphasis of matters invited to note 38 of the financial statement which describe the factors and conditions that indicate the existence of material uncertainties that cast a substantial doubt on the Company's ability to continue as a going concern. The audit report is not qualified for this matter.

Director explanation for the above emphasis of matter is that as seen from the note 38 of the consolidated financial statement, the Company's net current assets is INR 1,275 million (excluding ENI payables of INR 263 million). Considering the available working capital and with the internal accruals, the company can meet the ongoing development capital expenditure of the block AAP-ON-94/1. Further this capital expenditure for this block will be spent over a period of 18 months. The Company has a BBB stable rating for the borrowing to the tune of INR 1,000 million which can meet any of the discretionary capital spending for the value creation. This emphasis of matter by auditor about the "going concern" was continuing from the financial year 2013-2014 and this emphasis is continuing even after 2 years. In Directors opinion there is no doubt about the ability of the Company as a going concern and the company can meet all its financial obligations including the growth capital and will continue to grow as a going concern.

16. ACCOUNTING FOR SURVEY COST

In compliance with SEBI directions relating to treatment of survey cost under the Guidance Note (Accounting for Oil and Gas Producing Activities, issued by Institute of Chartered Accountants of India), the Company has expensed off survey costs amounting to INR 70 million (INR 446 million pertaining to previous years) in the Statement of Profit and Loss.

17. UNINCORPORATED JOINT VENTURES

The financial statements of the Company reflect its share of assets, liabilities, income and expenditure of the Joint Venture operations which are accounted on the basis of available information on a line-by-line basis with similar items in the Company's Accounts to the extent of the participating interest of the Company as per various "Production Sharing Contracts". The financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures.

18. FIXED DEPOSITS

Your Company has not accepted any fixed deposits and as such, no principal or interest are outstanding as at the balance sheet date.

19. CORPORATE GOVERNANCE CERTIFICATE

The report on Corporate Governance as stipulated under the Listing Agreement forms an integral part of this Report. The requisite certificate from the Company Secretary in Practice, confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance.

20. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 as required pursuant to Section 92 of the Companies Act, 2013 is included in this Report as Annexure -I and this forms an integrated part of this Report.

21. DIRECTORS

During the year, Mr. Manish Maheshwari, Managing Director resigned from the Board on 08 October 2014, Mr. R. Vasudevan, Non-Executive Independent Director (Chairman) and Mr. V S. Rangan, Non-Executive/ Non-Independent Director also resigned from the Board on 08 October 2014. Mr. Dhruv S. Kaji, Non-Executive and Independent Director who joined the board on 14 February 2014 resigned on 25 September 2014. However, Mr Sunil Behari Mathur resigned from the Board on 08 October 2014 has re-joined the Board on 17 November 2014 as an Independent Director and Non-Executive Chairman. The Board places on record its appreciation for the services rendered by the above resigned directors.

During the year Ms. Sharmila Amin has been appointed as Non-Executive, Independent woman director on 17 December 2014. Mr. P Elango, has been appointed as Additional Director and designated as Managing Director for a period of 3 years effective from 02 February 2015 subject to approval of the members in the General Meeting. Mr. R. Jeevanandam, has been appointed as Additional Director and designated as Chief Financial Officer for 3 years effective from 02 February 2015 subject to approval of the members in the General Meeting.

Mr. Guido Papetti and Mr. Paolo Ceddia, Directors retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment.

Pursuant to Section 149 of the Companies Act, 2013 and the rules made thereunder and other applicable provisions, if any, your Directors are seeking appointment.

Ms. Sharmila Amin joined the Board as an Additional Director (Non-Executive Independent Director (Woman)) of the Company effective from 17 December 2014 and she shall hold office up to the date of the ensuing Annual General Meeting. The Company has received notice in writing from a member along with requisite deposit proposing the appointment of Ms. Sharmila Amin as a Non-Executive Independent Director for a period of 5 (five) consecutive years from the date of appointment. The Board recommends her appointment by way of Ordinary Resolution by the members in the ensuing Annual General Meeting.

Mr. Sunil Behari Mathur re-joined the Board as Chairman and Non-Executive Independent Director effective 17 November 2014 and he shall hold office up to the date of the ensuing Annual General Meeting. The Company has received notice in writing from a member proposing the appointment of Mr. Sunil Behari Mathur as a Non-Executive Independent Director for a period of 5 (five) consecutive years from the date of appointment. The Board recommends his appointment by way of a Special Resolution by the members in the ensuing Annual General Meeting.

The Board of Directors at its meeting held on 02 February 2015, has appointed Mr. P Elango as Additional Director effective from 02 February 2015 in accordance with Section 161 of the Companies Act, 2013. Mr. P Elango holds office up to date of the ensuing Annual General Meeting. Company has received notice in writing from a member along with requisite deposit proposing his appointment as a Director. The Board also designated him as the Managing Director for a period of 3 years effective from 02 February 2015 to 01 February 2018. The Board recommends the appointment and the remuneration payable to him for the approval of the members at the ensuing Annual General Meeting of the Company by way of a Special Resolution.

The Board of Directors at its meeting held on 02 February 2015, has appointed Mr. R. Jeevanandam as Additional Director effective from 02 February 2015 in accordance with Section 161 of the Companies Act, 2013. Mr. R. Jeevanandam holds office up to date of forthcoming Annual General Meeting. Company has received notice in writing from a member along with requisite deposit proposing his appointment as a Director. The Board also designated him as the Whole-time Director and Chief Financial Officer for a period of 3 years effective from 02 February 2015 to 01 February 2018. The Board recommends the appointment and the remuneration payable to him for the approval of the members at the ensuing Annual General Meeting of the Company by way of a Special Resolution.

The Company has received necessary consents / declarations from the concerned directors. The brief resume of the Directors seeking appointment / reappointment and other information have been detailed in the Notice. Your Board recommends the above appointments / reappointment of Directors in the best interest of the Company.

All independent directors have given declarations that they meet the criteria of independence as stipulated under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

22. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit and Nomination & Remuneration Committees. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report.

23. NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE

During the year, 10 Board Meetings and 6 Audit Committee Meetings were convened and held. The details of meetings are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

24. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY

Details of loans, investments, guarantees and securities provided along with the purpose covered under the provisions of section 186 of the Companies Act, 2013 are given in the Notes 10 and 12 to the Standalone Financial Statements.

25. REMUNERATION AND NOMINATION POLICY

The Board of Directors has framed a policy which lays down a frame work for the remuneration payable to Directors and other key managerial personnel. This policy also states the criteria for selection and appointment of Board Members. The details of the policy is stated in the Corporate Governance Report. Nominee Directors of the Company on the Board of HOEC Bardahl India Limited (wholly owned subsidiary of HOEC) do not receive any remuneration or commission.

26. MANAGERIAL REMUNERATION

Due to the loss during the year, the managerial remuneration paid to Mr. Manish Maheshwari, the then Managing Director, has been in excess of the limits prescribed under the Companies Act, 2013. In terms of the provisions of Schedule V Part II of the Companies Act, 2013, such managerial remuneration requires the approval of the Shareholders. Accordingly, the Board recommends the same by way of a Special Resolution and to make an application to the Central Government in terms of the Companies Act, 2013.

27. PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report as Annexure III which is an integral part of this report.

28. EMPLOYEES STOCK OPTION SCHEME

In supersession of the existing stock option scheme with no outstanding stock option, a new stock option scheme "Associate Stock Option Plan-2015" is recommended by the Board for the approval of the members in the ensuing Annual General Meeting by way of a special Resolution. The ASOP scheme is necessitated to retain and get the new talent pool for the growth of the Company. The ASOP scheme is detailed in the Notice to the Annual General Meeting.

29. RELATED PARTY TRANSACTIONS

All transactions entered with related parties for the year under review were on arm's length in the ordinary course of business. The particulars of every contract or arrangement entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arm's length transactions are disclosed in the Form AOC-2 as Annexure II. Your Directors also draw attention of the members to Note 30 to the standalone financial statements which set out related party disclosures.

30. MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company.

31. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There were no material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

32. DIRECTORS' RESPONSIBILITY STATEMENT

Your directors state that to the best of knowledge and belief and according to the information and explanation obtained by them, they make the following statements in term of Section 134 (3) (C) of the Companies Act, 2013:

(i) that in the preparation of Annual Accounts for the year ended 31 March 2015, the applicable accounting standards have been followed along with proper explanation for material departures if any.

(ii) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31 March 2015 and of the loss of the company for the year ended on that date.

(iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing, detecting fraud and other irregularities.

(iv) the annual accounts have been prepared on a going concern basis.

(v) the directors, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

33. STATUTORY AUDITOR

M/s. S.R. Batliboi & Associates LLP (FRN: 101049W) has been the auditor of the Company for the last five years and the five year terms comes to an end at this Annual General Meeting. Board of Directors recommend as a matter of policy and good governance, the statutory auditors are to be rotated once in five years. Accordingly, based on the recommendation of the Audit Committee and as a matter of good governance, the Board has at its meeting held on 28 May 2015 recommended to appoint M/s. Deloitte Haskins & Sells LLP (FRN: 117366 W/W 100018), a leading Chartered Accountants for a period of 5 (five) years from this Annual General Meeting. This appointment is subject to ratification at every Annual General Meeting of the Company.

M/s. Deloitte Haskins & Sells LLP have confirmed that they are eligible for appointment and within the limits prescribed under Section 139 of the Companies Act, 2013. Accordingly, the recommendation of appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as the Statutory Auditors from the year 2015-2016 is proposed for the approval of the members by way of an Ordinary Resolution.

34. COMPANY SECRETARY

Upon resignation of the erstwhile Company Secretary in 2011, Assistant Company Secretary was authorized to discharge the functions of the Company Secretary and Compliance officer for the years 2012-13, 2013-14 and 2014-15. However, the company has appointed Mr K. Premnatha as Dy. Manager, being a qualified Company Secretary will discharge the function of the Company Secretary and Compliance Officer with effect from 10 August 2015.

35. SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act, 2013 and rules made there under the company has appointed M/s. S. Sandeep & Associates, Company Secretary in Practice to undertake the secretarial audit of the Company. The Secretarial Audit report is included as Annexure V to this report.

It is observed in the Secretarial Audit Report, the remuneration paid to the then Managing Director, Mr Manish Maheshwari for the period from 01 April 2014 to 08 October 2014 is in excess of the limits specified in Schedule V to the Companies Act, 2013, which needs to be ratified. It is also observed, the Company needs to appoint a qualified Company Secretary and certain delay in filing the returns required under the Companies Act and in terms of the Listing Agreement which was due to the reconstitution of the Board and the appointment of Directors. In this regard the Directors to state that a Special Resolution is proposed for the ratification of the remuneration paid to the then Managing Director and necessary application will be filed. In case of other observation, a qualified Company Secretary is appointed and will function as a Company Secretary and the Company will ensure the returns will be filed in time.

36. INTERNAL AUDIT

During the year, the Company has engaged M/s. Guru & Ram, Chartered Accountants, as its Internal Auditor. The Company continues to implement their suggestions and recommendations to improve the control environment. Their scope of work includes review of internal controls and its adherence, statutory compliances, health safety and environment compliance, compliance towards related party transactions and risk assessments. Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations.

37. INTERNAL FINANCIAL CONTROLS

The company has a proper and adequate system of internal control commensurate with the size and nature of business. The systems provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the company and ensuring the compliance with corporate policies. The system monitors and manages the risks associated with each asset's operations and performance. Periodic evaluations are done mainly through its Internal Audit, in order to determine the adequacy of its internal control systems. Further the adequacy of internal controls system is monitored on a systematic basis by the Audit Committee. Reports by the Management and the Internal Auditors include assessments of the major risks and the effectiveness of the Internal Control System in addressing them.

38. MANAGEMENT DISCUSSION AND ANALYSIS

Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

39. PROTECTION TO WOMEN EMPLOYEES

The Company has a policy to prevent the sexual harassment of women at work place in terms of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. In order to implement the policy, a committee has been set up and no complaint was received during the year under review.

40. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company operates in environmentally responsible manner for enduring benefit to all stakeholders. During the year under review several steps were taken for conservation of energy and some of which are listed below:

A) Conservation of Energy:

a) The Steps taken or impact on conservation of energy are

1. Due consideration has been given to energy consumption while procuring equipment's with preference for BEE Star rated equipment's, wherever feasible.

2. As a responsible Corporate Citizen and in adherence to climate change policy, Company is continuously taking effective steps to conserve energy and to reduce methane and other Green Houses Gases (GHG) emissions, wherever feasible.

3. Minimized environmental impact from its activities. Company continues with its initiatives on energy and resource conservation at its PY-1 facilities and use of renewable energy like solar panels at offshore locations.

4. The Company regularly monitored air emission sources and ambient air quality and ensured that emission levels at all times remain lower than the statutory limits.

5. Except the emergency lights, all lights and electrical gadgets are turned off after working hours and on holidays at office premises of the Company to help in minimizing the energy consumption.

b) Steps taken by the Company for utilizing alternate source of energy

During the year the Company is in the process of formulating a policy for use of solar energy in its process installation.

c) The Capital investment on energy conservation equipment

No additional investment is made or implemented for reduction in energy consumption.

d) Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods Reduction in emission of Green House Gases as a result of minimal use of air conditioning and reduced consumption of power and fuel.

B) Technology absorption

(a) During the year the technology absorption, adaptation and innovation is nil.

(b) No technology import was made during the last 3 years.

(c) No Research and Development expenditure was made during the year

(d) No benefits were derived like product improvement, cost reduction, product development or import substitution during the year.

C) Foreign exchange earnings and Outgo

(a) activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans: Company is engaged in production of crude oil and natural gas; the existing Government policies and Production Sharing Contracts (PSCs), to which Company is a party, is subject to domestic market obligations till self-sufficiency in domestic production of hydrocarbons.

(b) total foreign exchange used and earned:

(INR Million)

Particulars 2014-15 2013-14

A. Foreign Exchange Earnings — —

B. Foreign Exchange Used

* Cash Call Payment to Joint — 23 71 Ventures

* Expenditure in Foreign 161.22 318.43 Currency*

* Repayment of Foreign 94.66 242.02 Currency loan

Total Foreign Exchange Used (B) 255.88 584.16

Net Foreign Exchange Used (B-A) 255.88 584.16

* The amount includes Interest on ECB loans paid in foreign currency

41. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The company is in continuous loss and no amount has been spent on CSR. However, the Company is in the process of formulating a CSR policy.

The Board of Directors at their meeting held on 28 May 2015 constituted a committee called as Corporate Social Responsibility Committee with Mr. Sunil Behari Mathur as Chairman, Mr. P. Elango and Ms. Sharmila Amin as members with a mandate to formulate a CSR policy and the subsequent implementation of the policy effective from the financial year 2015-16.

42. HUMAN CAPITAL & MANAGEMENT

The Company continues to pursue best practices to develop its human capital. The Company has a transparent Performance Appraisal System (PAS) with focus on the organizational objectives aligned with Key Performance Indicators. An objective performance measurement with an assessment of potential and identification of training needs for individual growth are being pursued.

43. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of the Investor Education Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has already filed the necessary form and submitted the details of unpaid and unclaimed amounts lying with the Company with the Ministry of Corporate Affairs.

44. LISTING WITH STOCK EXCHANGES

The Company confirms that it has paid the Annual Listing Fees for the year 2015-2016 to NSE and BSE where the Company's Shares are listed.

45. ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and co-operation received from Government agencies namely the Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, Ministry of Defence, Ministry of Environment and Forests and the State Governments of Gujarat, Tamil Nadu, Assam, Rajasthan and Telangana and the authorities working under them. Your Directors express their gratitude to the company's stakeholders, shareholders, business partners and the bankers for their understanding and support and look forward to their continued support in future. Your Directors value the professionalism, dedication and commitment of the HOEC team to overcome the present challenges.

For and on behalf of the Board of Directors

S. B. Mathur Date : 10 August, 2015 DIN: 00013239 Place : Chennai Chairman




Mar 31, 2014

To the Members of HINDUSTAN OIL EXPLORATION COMPANY LIMITED

The Directors have the pleasure in placing before you the 30th Annual Report including the Audited Financial Statements for the year ended March 31, 2014.

1. FINANCIAL HIGHLIGHTS INR Million Particulars HOEC Standalone 2013-2014 2012-2013

Turnover 569 1,088

Other Income 58 116

Revenue 627 1,204

Earnings / (Loss) before Depreciation / Depletion / Amortization / Taxation /

Exploration and Exceptional items 100 655 Less: Depreciation / Depletion/

Amortization / Exploration 1,477 874

Exceptional Items – Impairment

and Additional Depletion — 5,720

Profit / (Loss) Before Tax (1,377) (5,939)

Less: Provision for Tax (129) (431)

Profit / (Loss) After Tax (1,248) (5,508)

Profit / (Loss) brought forward (2,577) 2,931 Profit / (Loss) available for

Appropriation (3,825) (2,577)

Balance carried to the Balance Sheet (3,825) (2,577) Consolidated Particulars 2013-2014 2012-2013

Turnover 756 1,287

Other Income 56 81

Revenue 812 1,368

Earnings / (Loss) before Depreciation / Depletion / Amortization / Taxation /

Exploration and Exceptional items 116 645

Less: Depreciation / Depletion/ Amortization / Exploration 1,477 875

Exceptional Items – Impairment and Additional Depletion — 5,720

Profit / (Loss) Before Tax (1,361) (5,950)

Less: Provision for Tax (124) (424)

Profit / (Loss) After Tax (1,237) (5,526)

Profit / (Loss) brought forward (2,518) 3,015

Profit / (Loss) available for Appropriation (3,755) (2,511)

Balance carried to the Balance Sheet (3,755) (2,517)

During the year, your Company produced 0.37 mmboe of crude oil and gas (previous year 0.83 mmboe), the decrease being predominantly in PY-1 Field due to accelerated decline in reservoir pressure and high water cut in existing wells.

Te lower production has resulted in a Turnover of INR 569 million for the year, a decrease of 48% over the previous year. Te Revenue for the year was INR 627 million, a decrease of 48% over the previous year, for the aforesaid reasons.

On a standalone basis, the Loss-Before-Tax was INR 1,377 million. Tis is mainly due to:

(a) depreciation charge of INR 1,031 million predominantly related to PY-1 Field; and

(b) the exploration cost of INR 446 million written of during the year in accordance with Guidance Note (Accounting for Oil and Gas Producing Activities, issued by Institute of Chartered Accountants of India).

Provision for tax during the year refects the write-back of provision for income tax of earlier years on account of favourable order from Hon''ble ITAT relating to deduction under Section 80IB(9) of the Income Tax Act, 1961 and netting of reversal of MAT credit as a prudential accounting measure.

During the year under review, your Company had a Loss-After- Tax of INR 1,248 million compared to Loss-After-Tax of INR 5,508 million during the previous year.

2. DIVIDEND

In view of the Loss-After-Tax during the year, the Directors have not recommended any dividend for the Financial Year 2013-2014.

3. CAPITAL EXPENDITURE

During the year under review, the Company has incurred capital expenditure aggregating to INR 230 million towards exploration and development programme in existing portfolio.

4. OPERATIONAL HIGHLIGHTS

Operations review has been provided in the Management Discussion and Analysis Report, which forms part of this Annual Report.

5. MEASURES BEING TAKEN TO IMPROVE THE OPERATIONAL AND FINANCIAL PERFORMANCE

Te Company has initiated following measures to achieve improvement in operational and financial performance:

i. Focus on Cost Optimisation in existing Producing Field:

Your Company has implemented various cost optimisation initiatives in PY-1 Field, salient amongst them include de-hiring of chopper services, de-hiring of warehouse and explosive storage yard, undertaking in-house maintenance of critical equipment, tele linking platform to control centre through a low cost yet proven and reliable solution, phasing out expatriates at PY-1 site and improvised rotational work pattern for efective manpower utilization.

ii. Focus on Development of Discoveries in existing portfolio:

Your Company is singularly focused on transforming the reserves in the three existing discoveries, namely Gulf A (Cambay), Dirok (Assam) and PY-3 (Cauvery), to production in the near to mid-term.

6. OUTLOOK

Te Company has capital requirements to implement its business plans and commitments under the Production Sharing Contracts (PSC) in the foreseeable future, which cannot be met through internal accruals alone. As a strategic exercise initiated pursuant to appointment of a Financial Advisor, discussions are underway between the Promoter and prospective investors. Notwithstanding

uncertainties which may be attached to the outcome of any such process, the Board recognizes that the Company has a successful track record of raising capital in the past and that the Company shall raise financial resources as and when needed to meet its commitments under the Production Sharing Contracts and to transform the reserves from the existing discoveries to production. Based on the foregoing, the Financial Statements have been prepared on the basis that the Company is a going concern.

7. ECB AGREEMENTS NOVATED IN FAVOR OF ENI LASMO PLC

Due to internal structuring within the Eni Group, Eni Finance International (EFI), upon receipt of regulatory approvals from the Indian authorities, has novated the existing agreements relating to external commercial borrowings (ECBs) in favour of Eni Lasmo Plc, a wholly-owned subsidiary of Eni S.p.A, and which indirectly owns 47.18% stake in HOEC.

8. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report are appended to and forms part of this Annual Report.

9. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, the report on Corporate Governance, along with a Certifcate thereon, from a Company Secretary in Practice, is appended to and forms part of this Annual Report.

10. COMPANY SECRETARY

Upon resignation of the erstwhile Company Secretary and Legal Counsel, the Company is in the process of appointing a Company Secretary and Legal Counsel, and till such time a suitable replacement is found, Mr. Minesh Bhatt, Assistant Company Secretary, has been authorised to discharge the functions of the Company Secretary and Compliance Ofcer.

11. COST ACCOUNTING RECORDS

Te Company has maintained cost records as required by Cost Accounting Records (Petroleum Industry) Rules, 2002 notifed on October 8, 2002.

Te Ministry of Corporate Afairs vide its Order dated May 02, 2011 has notifed that a company engaged in petroleum operations shall get its cost accounting records in respect of each financial year commencing on or after April 01, 2011, audited by a cost auditor who shall be, either a cost accountant or a firm of cost accountants, holding valid certifcate of practice under the provisions of Cost and Works Accountants Act, 1959. In compliance with the aforesaid requirement, the Cost Accounting Records of the Company for Financial Year 2013-2014 were audited by Mr. K. Suryanarayanan, a qualified Cost Accountant-in-Practice.

12. HOEC BARDAHL INDIA LIMITED (HBIL), SUBSIDIARY OF HOEC

Te Ministry of Corporate Afairs, Government of India vide its Circular No. 5/12/2007-CL-III dated February 8, 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956, from attaching the balance sheet, Profit and loss account and other documents of the subsidiary companies to the balance sheet of the company. Accordingly, annual accounts of HBIL and the related detailed information will be made available to the shareholders of the Company seeking such information at any time during the ofce hours.

Te Consolidated Financial Statements presented by the Company include financial information of HBIL prepared in compliance with the applicable accounting standards.

Details of the financial information required under the Circular are covered in Note No. 26 of the Consolidated Financial Statements.

Te annual accounts of HBIL are available for inspection by any shareholder at the Company''s Registered Ofce and at the Registered Ofce of HBIL, at Vadodara.

13. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Accounting Standard (AS) 21 and the Listing Agreement entered into with the Stock Exchanges, Consolidated Financial Statements for the Financial Year 2013-2014 are appended to and form part of this Annual Report.

14. CREDIT RATING

ICRA has accorded a long term rating of [ICRA] BBB for the line of credit to the Company and the outlook on the long term rating is "Stable".

15. AUDITORS'' REPORT AND DIRECTORS'' EXPLANATION

In response to the Specific observation in the Auditors'' Report, the Directors'' explanation is as hereunder:

Auditors have made an observation under heading "Basis for qualified opinion" in their report about inability to obtain sufcient audit evidence in relation to the assessment of impairment loss, if any, in the carrying value of the producing property.

In this regard, the Directors have to state that :

While the EBITDA of INR 236 million for FY 2013-2014 has been positive, the Company has reported negative EBIT of INR 1,240 million and LBT of INR 1,377 million for the same period, primarily due to high depletion, depreciation and amortization (DDA) charge in an ofshore producing property, PY-1, located in the Cauvery Basin. Te Company, as Operator, has commissioned a comprehensive geological and reservoir study by an independent 3rd party for PY-1 Field, the results and recommendations of which are still awaited. Pending the results of the Study, the Company has relied on the last independent

reserve report of January 2013 and the capital allocation assumption considered towards drilling additional producer wells at the time of the Impairment Test for the year ended March 2013. Should the fndings of the Study and the capital allocation assumptions undergo revision, there may be uncertainty in the recoverability of the carrying value of PY-1 Asset, which as of March 31, 2014 is approximately INR 11,657 million.

16. ACCOUNTING OF SURVEY COST AS PER GUIDANCE NOTE

In compliance with SEBI directions relating to treatment of survey cost under the Guidance Note (Accounting for Oil and Gas Producing Activities, issued by Institute of Chartered Accountants of India), the Company has expensed of survey costs amounting to INR 446 million (INR 341 million pertaining to previous years) in the Statement of Profit and Loss.

17. UNINCORPORATED JOINT VENTURES

Te financial statements of the Company refect its share of assets, liabilities, income and expenditure of the Joint Venture operations which are accounted on the basis of available information on a line- by-line basis with similar items in the Company''s Accounts to the extent of the participating interest of the Company as per various "Production Sharing Contracts". Te financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures.

18. FIXED DEPOSIT

Your Company has not accepted any fixed deposits and, as such, no amount of principal or interest was outstanding as at the balance sheet date.

19. DIRECTORS

Mr. Sergio Laura, Managing Director, Mr. Mukesh Butani, Independent Director, Mr. Luigi Ciarrocchi, Non-executive Director and Mr. Paolo Carmosino, Non-executive Director resigned from the Board of Directors of the Company. Te Board places on record its appreciation for valuable services rendered by Mr. Sergio Laura, Mr. Mukesh Butani, Mr. Luigi Ciarrocchi and Mr. Paolo Carmosino to the Company.

In terms of the Articles of Association of the Company and provisions of the Companies Act, 2013, Mr. V.S. Rangan, Mr. Manish Maheshwari, Mr. Guido Papetti and Mr. Paolo Ceddia, Directors will retire by rotation and being eligible, have ofered themselves for re-appointment as Directors.

Further, Mr. Manish Maheshwari has given his consent to be re- appointed as Managing Director. Upon recommendation by the Nomination & Remuneration Committee, the Board of Directors has, at its meeting held on July 26, 2014, recommended the appointment of Mr. Manish Maheshwari as Managing Director

of the Company for a period of 5 years from the conclusion of the ensuing Annual General Meeting.

Pursuant to the provisions of the Companies Act 2013, Mr. R. Vasudevan and Mr. Sunil Behari Mathur, Independent Directors retire at the ensuing Annual General Meeting. Te Company has received requisite notices in writing from a member proposing appointment of Mr. R. Vasudevan and Mr. Sunil Behari Mathur as Independent Directors.

Pursuant to the provisions of Section 161(1) of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Dhruv S. Kaji was appointed as an Additional Director designated as an Independent Director w.e.f. February 14, 2014 and he shall hold ofce upto the date of the ensuing Annual General Meeting. Te Company has received notice in writing from a member proposing the appointment of Mr. Dhruv S. Kaji as an Independent Director for a period of 5 consecutive years until the conclusion of the 35th Annual General Meeting.

Te Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges.

Te Board of Directors recommends aforesaid re-appointments / appointments at the ensuing Annual General Meeting.

Te information on the particulars of Directors seeking re-appointment / appointment as required under Clause 49 of the Listing Agreement executed with the BSE Limited and National Stock Exchange of India Limited have been given in the Notice convening the 30th Annual General Meeting of the Company.

20. EMPLOYEES STOCK OPTION SCHEME

No stock options were granted during the Financial Year 2012- 2013 and 2013-2014. Stock options aggregating to 17,680 and outstanding as at March 31, 2013 have been exercised during the year.

21. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988:

A. Conservation of Energy:

(a) energy conservation measures taken:

During the year, Company continued to focus on minimizing the energy consumption and the measures taken are summarised below:

1. Due consideration has been given to energy consumption while procuring equipments with preference for BEE Star rated equipments, wherever feasible.

2. As a responsible Corporate Citizen and in adherence to climate change policy, Company is continuously taking efective steps to conserve energy and to reduce methane and other Green Houses Gases (GHG) emissions, wherever feasible.

3. Minimized environmental impact from its activity:

Company continues with its initiatives on energy and resource conservation at its various Production Facilities and promoting use of renewable energy like solar panels at onshore/ofshore locations.

4. Te Company regularly monitored air emission sources and ambient air quality and ensured that emission levels at all times remain lower than the statutory limits.

5. Except the emergency lights, all lights and electrical gadgets are turned of after working hours and on holidays at ofce premises of the Company to help in minimising the energy consumption.

(b) additional investments and proposals, if any, being implemented for reduction of consumption of energy: NIL

(c) impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

Reduction in emission of Green House Gases (GHGs) as a result of minimal use of air conditioning system and reduced consumption of power and fuel.

(d) total energy consumption and energy consumption per unit of production as per Form A of the annexure to the Rules in respect of industries specified in the schedule thereto:

Te Company is neither part of the industries nor engaged in any activity specified in the Schedule to the Rules.

A miniscule fraction of gas production is being utilized for internal consumption at PY-1 and CB-ON-7 sites.

B. Research and Development (R&D): NIL

C. Technology absorption, adaptation and innovation:

NIL during the year.

Technology imported during last five years: NIL during the last 5 years.

D. Foreign exchange earnings and outgo:

(a) activities relating to exports; initiatives taken to increase exports; development of new export markets for products

and services; and export plans: Company is engaged in the production of crude oil and natural gas; the existing Government policies and Production Sharing Contracts (PSCs), to which Company is a party, do not allow Company to export its production till India achieves self sufciency in domestic production of hydrocarbons.

22. HUMAN CAPITAL & MANAGEMENT

Te Company continues to pursue best practices to develop it''s human capital. Te Company has a 360 degree Performance Appraisal System (PAS) with focus on the organizational objectives aligned with KRAs of key personnel, objective performance measurement, and assessment of potential and identifcation of training needs for individual growth.

23. PARTICULARS OF EMPLOYEES

Te particulars of employees required to be furnished pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are appended hereto and forms part of this Report.

24. AUDITORS

Te Auditors, S. R. Batliboi & Associates LLP, (SRB), Chartered Accountants, will retire at the forthcoming Annual General Meeting and are eligible for reappointment. SRB have confirmed that their appointment, if made shall be within the limits as prescribed in the Companies Act, 2013. Based on the recommendation of the Audit Committee, the Board has, at its meeting held on July 26, 2014, recommend the appointment of SRB as Statutory Auditors of the Company to hold ofce from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting.

25. MANAGERIAL REMUNERATION

Due to inadequate Profit/loss during the year, the managerial remuneration paid to Mr. Manish Maheshwari, Managing Director, has been rendered in excess of the limits prescribed under the Companies Act, 1956. In terms of the provisions of Schedule XIII Part II of the Companies Act, 1956, such managerial remuneration requires the approval of the Shareholders and a proposal has been included as part of the agenda for the Annual General Meeting together with disclosures/details therein. Te Board recommends the approval of the said proposal/special resolution.

26. DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) that the Directors have selected such accounting policies and applied them consistently unless otherwise stated and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of afairs of the Company at the end of the financial year and of the Profit or loss account of the Company for the year ended on that date;

(iii) that the Directors have taken proper and sufcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the accounts on a ''going concern'' basis.

27. ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and cooperation received from Government agencies namely, the Ministry of Defence, Ministry of Environment and Forests, Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, Government of Gujarat, Government of Tamil Nadu, Government of Assam, Government of Telangana, Government of Rajasthan and the authorities working under them. Your Directors express their gratitude to the Company''s stakeholders, shareholders, business partners, and bankers for their understanding and support and look forward to their continued support in future. Your Directors value the professionalism, dedication and commitment of the HOEC team to overcome the present challenges.

For and on behalf of the Board

R. Vasudevan Date: July 26, 2014 Chairman


Mar 31, 2013

To the Members of HINDUSTAN OIL EXPLORATION COMPANY LIMITED

The Directors have the pleasure in placing before you the 29th Annual Report including the Audited Financial Statements for the year ended March 31, 2013.

1. FINANCIAL HIGHLIGHTS

INR million Particulars HOEC Standalone Consolidated 2012-2013 2011-2012 2012-2013 2011-2012

Turnover 1,088 1,440 1,287 1,633

Other Income 116 250 81 252

Revenue 1,204 1,690 1,368 1,885

Proft before Depreciation / Depletion / Amortization / Taxation and

Exceptional items 655 997 645 1,020

Less: Depreciation/ Depletion /

Amortisation 874 555 875 555

Exceptional Items – Impairment and Additional Depletion 5,720 5,720

Proft / (Loss) Before Tax (5,939) 442 (5,950) 465

Less: Provision for Tax (431) 107 (424) 120

Proft / (Loss) After Tax (5,508) 335 (5,526) 345

Proft / (Loss) brought forward 2,931 2,596 3,015 2,670

Proft / (Loss) available for Appropriation (2,577) 2,931 (2,511) 3,015

Balance carried to the Balance Sheet (2,577) 2,931 (2,517) 3,015

Figures have been rounded of.

During the year, your Company produced 0.83 mmboe of crude oil and gas (previous year 1.05 mmboe), the decrease being (a) on account of the buyer, GAIL India Limited, being unable to of-take PY-1 Gas for 135 days due to shut-down/limitation of downstream consumer; and (b) unexpected behavior of PY-1 reservoir marked by water breakthrough and accelerated depletion. Te lower production has resulted in a Turnover of INR 1,088 million for the year, a decrease of 24% over the previous year. Te Revenue for the year was INR 1,204 million, a decrease of 29% over the previous year, for the aforesaid reasons.

On a standalone basis, the Loss-Before-Tax was INR 5,939 million. Tis is due to recognition of impairment loss and charging of of additional depreciation pursuant to reduction in PY-1 Reserves as certifed by an independent 3rd Party in January 2013.

Provision for tax refects the deferred tax asset created on carried forward business losses and unabsorbed depreciation to the extent of deferred tax liability as at March 31, 2013.

During the year under review, your Company had a Loss-After- Tax of INR 5,508 million compared to Proft-After-Tax of INR 335 million during the previous year.

2. DIVIDEND

In view of recognition of impairment loss and the consequential Loss-After-Tax during the year, the Directors have not recommended any dividend for the Financial Year 2012-2013.

3. DIRECTORS'' COMMISSION

Te Independent Directors have chosen not to accept commission as a gesture to support the Company in its immediate endeavors.

4. CAPITAL EXPENDITURE

During the year under review, the Company incurred (a) development expenditure of INR 3,265 million mainly towards drilling of ''Surya'' Well in PY-1 Field; and (b) appraisal/ exploration expenditure of INR 473 million in Assam and Rajasthan Blocks.

5. OPERATIONAL HIGHLIGHTS

Operations review has been provided in the Management Discussion and Analysis Report, which forms part of this Annual Report.

6. DRILLING OF ''SURYA'' WELL IN PY-1 FIELD AND IMPAIRMENT ASSESSMENT

During the year, your Company drilled multi-lateral well, ''Surya'' in PY-1 Field. Initial eforts to activate this well by using nitrogen met with little success as the gas production was impeded due to loss of drilling fuids while drilling in the reservoir section, which seems to be partially depleted. Te Company is pursuing rigless intervention like huf & puf technique to lift the well.

Pending activation of ''Surya'' well, the Company commissioned an independent 3rd Party reserve certifcation to re-assess the potential of PY-1 Field. Based on the said report, the Total Proved Reserves are estimated to be 120 bcf as against earlier approved estimates of 185 bcf.

Consequent to the reduction in the Proved Reserves of PY-1 Field, the Company has carried out an impairment assessment as at December 31, 2012, based on procedures consistent with Accounting Standard 28 (AS-28) and recognised an impairment loss to the extent of INR 4,593.9 million and additional depletion amounting to INR 1,125.8 million upto the date of assessment of impairment. Te aggregate amount of INR 5,719.7 million has been disclosed under exceptional items.

As recommended in the aforesaid 3rd Party Report, a comprehensive geological & reservoir study has been commissioned and the fndings thereto are expected to help monetise the PY-1 gas reserves in an economical manner.

7. SUPPORT FROM ENI (PROMOTERS OF THE COMPANY)

Pursuant to the Petroleum Service Agreement (PSA) with Eni India Limited (Eni), your Company has received technical support from Eni towards drilling of ''Surya'' Well in PY-1, Reservoir & Production Management, PY-3 Static & Dynamic Modelling, exploration support in Assam and Rajasthan Blocks, and continuous improvement in HSE standards.

Further, Eni Finance International has provided external commercial borrowing of USD 60 million to the Company to part fnance the PY-1 capex programme.

8. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report are appended to and forms part of this Annual Report.

9. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, the report on Corporate Governance, along with a Certifcate thereon, from a Company Secretary in Practice, is appended to and forms part of this Annual Report. Te Board of Directors have implemented certain provisions of the ''Corporate Governance Voluntary Guidelines 2009'', issued by the Ministry of Corporate Afairs, in order to pursue best Corporate Governance practices.

10. COMPANY SECRETARY

Upon resignation of the erstwhile Company Secretary and Legal Counsel, the Company has initiated the process of appointing a Company Secretary and Legal Counsel, and till such time a suitable replacement is found, Mr. Minesh Bhatt, Assistant Company Secretary, has been authorised to discharge the functions of the Company Secretary and Compliance Ofcer.

11. COST ACCOUNTING RECORDS

Te Company has maintained cost records as required by Cost Accounting Records (Petroleum Industry) Rules, 2002 notifed on October 8, 2002.

Te Ministry of Corporate Afairs vide its Order dated May 02, 2011 has notifed that a company engaged in petroleum operations shall get its cost accounting records in respect of each fnancial year commencing on or after April 01, 2011, audited by a cost auditor who shall be, either a cost accountant or a frm of cost accountants, holding valid certifcate of practice under the provisions of Cost and Works Accountants Act, 1959. In compliance with the aforesaid requirement, the Cost Accounting Records of the Company for Financial Year 2012-2013 were audited by Mr. K. Suryanarayanan, a qualifed Cost Accountant.

12. HOEC BARDAHL INDIA LIMITED (HBIL), SUBSIDIARY OF HOEC

During the year under review, net income of HBIL, HOEC''s wholly owned subsidiary, was INR 213 million being approximately 12% higher as against previous year of INR 190 million. Te net proft was INR 17 million during the year as against INR 10 million in the previous year.

Te Consolidated Financial Statements presented by the Company include fnancial information of HBIL prepared in compliance with applicable accounting standards. Te Ministry of Corporate Afairs, Government of India vide its Circular No. 5/12/2007-CL-III dated February 8, 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956, from attaching the balance sheet, proft and loss account and other documents of the subsidiary companies to the balance sheet of the company. Accordingly, annual accounts of HBIL and the related detailed information will be made available to the shareholders of the Company seeking such information at any time during the ofce hours.

Te annual accounts of HBIL are also available for inspection by any shareholder at the Company''s Registered Ofce and at the Registered Ofce of HBIL, at Vadodara.

Details of the fnancial information required under the Circular is covered in Note No. 26 of the Consolidated Financial Statements.

13. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Accounting Standard (AS) 21 and the Listing Agreement entered into with the Stock Exchanges, Consolidated Financial Statements for the Financial Year 2012-2013 are appended to and form part of this Annual Report.

14. CREDIT RATING

Subsequent to the recognition of impairment loss in PY-1, ICRA has revised the long term rating in February 2013 from [ICRA] A to [ICRA] A– for the line of credit and the outlook on the long term rating is "Stable".

15. AUDITORS'' REPORT AND DIRECTORS'' EXPLANATION

In response to the specifc observation in the Auditors'' Report, the Directors'' explanation is as hereunder:

Auditors have made an observation under heading "Basis for qualifed opinion" in their report about capitalisation of the costs of surveys and studies relating to exploration activities under the ''Successful Eforts Method'' in line with the "Guidance Note on Accounting for Oil and Gas Producing Activities" (Guidance Note) issued by the Institute of Chartered Accountants of India.

As per the Company''s Accounting Policy, the survey costs are initially capitalized as "Exploration Expenditure" and subsequently either expensed if the exploration activity is determined as unsuccessful or transferred to "Producing Properties" on attainment of commercial production. In this regard, the Directors have to state that:

(a) the Company''s Financial Statements have been prepared in compliance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(b) the aforesaid Guidance Note, issued by the Institute of Chartered Accountants of India, is not mandatory and only recommendatory in nature and does not form part of the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(c) the Company''s Accounting Policy, which has been followed consistently during the earlier quarters in the Financial Year 2012-2013 and in the earlier Financial Years with reference to treatment of survey cost, is in compliance with international Oil and Gas Industry accounting practices, and has been accepted by the auditors in the past without modifcation; and

(d) the accounting for the cost of surveys is in compliance with the terms of the Production Sharing Contract (PSC) signed with the Government of India.

In view of explanation stated above, the Company is in compliance with the Accounting Standards referred to in the Companies Act, 1956.

16. UNINCORPORATED JOINT VENTURES

Te fnancial statements of the Company refect its share of assets, liabilities, income and expenditure of the Joint Venture operations which are accounted on the basis of available information on a line-by-line basis with similar items in the Company''s Accounts to the extent of the participating interest of the Company as per various "Production Sharing Contracts". Te fnancial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures.

17. FIXED DEPOSIT

Your Company has not accepted any fxed deposits and, as such, no amount of principal or interest was outstanding as at the balance sheet date.

18. DIRECTORS

Mr. Sergio Adriano Laura resigned as Director and Managing Director of the Company with efect from May 29, 2013 (closure of business hours). Mr. Marcello Simoncelli also resigned as Director with efect from May 28, 2013. Te Board places on record its appreciation for valuable services rendered by Mr. Sergio Adriano Laura and Mr. Marcello Simoncelli to the Company.

In accordance with the Articles of Association of the Company and provisions of the Companies Act, 1956, Mr. Sunil Behari Mathur and Mr. Luigi Ciarrocchi will retire by rotation and being eligible, have ofered themselves for re-appointment as Directors.

Te Board at its meeting held on May 29, 2013 has appointed Mr. Guido Papetti and Mr. Paolo Ceddia as Additional Directors with efect from May 30, 2013 subject to approval of the shareholders at the ensuing Annual General Meeting of the Company.

Te term of appointment of Mr. Guido Papetti and Mr. Paolo Ceddia, who were appointed as Additional Directors of the Company with efect from May 30, 2013, will expire concurrent with the ensuing AGM, and are being eligible for re-appointment. Te Company has received notices under Section 257 of the Companies Act, 1956 proposing the appointment of Mr. Guido Papetti and Mr. Paolo Ceddia as Directors of the Company, liable to retire by rotation.

None of the Directors are disqualifed from being appointed as Directors as specifed in Section 274(1)(g) of the Companies Act, 1956.

Te Board of Directors recommends aforesaid re-appointments / appointments at the ensuing Annual General Meeting.

Te information on the particulars of Directors seeking re-appointment / appointment as required under Clause 49 of the Listing Agreement executed with the BSE Limited and National Stock Exchange of India Limited have been given in the Notice convening the 29th Annual General Meeting of the Company.

19. EMPLOYEES STOCK OPTION SCHEME

No stock options were granted during the Financial Year 2012-2013.

Te ESOS disclosure as at March 31, 2013 is as below:

PARTICULARS HOEC

EMPLOYEE

STOCK OPTION

SCHEME-2005

(a) Stock Options outstanding as at : 67,643 April 01, 2012

(b) Options Exercised during the year from : 14,174 Stock Options outstanding as at April 01, 2012

(c) Options Granted during the year : Nil

(d) Pricing Formula : Nil

(e) Options Vested during the year : Nil

(f) The total number of shares arising upon / : Nil after exercise of Options

(g) Options Forfeited/Lapsed during the year : 35,789

(h) Variation in terms of Options : Not Applicable

(i) Money realized by exercise of Options : Nil

(j) Total number of Options in force as of : 17,680

March 31, 2013

(k) Details of Options granted during the : Financial Year 2012-2013

Senior Management Personnel : Nil

Any other employee who received a grant : Nil in any one year of Options amounting to 5% or more of Options granted during that year

Identifed employees who were granted : Nil

Options, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding equity share) of the Company at the time of grant.

(l) Diluted Earnings Per Share (EPS) before : INR (42.21) exceptional items pursuant to issue of shares on exercise of Options calculated in accordance with Accounting Standard-20 (AS-20) Earning Per Share Refer Note-1

(m) Weighted – average exercise price : Nil

Weighted – average fair value of options : No option separately for options, whose exercise granted during price either equal or exceed or is less the year than the market price of the stock on the grant date.

Note:

1. Under the ESOS Scheme approved by the Shareholders, the exercise of options has no dilution impact on the EPS.

20. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988:

A. Conservation of Energy:

(a) energy conservation measures taken:

During the year, Company continued to focus on minimizing the energy consumption and the measures taken are summarised below:

1. Due consideration has been given to energy consumption while procuring equipments with preference for BEE Star rated equipments, wherever feasible.

2. As a responsible Corporate Citizen and in adherence to climate change policy, Company is continuously taking efective steps to conserve energy and to reduce methane and other Green Houses Gases (GHG) emissions, wherever feasible.

3. Minimized environmental impact from its activities:

Several measures have been implemented during drilling of ''Surya'' well in PY-1 Field for prevention and control of pollution and improvement of environmental performance.

Company continues with its initiatives on energy and resource conservation at its PY-1 facilities and use of renewable energy like solar panels at onshore and ofshore locations.

4. Te Company regularly monitored air emission sources and ambient air quality and ensured that emission levels at all times remain lower than the statutory limits.

5. Except the emergency lights, all lights and electrical gadgets are turned of after working hours and on holidays at ofce premises of the Company to help in minimising the energy consumption.

(b) additional investments and proposals, if any, being implemented for reduction of consumption of energy: NIL

(c) impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

Reduction in emission of Green House Gases (GHGs) as a result of minimal use of air conditioning system and reduced consumption of power and fuel.

(d) total energy consumption and energy consumption per unit of production as per Form A of the annexure to the Rules in respect of industries specifed in the schedule thereto:

Te Company is neither part of the industries nor engaged in any activity specifed in the Schedule to the Rules.

A miniscule fraction of gas production is being utilized for internal consumption at PY-1 and CB-ON-7 sites.

B. Research and Development (R&D): NIL

C. Technology absorption, adaptation and innovation:

Various technology absorption, adaptation and innovation initiatives were implemented including inter-alia use of vortex bottom hole drilling assembly, aluminium drill pipes, torque and drag reducers to drill multi-lateral extended reach horizontal well ''Surya'' in PY-1 Field. Te Company continued to use bio degradable base oil in mud system for drilling applications.

Technology imported during last fve years: NIL

21. HUMAN CAPITAL & MANAGEMENT

Te Company continues to pursue best practices to develop it''s human capital. Te Company has a 360 degree Performance Appraisal System (PAS) with focus on the organizational objectives aligned with KRAs of key personnel, objective performance measurement, and assessment of potential and identifcation of training needs for individual growth.

22. PARTICULARS OF EMPLOYEES

Te particulars of employees required to be furnished pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are appended hereto and forms part of this Report.

23. AUDITORS

Te Auditors, S. R. Batliboi & Associates LLP, (SRB) Chartered Accountants, will retire at the forthcoming Annual General Meeting and are eligible for reappointment. SRB have confrmed that their appointment, if made shall be within the limits of Section 224(1B) of the Companies Act, 1956. Based on the recommendation of the Audit Committee, the Board has, at its meeting held on May 29, 2013, recommend the appointment of SRB as Statutory Auditors of the Company to hold ofce from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting.

24. MANAGERIAL REMUNERATION

Due to inadequate proft/loss during the year following recognition of impairment loss in PY-1 on account of reduction in reserves, the managerial remuneration paid to Mr. Manish Maheshwari, Managing Director, has been rendered in excess of the limits prescribed under the Companies Act, 1956. In terms of the provisions of Schedule XIII Part II of the Companies Act, 1956, such managerial remuneration requires the approval of the Shareholders and a proposal has been included as part of the agenda for the Annual General Meeting together with disclosures/details therein. Te Board recommends the approval of the said proposal/resolution.

25. DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confrmed:

(i) that in the preparation of the annual accounts for the fnancial year, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) that the directors have selected such accounting policies and applied them consistently unless otherwise stated and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of afairs of the Company at the end of the fnancial year and of the proft or loss account of the Company for the year ended on that date;

(iii) that the directors have taken proper and sufcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors have prepared the accounts on a ''going concern'' basis.

26. ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and cooperation received from Government agencies namely, the Ministry of Defence, Ministry of Environment and Forests, Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, Government of Gujarat, Government of Tamil Nadu, Government of Assam, Government of Andhra Pradesh, Government of Rajasthan and the authorities working under them. Your Directors express their gratitude to the Company''s stakeholders, shareholders, business partners, and bankers for their understanding and support and look forward to their continued support in future. Your Directors value the professionalism, dedication and commitment of the HOEC team to achieve the corporate goals.

For and on behalf of the Board

R. Vasudevan

Date: July 22, 2013 Chairman


Mar 31, 2012

The Directors have the pleasure in placing before you the 28th Annual Report including the Audited Financial Statements for the year ended March 31, 2012.

1. FINANCIAL HIGHLIGHTS

INR million

Particulars Standalone Consolidated

2011-2012 2010-2011 2011-2012 2010-2011

Turnover 1,440 3,285 1,633 3,443

Other Income 250 88 252 92

Revenue 1,690 3,373 1,885 3,535

Profit before Depreciation / 997 2,402 1,020 2,429

Depletion / Amortization / Taxation

Less , Depreciation / Depletion / 555 1,223 555 1,223 Amortisation

Profit Before Tax 442 1,179 465 1,206

Less : Provision for Tax 107 377 120 391

Profit After Tax 335 802 345 815

Profit / (Loss) brought forward 2,596 1,870 2,670 1,930

Profit available for Appropriation 2,931 2,672 3,015 2,745

Balance carried to the Balance Sheet 2,931 2,596 3,015 2,670

Figures have been rounded off.

During the year, your Company produced 1.05 mmboe of crude oil and gas (previous year 2.7 mmboe), the decrease being on account of: (a) lower production and no oft-take of gas for 159 days by the buyer from PY-1 Field; and (b) shut down of production in PY-3 Field since July 2011. The lower production has resulted in a Turnover of INR 1,440 million, a decrease of 56.1% over the previous year. The Revenue for the year was INR 1,690 million, nearly 50% of the previous year, for the aforesaid reason.

The Profit-Before-Tax was INR 442 million, a decrease of 62.5% over the previous year.

Provision for tax was lower because of lower taxable income in the current year.

During the year under review, your Company had a Profit-After-Tax of INR 335 million, a decrease of 58.2% over the previous year.

2. DIVIDEND

In view of foreseeable capital expenditure for redevelopment / enhanced recoveries in existing producing fields and potential development of Assam Discovery, the Directors have not recommended any dividend for the Financial Year 2011-2012.

3. DIRECTORS' COMMISSION

The Independent Directors have chosen not to accept commission as a gesture to support the Company in its immediate endeavors.

4. CAPITAL EXPENDITURE

During the year under review, the Company invested capital expenditure of INR 65.50 million towards development activities and INR 220.10 million towards exploration activities, primarily covering appraisal programme in Block AAP-ON-94/1.

5. OPERATIONAL HIGHLIGHTS

Operations review has been provided in the Management Discussion and Analysis Report, which forms part of this Annual Report.

6. COMPLETION OF DRILLING OF APPRAISAL WELL IN ASSAM

Your Company, as Operator of AAP-ON-94/1 consortium, has successfully drilled second appraisal well Dirok-4 and conducted drill stem test (DST) in two of the multiple hydrocarbon bearing sands encountered during drilling. During the DST, the gas flow rate was around 2 million standard cubic feet per day along with approx. 32 bbls of condensate per day.

The Company has a 40.323% participating interest during exploration / appraisal period in the said Block. Subsequent to the Government nominee's back-in right under the PSC during the development and production phase, the participating interest of the Company in the Block shall be 26.882%.

7. SUPPORT FROM ENI (PROMOTERS OF THE COMPANY)

Pursuant to the Petroleum Service Agreement (PSA) with Eni India Limited (Eni), your Company has received, during the year under review, technical support from Eni towards reservoir modelling and management in PY-1, exploration support for finalisation of appraisal programme in Assam, and continuous improvement in HSE standards besides deputation of technical personnel at HOEC.

Further, Eni Finance International has agreed to provide external commercial borrowing of USD 60 million to the Company to part finance its ongoing capex programme.

8. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is appended to and forms part of this Annual Report.

9. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, the report on Corporate Governance, along with a Certificate thereon, from a Company Secretary in Practice, is appended to and forms part of this Annual Report. The Board of Directors have implemented certain provisions of the 'Corporate Governance Voluntary Guidelines 2009^ issued by the Ministry of Corporate Affairs, in order to pursue best Corporate Governance practices.

10. COST ACCOUNTING RECORDS

The Company has maintained cost records as required by Cost Accounting Records (Petroleum Industry) Rules, 2002 notified on October 8, 2002.

The Ministry of Corporate Affairs vide its Order dated May 02, 2011 has notified that a company engaged in petroleum operations shall get its cost accounting records in respect of each financial year commencing on or after April 01, 2011, audited by a cost auditor who shall be, either a cost accountant or a firm of cost accountants, holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959. In compliance with the aforesaid requirement, the Cost Accounting Records of the Company for Financial Year 2011-2012 were audited by Mr. K. Suryanarayanan, a qualified Cost Accountant.

11. HOEC BARDAHL INDIA LIMITED (HBIL), SUBSIDIARY OF HOEC

During the year under review, net income of HBIL, HOEC's wholly owned subsidiary, was INR 189.9 million being approximately 11.5% higher as against previous year of INR 170.2 million. The net profit was INR 10.5 million during the year as against INR 13.4 million in the previous year. The decrease in the net profit was mainly on account of higher input costs and competitive pricing policy to maintain the market share of HBIL products.

The Consolidated Financial Statements presented by the Company include financial information of HBIL prepared in compliance with applicable accounting standards. The Ministry of Corporate Affairs, Government of India vide its Circular No. 5/12/2007-CL-III dated February 8, 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956, from attaching the balance sheet, profit and loss account and other documents of the subsidiary companies to the balance sheet of the company, provided certain conditions are fulfilled. Accordingly, annual accounts of HBIL and the related detailed information will be made available to the shareholders of the Company seeking such information at any time during the office hours.

The annual accounts of HBIL are available for inspection by any shareholder at the Company's Registered Office and at the Registered Office of HBIL, at Vadodara.

Details of the financial information required under the Circular is covered in Note No. 25 of the Consolidated Financial Statements.

12. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Accounting Standard AS-21 and the Listing Agreement entered into with the Stock Exchanges, Consolidated Financial Statements for the Financial Year 2011-2012 are appended to and form part of this Annual Report.

13. CREDIT RATING

ICRA has reaffirmed the long-term rating of [ICRA] A (pronounced as ICRA A plus) for the line of credit and the outlook on the long-term rating is "stable".

14. AUDITORS' REPORT AND DIRECTORS' EXPLANATION

In response to the specific observations in the Auditors' Report, the Directors' explanation is as hereunder:

(i) Auditors have made an observation vide para 6 to the Auditors' Report about non exclusion of exchange differences as Borrowing Cost to the extent that the same can be regarded as an adjustment to interest costs as required by Paragraph 4(e) of Accounting Standard 16.

As per the Company's Accounting Policy, which is in compliance with GSR 225 (E) dated March 31, 2009 and Paragraph 46A of the Accounting Standard-11 inserted vide notification no. GSR 914 (E) dated December 29, 2011 by the Government of India, exchange differences arising on reporting of long term foreign currency monetary items including inter-alia long term foreign currency borrowing, as defined in the Accounting Standard-11, relating to the acquisition of a depreciable capital asset, have been added to / deducted from the cost of the asset consistently since March 31, 2009. The Auditors, in their Report for the Financial Year 2011-2012, have observed that the Company has not considered any part of the foreign exchange fluctuations on the underlying borrowing as interest cost, as required under AS-16. In this regard, the Directors have to state the following:

(a) Company's business is significantly denominated in United States Dollar (USD), which is also considered as a controlling currency under the Production Sharing Contracts with the Government of India. Company's decision to borrow in USD was never driven on the basis of interest cost arbitrage but to meet the end use of such borrowing to finance USD denominated capital expenditure. Consequently, any exchange difference is incidental and in the view of the Directors, the same should not be recognized as part of the interest cost. Accordingly, the applicability of Paragraph 4(e) of AS-16 does not arise in the present context and hence the Directors believe that the Company's accounting treatment is appropriate.

(b) Even if Paragraph 4(e) of AS-16 was to be applied, the Company does not have any comparative interest rate in INR for a structured borrowing undertaken in year 2009 to compute the interest rate differential given the fact that the Company never evaluated option to borrow in local currency in year 2009 considering the end use of such borrowing as explained hereinabove.

(c) Finally, AS 16 states that borrowing costs may include exchange differences to the extent they are regarded as an adjustment to interest costs - it does not therefore mandate such specific adjustment to be effected to the borrowing cost.

In view of the explanation stated above, the Directors do not regard such exchange differences as an adjustment to interest cost. Consequently, Paragraph 4(e) of AS-16 is not applicable to the referred borrowing and the Company is in compliance with the Accounting Standards.

Further, subsequent to the date of approval of audited Financial Statements by the Board, the Government of India, vide circular no. 25/2012 dated August 9, 2012, has confirmed that Paragraph 4(e) of AS-16 shall not apply to a company which is applying clause 46A of AS-11. Accordingly the accounting treatment of the foreign exchange fluctuations as considered by the Company is revalidated to be in compliance with AS-11 and AS-16.

(ii) Auditors have made an observation vide para 7 to the Auditors' Report about capitalisation of the costs of surveys and studies relating to exploration activities under the Successful Efforts Method in line with the "Guidance Note on Accounting for Oil and Gas Producing Activities" (Guidance Note) issued by the Institute of Chartered Accountants of India.

As per the Company's Accounting Policy, the survey costs are initially capitalized as "Exploration Expenditure" and subsequently either expensed if the exploration activity is determined as unsuccessful or transferred to "Producing Properties" in case the activities are determined to be successful. The Auditors, for the first time, have observed in their Audit Report dated May 18, 2012, non-adherence of Guidance Note (Accounting for Oil and Gas Producing Activities, issued by the Institute of Chartered Accountants of India in 2003) requirement that costs of surveys relating to exploration activities is to be expensed in the year incurred. In this regard, the Directors have to state that:

(a) the Company's Financial Statements have been prepared in compliance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(b) the aforesaid Guidance Note, issued by the Institute of Chartered Accountants of India, is not mandatory and only recommendatory in nature and does not form part of the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(c) the Company's Accounting Policy, which has been followed consistently during the earlier quarters in the Financial Year 2011-2012 and in the earlier Financial Years with reference to treatment of survey cost, is in compliance with international Oil and Gas Industry accounting practices and International Financial Reporting Standards, and has been accepted by the auditors in the past without modification; and

(d) the accounting for the cost of surveys is in compliance with the terms of the Production Sharing Contract signed with the Government of India.

In view of explanation stated above, the Company is in compliance with the Accounting Standards referred to in the Companies Act, 1956.

15. UNINCORPORATED JOINT VENTURES

The financial statements of the Company reflect its share of assets, liabilities, income and expenditure of the Joint Venture operations which are accounted on the basis of available information on a line-by-line basis with similar items in the Company's Accounts to the extent of the participating interest of the Company as per various "Production Sharing Contracts". The financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures.

16. FIXED DEPOSIT

Your Company has not accepted any fixed deposits and, as such, no amount of principal or interest was outstanding as at the balance sheet date.

17. DIRECTORS

Mr. Deepak S. Parekh resigned as Director of the Company with effect from December 05, 2011. Mr. Parekh's association with the Company dates back to its formative years and the Company gained tremendously with his visionary leadership and valuable guidance all along his tenure as a Director of the Company. Your Directors wish to place on record their sincere gratitude to Mr. Parekh for his enriching contribution to the growth of the Company.

In accordance with the Articles of Association of the Company and provisions of the Companies Act, 1956, Mr. R. Vasudevan, Mr. Paolo Carmosino and Mr. Sergio Adriano Laura will retire by rotation and being eligible, have offered themselves for reappointment as Directors.

Mr. V Srinivasa Rangan's term, who was appointed Additional Director of the Company on January 23, 2012, will expire at the conclusion of the ensuing Annual General Meeting. Company has received a notice under Section 257 proposing the appointment of Mr. V Srinivasa Rangan as a Director.

The Board of Directors recommends aforesaid re-appointments / appointment at the ensuing Annual General Meeting.

The information on the particulars of Directors seeking re-appointment / appointment as required under clause 49 of the listing agreement executed with the BSE Limited and National Stock Exchange of India Limited have been given in the Notice convening the 28* Annual General Meeting of the Company.

18. EMPLOYEES STOCK OPTION SCHEME

During the Financial Year 2011-2012, an aggregate of 34,524 stock options were granted to the Non Executive Independent Directors.

While performance bonus was awarded to the employees, no stock options were granted to them during the Financial Year 2011-2012.

19. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988:

A. Conservation of Energy:

(a) energy conservation measures taken:

During the year, Company continued to focus on minimizing the energy consumption and the measures taken are summarised below:

1. Due consideration has been given to energy consumption while procuring equipments with preference for BEE Star rated equipments, wherever feasible.

2. As a responsible Corporate Citizen and in adherence to our climate change strategy, Company is continuously taking effective steps to conserve energy and to reduce methane and other Green Houses Gases (GHG) emissions, wherever feasible.

3. Minimized environmental impact from its activities:

Several measures have been implemented during drilling of appraisal well, Dirok-4, for prevention and control of pollution and improvement of environmental performance.

Company continues with its initiatives on energy and resource conservation at its PY-1 facilities and use of renewable energy like solar panels at onshore and offshore locations.

4. The Company regularly monitored air emission sources and ambient air quality and ensured that emission levels at all times remain lower than the statutory limits.

5. Except the emergency lights, all lights and electrical gadgets are turned off after working hours and on holidays at office premises of the Company to help in minimising the energy consumption.

(b) additional investments and proposals, if any, being implemented for reduction of consumption of energy: NIL

(c) impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

Reduction in emission of Green House Gases (GHGs) as a result of minimal use of air conditioning system and reduced consumption of power and fuel.

(d) total energy consumption and energy consumption per unit of production as per Form A of the annexure to the Rules in respect of industries specified in the schedule thereto:

The Company is neither part of the industries nor engaged in any activity specified in the Schedule to the Rules.

A miniscule fraction of gas production is being utilized for internal consumption at PY-1 and CB-ON-7 sites.

B. Research and Development (R&D): NIL

C. Technology absorption, adaptation and innovation:

Various technology absorption, adaption and innovation initiatives were taken including inter-alia use of vortex bottom hole drilling assembly, aluminium drill pipes, torque and drag reducers to drill multi-lateral extended reach horizontal well in PY-1 Field. The Company continued to use bio degradable base oil in mud system for drilling applications.

Technology imported during last five years: NIL

20. HUMAN CAPITAL & MANAGEMENT

The Company continues to pursue best practices to develop it's human capital. The Company continuously evaluates it's HR polices and practices to attract and develop talent. Company has made its web-based Performance Appraisal System (PAS) fully functional with focus on organizational objectives aligned with KRAs of key personnel, objective performance measurement, assessment of potential and identification of training needs for individual growth.

21. PARTICULARS OF EMPLOYEES

The particulars of employees required to be furnished pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are appended hereto and forms part of this Report.

22. AUDITORS

The Auditors, S. R. Batliboi & Associates (SRB), will retire at the forthcoming Annual General Meeting. Based on the recommendation of the Audit Committee, the Board has, at its meeting held on July 31, 2012, recommended the appointment of SRB as the Statutory Auditors of the Company to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting.

23. DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) that the directors have selected such accounting policies and applied them consistently unless otherwise stated and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss account of the Company for the year ended on that date;

(iii) that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors have prepared the accounts on a going concern' basis.

24. ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and co-operation received from Government agencies namely, the Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, Government of Gujarat, Government of Tamil Nadu, Government of Assam, Government of Andhra Pradesh, Government of Rajasthan and the authorities working under them. Your Directors express their gratitude to the Company's stakeholders, shareholders, business partners, and bankers for their understanding and support and look forward to their continued support in future. Your Directors value the professionalism, dedication and commitment of the HOEC team to achieve the corporate goals.

For and on behalf of the Board

R. Vasudevan

Date: August 21, 2012 Chairman


Mar 31, 2011

To the Members of HINDUSTAN OIL EXPLORATION COMPANY LIMITED

The Directors have the pleasure in placing before you the 27th Annual Report including the Audited Statement of Accounts for the year ended March 31, 2011.

1. FINANCIAL HIGHLIGHTS

INR million

Particulars Standalone Consolidated

2010-2011 2009-2010 2010-2011 2009-2010

Turnover 3,285 1,450 3,444 1,607

Other Income 88 139 92 144

Revenue 3,373 1,589 3,536 1,751

Profit before Depreciation/ Depletion/ 2,402 1,123 2,430 1,160 Amortization/Write Offs/ Taxation

Less : Depreciation/ Depletion/ 1,223 472 1,223 473 Amortisation

Less : Provisions & Write Offs 0 0 0 0

Profit Before Tax 1,179 651 1,207 687

Less : Provision for Tax 377 235 391 247

Profit After Tax 802 416 816 440

Profit/(Loss) brought forward 1,870 1,454 1,930 1,490

Profit available for Appropriation 2,672 1,870 2,746 1,930

Balance carried to the Balance Sheet 2,596 1,870 2,670 1,930

Figures have been rounded off.

During the year, your Company produced 2.7 mmboe of crude oil and gas (previous year 1.0 mmboe), the increase being on account of full year production from PY-1 and PY-3 Fields. This has resulted in a turnover of INR 3,285 million, an increase of 2.26 times over the previous year.

Te Profit-Before-Tax was INR 1,179 million, an increase of 81% over the previous year.

Provision for tax was higher because of higher taxable income in the current year.

During the year under review, your Company had a Profit-After-Tax of INR 802 million, an increase of 93% over the previous year.

2. DIVIDEND

During the year, the Directors declared an interim dividend of 5%. In view of foreseeable capital expenditure in existing producing fields and development of discoveries in Assam and Cambay, the Directors recommend to the members that the interim dividend of 5% may be treated as the final dividend for the year 2010-2011.

3. CAPITAL EXPENDITURE

During the year under review, the Company invested capital expenditure of INR 150 million towards development activities, including PY-1 Field and INR 334 million towards exploration activities covering primarily appraisal programme in Block AAP- ON-94/1.

4. DIRECTORS' COMMISSION

While the Compensation and Remuneration Committee has recommended an aggregate commission of INR 3.0 million to be distributed amongst the Non Executive Independent Directors, however the Independent Directors have chosen not to accept this commission as a gesture to support the Company in its immediate endeavors.

5. OPERATIONAL HIGHLIGHTS

Operations review has been provided in the Management Discussion and Analysis Report, which forms part of this Annual Report.

6. COMPLETION OF DRILLING OF APPRAISAL WELL IN ASSAM

Your Company, as Operator of AAP-ON-94/1 consortium, has successfully drilled and tested first appraisal well in Block AAP-ON-94/1 during the year. Te drill stem test has resulted in initial flow rate of approximately 6.50 million standard cubic feet per day (mmscfd) of natural gas and 140 barrels per day of condensate through a 32/64" choke. Te Company has a 40.323% participating interest during exploration/appraisal period in the said Block.

7. GN-ON-90/3 BLOCK (PRANHITA GODAVARI) ARBITRATION AWARD

Arbitral Tribunal, in the matter of arbitration between Company, as one of the claimants, and ONGC and Government, as respondents, has given its award in favour of the Company (claimant). Te Award has upheld the Company's claims and ordered respondents to pay to the claimants the entire amount of encashed Bank Guarantee along with interest and cost of arbitration.

8. TECHNICAL SUPPORT FROM ENI (PROMOTERS OF THE COMPANY)

Pursuant to the Petroleum Service Agreement (PSA) with Eni India Limited (Eni), your Company has received during the year under review, support from Eni in activities like updation of PY-1 Geological & Reservoir Models, seismic and structural studies in Assam, and continuous improvement in HSE standards besides deputation of technical personnel at HOEC.

9. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is appended to and forms part of this Annual Report.

10. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, the report on Corporate Governance, along with a Certificate thereon, from a Company Secretary in Practice, is appended to and forms part of this Annual Report.

Te Board of Directors have implemented certain provisions of the 'Corporate Governance Voluntary Guidelines 2009', issued by the Ministry of Corporate Afairs in December 2009 in order to pursue best Corporate Governance practices.

11. COST ACCOUNTING RECORDS

Te Company has maintained cost records as required by Cost Accounting Records (Petroleum Industry) Rules, 2002 notified on October 8, 2002.

Te Ministry of Corporate Afairs vide its Order dated May 02, 2011 has notified that a company engaged in petroleum operations shall get its cost accounting records in respect of each financial year commencing on or after April 01, 2011, audited by a cost auditor who shall be, either a cost accountant or a form of cost accountants, holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959. In compliance with the aforesaid requirement, the Company has appointed a qualified practicing cost accountant for auditing its cost accounting records for FY 2011-12.

12. HOEC BARDAHL INDIA LIMITED (HBIL), SUBSIDIARY OF HOEC

During the year under review, net income of HBIL, HOEC's wholly owned subsidiary, was INR 170 million being marginally higher as against previous year of INR 169 million. Te net Profit was INR 13.4 million during the year as against INR 24 million in the previous year. Te decrease in the net Profit was mainly on account of higher inputs costs and competitive pricing policy to maintain the market share of HBIL products. Te Consolidated Financial Statements presented by the Company include financial information of HBIL prepared in compliance with applicable accounting standards. Te Ministry of Corporate Afairs, Government of India vide its Circular No. 5/12/2007-CL-III dated February 8, 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956, from attaching the balance sheet, Profit and loss account and other documents of the subsidiary companies to the balance sheet of the company, provided certain conditions are fulfilled. Accordingly, annual accounts of HBIL and the related detailed information will be made available to the shareholders of the Company seeking such information at any time during the office hours. Te annual accounts of HBIL are available for inspection by any shareholder at the Company's Registered office and at the Registered office of HBIL, at Vadodara. Details of the financial information required under the Circular is covered in Note No. 1 under Schedule 17- "Notes to the Consolidated Accounts".

13. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Accounting Standard AS-21 and the Listing Agreement entered into with the Stock Exchanges, Consolidated Financial Statements for the financial year 2010-2011 are appended to and form part of this Annual Report.

14. CREDIT RATING

Company continues to have LA rating assigned by ICRA to the term loan facilities availed by the Company. LA is the adequate- credit quality rating assigned by ICRA and the rated instrument carries average credit risk.

15. AUDITORS' REPORT AND DIRECTORS' EXPLANATION

In the previous Annual Report for FY 2009-10, the Company had stated that it had issued certain job orders to Eni for specific services, subsequent to Board approval. As per the Board's directive,

the Company had accrued the charges of INR 160,438,827 as on March 31, 2010 for these services based on Eni's invoices. Pending receipt of detailed documentation supporting the charges for such services including independent certification by the auditors of Eni regarding the basis of such charges, the Auditors of the Company had then drawn a reference in their Audit Report of the amounts accounted for as development expenditure in the Financial Year ended March 31, 2010.

During the year under review, Company has received substantial documentation including the certification from the auditors of Eni to support basis of the charges towards services received in FY 2009-10 which satisfies the conditions as stipulated by the Audit Committee and Board and thus the Auditors' observation for FY 2009-10 has been complied with.

Further, during the year under review, Company has issued job orders to Eni for specific services subsequent to obtaining Board approval. As per the Board's directive, the Company has accrued the charges of INR 186,039,614 for these services as of March 31, 2011. Based on the principles established by PSA and expected to be consistently followed by Eni, a reference to such matter has not been made by the Auditors in their Audit Report for the Financial Year ended March 31, 2011.

16. UNINCORPORATED JOINT VENTURES

Te financial statements of the Company reflect its share of assets, liabilities, income and expenditure of the Joint Venture operations which are accounted on the basis of available information on a line-by-line basis with similar items in the Company's Accounts to the extent of the participating interest of the Company as per various "Production Sharing Contracts". Te financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures.

17. FIXED DEPOSIT

Your Company has not accepted any fixed deposits and, as such, no amount of principal or interest was outstanding as at the balance sheet date.

18. DIRECTORS

In accordance with the Articles of Association of the Company and provisions of the Companies Act, 1956, Mr. Sunil Behari Mathur, Mr. Mukesh Butani, Mr. Luigi Ciarrocchi and Mr. Manish Maheshwari will retire by rotation and being eligible, have ofered themselves for re-appointment as Directors.

Te Board of Directors recommends aforesaid re-appointments at the ensuing Annual General Meeting.

Te term of appointment of Mr. Luigi Ciarrocchi as Managing Director will expire at the conclusion of the ensuing Annual General Meeting. He has declined to be re-appointed as Managing Director due to his pre-occupation and other business commitments.

Board herein places on record its appreciation for valuable services made by Mr. Luigi Ciarrocchi as the Managing Director.

Te term of appointment of Mr. Manish Maheshwari will expire at the conclusion of the ensuing Annual General Meeting.

He has given his consent to be re-appointed as Managing Director.

Board, at its meeting held on May 09, 2011, has recommended the appointment of Mr. Manish Maheshwari as Managing Director of the Company.

Further, Board at its meeting held on August 05, 2011 has recommended Mr. Sergio A. Laura to be appointed as Managing Director of the Company at the ensuing Annual General Meeting.

Mr. Laura has given his consent for such appointment.

19. EMPLOYEES STOCK OPTION SCHEME

During the year FY 2010-11, an aggregate of 17,680 stock options were granted to Non Executive Independent Directors. While performance bonus was awarded to Executive Director and employees, no stock options were granted to them during the FY 2010-11.

Te ESOS disclosure as at March 31, 2011 is as below:

PARTICULARS HOEC EMPLOYEE STOCK OPTION SCHEME-2005

(a) Stock Options outstanding as at : 34,441 April 01, 2010

(b) Option Granted during the year : 17,680

(c) Pricing Formula : Nil

(d) Options Vested during the year : Nil

(e) Options Exercised during the year : Nil

(f) The total number of shares arising : 17,680 upon/after exercise of Option

(g) Options Lapsed during the year : 3,011

(h) Variation in terms of Options : Not Applicable

(i) Money realized by exercise of Options : Nil

(j) Total number of Options in force as of : 49,110 March 31, 2011

(k) Details of Options granted during the

FY 2010-11:

Non-Executive Directors:

Mr. R. Vasudevan : 6,800

Mr. Mukesh Butani : 5,440

Mr. Sunil Behari Mathur : 5,440

Managing Director/Joint Managing : Nil

Director

Senior Management Personnel : Nil

Any other employee who received : Nil a grant in any one year of Options amounting to 5% or more of Options granted during that year

Identified employees who were granted : None Options, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding equity share) of the Company at the time of grant.

(l) Diluted Earnings Per Share (EPS) : INR 6.15 before exceptional items pursuant to issue of shares on exercise of Options calculated in accordance with Accounting Standard (AS) 20 'Earning Per Share' refer note-1

(m) Weighted- average exercise price : Nil

Weighted- average fair value of : INR 183.85 options separately for options, whose exercise price either equal or exceed or is less than the market price of the stock on the grant date

Note:

1. Under the ESOS Scheme approved by the Shareholders, the exercise of options has no dilution impact on the EPS.

20. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988: A. Conservation of Energy:

(a) energy conservation measures taken:

During the year, Company continued to focus on minimizing the energy consumption and the measures taken are summarised below:

1. Due consideration has been given to energy consumption while procuring services and equipments.

2. As a responsible Corporate Citizen and in adherence to our climate change strategy, Company is continuously taking efective steps to conserve energy and to reduce methane and other Green Houses Gases (GHG) emissions, wherever feasible.

3. Minimized environmental impact from its activities: Many measures have been implemented in PY-1 Project for prevention and control of pollution and improvement of environmental performance. Company continues with its initiatives on energy and resource conservation at its PY-1 facilities.

4. Te Company regularly monitored air emission sources and the ambient air quality and maintained emission levels within regulatory standards in 2010-11.

5. Solar panels at ofshore PY-1 Platform were installed to provide un-interrupted power supply.

6. Except the emergency lights, all lights and electrical gadgets are turned of after working hours and on holidays at office premises of the Company to help in minimising the energy consumption.

(b) additional investments and proposals, if any, being implemented for reduction of consumption of energy: NIL

(c) impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

Reduction in emission of Green House Gases (GHGs) as a result of minimal use of air conditioning system and reduced consumption of power and fuel.

(d) total energy consumption and energy consumption per unit of production as per Form A of the annexure to the Rules in respect of industries specified in the schedule thereto:

Te Company is neither part of the industries nor engaged in any activity specified in the Schedule to the Rules. A miniscule fraction of gas production is being utilized for internal consumption at PY-1 Site.

B. Research and Development (R&D): Nil

C. Technology absorption, adaptation and innovation: Various technology absorption, adaptation and innovation initiatives were taken including inter alia Managed Pressure Drilling for gas wells in PY-1, multi-well-single-pad approach

reducing the environmental imprint in Assam, rotary steerable drilling and high-end-logging-while-drilling technology, customized compact well head equipment, and usage of environmentally friendly bio degradable base oil in synthetic oil-based-mud-system for drilling applications which is not only environmentally friendly but also re- used in multiple wells thus avoiding disposal of thousands of barrels of drilling fuids. Te use of modern horizontal well technology, well control technology, with multiple mechanical barriers/reservoir isolation were utilized during well construction.

Young engineers and geoscientists were deputed for assignments relating to HOEC projects at Eni S.p.A, Milan with a view to gain advance technical expertise in geoscientific disciplines.

benefit derived as a result of the above eforts: All these initiatives are helping the Company in improving the overall efficiency, lowering the land impact and addressing environmental concerns, cost efectiveness and project economics.

Technology imported during last five years: NIL

D. Foreign exchange earnings and outgo:

(a) activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans: Company is engaged in production of crude oil and natural gas; the existing Government policies and Production Sharing Contracts (PSCs) to which Company is a Party, do not allow Company to export its production till India achieves self suficiency in domestic production of hydrocarbons.

(b) total foreign exchange used and earned:

INR million

Particulars 2010-2011 2009-2010

A. Forein Exchange Earnings 0.62 10.69 (See Note 1)

B. Foreign Exchange Used

- Cash Call Payment to Joint 444.65 5,748.47

Ventures

- Farm in Consideration 0 134.87

- Expenditure in Foreign

Currency (See Note 2) 266.54 192.21

- Repayment of Foreign

Currency Loan (See Note 3) 453.27 243.24

Total Foreign Exchange Used (B) 1,164.46 6,318.79

Net Foreign Exchange Used (B-A) 1,163.84 6,308.10

Notes:

1. Te above includes Interest received in foreign currency netted of against Borrowing Cost in accordance with the Accounting Standard 16. Current Year amount is NIL (Previous Year: INR 7.82 million)

2. Te above includes Interest paid in foreign currency capitalized as Borrowing Cost in accordance with the Accounting Standard 16. Current Year amount is NIL (Previous Year: INR 28.08 million)

3. Te above excludes drawdown of foreign currency loan. Current Year amount is NIL (Previous Year: INR 6,165 million).

21. HUMAN CAPITAL & MANAGEMENT

Te Company continues to pursue best practices to develop it's human capital. Te Company continuously evaluates it's HR polices and practices to attract and develop talent. Company has made its web-based Performance Appraisal System (PAS) fully functional which has now completed its one full cycle of implementation with focus on organizational objectives aligned with KRAs of key personnel, objective performance measurement, assessment of potential and identification of training needs for individual growth.

22. PARTICULARS OF EMPLOYEES

Te particulars of employees required to be furnished pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are appended hereto and forms part of this Report.

23. AUDITORS

Te Auditors, S. R. Batliboi & Associates (SRB), will retire at the forthcoming Annual General Meeting. Based on the recommendation of the Audit Committee, the Board has, at its meeting held on May 09, 2011, recommended the appointment of SRB as the Statutory Auditors of the Company to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting.

24. DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby conformed:

(i) that in the preparation of the annual accounts for the financial year, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) that the directors have selected such accounting policies and applied them consistently unless otherwise stated and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of afairs of the Company at the end of the financial year and of the Profit or loss account of the Company for the year ended on that date;

(iii) that the directors have taken proper and suficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors have prepared the accounts on a 'going concern' basis.

25. ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and co-operation received from Government agencies namely, the Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, Government of Gujarat, Government of Tamil Nadu, Government of Assam, Government of Andhra Pradesh, Government of Rajasthan and the authorities working under them. Your Directors express their gratitude to the Company's stakeholders, shareholders, business partners, and bankers for their understanding and support and look forward to their continued support in future. Your Directors value the professionalism, dedication and commitment of the HOEC team, which has contributed to the growth and performance of the Company.

For and on behalf of the Board

R. Vasudevan

Date: August 05, 2011 Chairman

 
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