Mar 31, 2023
Boardâs Report
To
The Members of
Hindustan Oil Exploration Company Limited
Your director''s have pleasure in placing before you the 39th Annual Report on the business and operations of your
Company along with the audited financial statements for the financial year ended March 31, 2023.
Particulars |
Standalone |
Consolidated |
||
2022-23 |
2021-22 |
2022-23 |
2021-22 |
|
Revenue from operations |
38,104.82 |
13,050.47 |
55,891.53 |
15,572.52 |
Other Income |
2,790.85 |
1,680.41 |
879.55 |
1,146.39 |
Total Income |
40,895.67 |
14,730.88 |
56,771.08 |
16,718.91 |
Total Expenses |
24,528.94 |
7,711.84 |
35,831.02 |
11,224.20 |
Profit before share of profit of associate, |
16,366.73 |
7,019.04 |
20,940.06 |
5,494.71 |
Share of profit of associate |
- |
- |
11.11 |
(89.71) |
Profit before exceptional items and tax |
16,366.73 |
7,019.04 |
20,951.17 |
5,405.00 |
Exceptional items |
- |
(3,436.53) |
(1,221.99) |
(3,436.53) |
Profit before tax |
16,366.73 |
3,582.51 |
19,729.18 |
1,968.47 |
Tax expense |
- |
- |
324.36 |
(30.90) |
Profit for the year |
16,366.73 |
3,582.51 |
19,404.82 |
1,999.37 |
Other comprehensive income |
3.17 |
(4.06) |
3.17 |
(4.06) |
Total comprehensive income for the year |
16,369.90 |
3,578.45 |
19,407.99 |
1,995.31 |
During the year, your Company produced and sold 4.59 BCF of gas and 0.18 million barrels of oil (previous year:
3.39 BCF of gas and 0.08 million barrel of oil). In oil equivalent term the production for the current year is
1.04 mmboe (0.84 mmboe in the previous year).
On a standalone basis, the revenue for the current year has increased to $ 38,104.82 lakhs from $ 13,050.47
lakhs in the previous year. Other income for the current year is $ 2,790.85 lakhs as against $ 1,680.41 lakhs
in the previous year.
The cost towards production expenses has increased to $ 16,951.92 lakhs compared to $ 2,225.18 lakhs in
the previous year and the total expenses for the current year has increased to $ 24,528.94 lakhs as compared
to $ 7,711.84 lakhs in the previous year on account of commencement of production from B-80 field. This also
includes the non-cash cost of depreciation, depletion and amortisation and finance cost towards unwinding of
decommissioning of $ 3,527.28 Lakhs in the current year as against $ 2,089.72 lakhs incurred during the
previous year.
On a standalone basis, the profit before exceptional items and tax has increased to $ 16,366.73 lakhs as
compared to $ 7,019.04 lakhs in the previous year. The profit after tax is $ 16,366.73 lakhs as against the
profit of $ 3,582.51 lakhs in the previous year. The cash and cash equivalent in the company as on March 31,
2023 is $ 13,866.98 lakhs, compared to $ 1,327.40 lakhs in the previous year. The gross working capital has
increased from $ 28,531.51 lakhs in the previous year to $ 61,027.91 lakhs.
On a consolidated basis, revenue from operations has increased from $ 15,572.52 lakhs to $ 55,891.53 lakhs and
the profit after tax for the current year is $ 19,404.82 lakhs compared to $ 1,999.37 lakhs in the previous year.
During the year under review, a capital expenditure of $ 4,324.02 lakhs ($ 21,617.88 lakhs for previous year) was
incurred for development activities in the discovered fields of Block B-80, $ 501.20 lakhs ($ 75.88 lakhs for previous
year) for Dirok and $ 1.53 lakhs ($ 76.24 lakhs for previous year) for other development activities.
During the year under review, no amount was transferred to the capital reserves of the company. The land and
buildings of the company are stated at cost and are not being revalued.
Measures taken to improve the operational & financial performance
Your Company has been appropriately addressing the challenges posed by the evolving situation with renewed
vigour, while ensuring the wellbeing of the employees and the communities in which we operate.
Your Company continues to closely monitor any material changes to future economic conditions and manage their
impact and costs across the organization.
Your Company has capital requirements to implement its business plans and to continue the development of
PY-1, Dirok and other marginal fields at Cambay in the near future, which will be met through internal accruals
and the existing working capital by proper scheduling of project activities. Our near-term focus is to secure
the best possible value from the excellent set of opportunities presented by our portfolio of discovered
resources along with prudent capital allocation and carefully planned market strategies. If necessary, additional
capital and debt will be raised to develop the blocks in the existing portfolio and for any inorganic opportunities.
Your Company is positioned on a growth trajectory and is actively pursuing both exploration opportunities and
appraisal / development of discoveries established in its existing portfolio. To finance this growth, the Company needs
financial resources in the immediate term and hence your Directors do not recommend any dividend for the year
Your Company has not accepted any deposits from public and as such, no amount on account of principal or
interest are outstanding as at the balance sheet date.
6. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies
Act, 2013 have been disclosed in the Standalone Financial Statements provided in this Annual Report.
7. NO CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business carried out by the Company.
There is no change in share capital during the year. The company has not issued any shares with differential rights
as to voting, dividend or otherwise.
Your Company is now identified as a "Listed entity with no promoter" with effect from March 13, 2023 and is
led by a qualified and experienced management team who have experience and knowledge in the oil and gas
sector, including in the fields of administration, marketing and human resource management.
Your Company has two subsidiaries namely, Hindage Oilfield Services Limited and Geopetrol International Inc.
Hindage Oilfield Services Limited:
Hindage Oilfield Services Limited (''Hindage'') is in the business of Oil Field Services (OFES).
Geopetrol International Inc. (''GPII'') is a Company incorporated in the Republic of Panama. GPII is registered as
a foreign company in India and operates through an Indian Project Office. GPII has 25% participating interest
in Kharsang oil field in Arunachal Pradesh.
GPII holds the entire share capital of Geopetrol Mauritius Ltd (''GML''), a company established under the laws
of Mauritius holding Category I Global Business License, which is in the business of investment in oil and gas
exploration and services.
GML has an Indian Associate Company viz., Geoenpro Petroleum Limited (''Geoenpro''), in which GML holds 50%
of the paid-up share capital. Geoenpro is the Operator of Kharsang Block with 10% participating interest.
There has been no material change in the business of the subsidiaries. During the year, the Board of Directors
of your Company have reviewed the affairs of the subsidiary companies.
Pursuant to Section 129(3) of the Companies Act, 2013, the Indian Accounting Standards (Ind AS) and relevant
provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Consolidated
Financial Statements of the Company have been prepared which form part of this Annual Report.
Also, a statement containing salient features of the Company''s subsidiaries is appended as Annexure - I to the
Board''s Report in the prescribed Form AOC-1.
Further, in accordance with Section 136 of the Companies Act, 2013, the Annual Audited Financial
Statements including the Consolidated Financial Statements and related information of the Company and the
Audited Financial Statements of the subsidiary companies are available on the company''s website
https://www. hoec.com/results-and-reports/annual-reports100/.
11. 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" (PSCs) and "Revenue Sharing Contracts" (RSCs). The financial statements
of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the
requirements prescribed by the respective PSCs and RSCs.
As pen SEBI Listing Regulations, the Corporate Governance Report with the Auditors'' Certificate thereon, and
the integrated Management Discussion and Analysis including the Business Responsibility and Sustainability
Report are set out in a separate section and form part of this Annual Report.
Pursuant to Section 92(3) read with Section 134(3Ka) of the Act, the Annual Return as on March 31, 2023,
is available on the Company''s website at https://www.hoec.com/results-and-reports/annual-reports-new/
14. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Changes in Directorate during FY 2022-23:
During the year, there were no changes in the Directorship position in the Company.
Further, the non-executive directors of the Company had no pecuniary relationship or transactions with the
Company, other than sitting fees, commission and reimbursement of expenses incurred by them for the purpose
of attending meetings of the Company.
During FY 2022-23, Ms. Josephin Daisy resigned from her position as Company Secretary on June 30, 2022
and Ms. Deepika CS was appointed as Company Secretary w.e.f. August 12, 2022.
As on March 31, 2023, Mr. P Elango, Managing Director, Mr. R. Jeevanandam, Executive Director & CFO and
Ms. Deepika CS, Company Secretary are the Key Managerial Personnel (KMP) of the Company.
15. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each independent director that he/she meets the criteria
of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015.
In the opinion of the Board, the independent directors fulfil the conditions specified in these regulations and
are independent of the management. There has been no change in the circumstances affecting their status as
an Independent Director during the year.
Pursuant to the provisions of the Companies Act, 2013 and the provisions of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, Board has carried out an annual evaluation of its own performance,
the Committees of the Board and individual directors. The manner in which the evaluation has been carried out
is explained in the Corporate Governance Report.
17. NUMBER OF MEETINGS OF THE BOARD
During the year, eleven (11) Board Meetings were 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.
Currently, the Board has five (5) Committees, namely Audit Committee, Nomination and Remuneration Committee,
Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Risk Management Committee.
The composition of the Board and its Committees are provided in the Corporate Governance Report section of
this Annual Report. During the year, all recommendations made by the respective Committees were approved
by the Board.
19. REMUNERATION AND NOMINATION POLICY
The Board of Directors have framed a policy which lays down a framework for the remuneration payable to
Directors and other Key Managerial Personnel. The details of the policy are stated in the Corporate Governance
Report.
20. DIVIDEND DISTRIBUTION POLICY
The Board of Directors have framed a policy which lays down a framework for distribution of dividend by the
Company in accordance with the provisions of the Act and the Listing Regulations. The details of the policy are
available on the Company''s website at https://www.hoec.com/grow-with-us/policies/
Details of the remuneration paid to the Executive and Non-Executive Directors of the Company are given in the
Corporate Governance Report section of this Annual Report.
22. RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the year under review were on an arm''s length
basis and in the ordinary course of business.
Your Directors draw the attention of the members to Note No. 46 to the standalone financial statements and
Annexure II to this report which sets out the related party disclosures.
23. MATERIAL CHANGES AND COMMITMENTS
There were no material changes in the business operations since the closure of the financial year.
24. 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 the Company''s operations in future.
25. DIRECTORSâ RESPONSIBILITY STATEMENT
The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS), the relevant
provisions of the Companies Act, 2013 and the Rules made thereunder, guidelines issued by SEBI and guidance
note on Accounting for oil and gas producing activities (Ind AS) issued by the Institute of Chartered Accountants
of India.
The financial statements are prepared under the historical cost convention on accrual basis except for certain
financial instruments that are measured at fair values, and guidelines.
In terms of Section 134(5) of the Companies Act, 2013, your directors, to the best of their knowledge and
belief and according to the information and explanation obtained by them, state that:
(i) in the preparation of annual accounts for the financial year ended March 31 , 2023, the applicable
accounting standards have been followed and there are no material departures;
(ii) they have 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 at the end of the financial year and of the profit and loss of the Company for that period;
(iii) they have 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 and detecting fraud and other irregularities;
Civ) they have prepared the annual accounts on a going concern basis;
(v) they have laid down internal financial controls to be followed by the Company and that such internal financial
controls are adequate and were operating effectively; and
Cvi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that
such systems were adequate and operating effectively.
Based on the framework of internal financial controls and compliance systems established and maintained by
the Company, the work performed by the internal, statutory and secretarial auditors, including the audit of
internal financial controls over financial reporting by the statutory auditors and the reviews performed by the
Board and Audit Committee, the Company''s internal financial controls were adequate and effective during the
year under review.
The statement pertaining to particulars of employees including their remuneration as required to be reported
under 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 [including any statutory modification(s) or re-enactment(s)
thereof, for the time being in force] (the Rules) are set out in Annexure III to this Report. However, as per the
provisions of Section 136 of the Act, the Reports and Accounts for the Financial Year 2022-23 are being sent
to the Members and others entitled thereto, excluding this statement. The said statement is available for
inspection by the members at the Registered Office of the Company during business hours on working days up
to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof,
such member may write to the Company Secretary. The disclosures pertaining to the remuneration of Directors,
KMP and employees as required under Section 197(12) of the Act, read with Rule 5(1) of the Rules are provided
in Annexure III to this Report.
27. AUDIT REPORTS AND AUDITORS
Audit Reports for the financial year ended March 31, 2023:
⢠The Auditors Report on the standalone and consolidated financial statements forms part of this Annual
Report and do not contain any qualifications, reservations or adverse remark.
⢠The Secretarial Audit Report for the year is included as Annexure IV to this Report and it does not contain
any qualification, reservation or adverse remark. The Company complies with all applicable secretarial
standards.
⢠Your Company has maintained cost records which were duly audited in terms of Section 148 of the
Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014. The cost audit
report for the financial year ended March 31, 2023 was filed with the Central Government within the
prescribed timelines.
⢠The Internal Auditors'' findings are discussed, and actions, as required, are taken as per the directions of
the Audit Committee on an ongoing basis to improve efficiency in operations.
⢠Neither the Statutory Auditors nor the Secretarial Auditors have reported to the Audit Committee
under Section 143(12) of the Companies Act, 2013, any instances of fraud committed against the
Company by its officers or employees, the details of which would be required to be mentioned in the Board''s
Report.
Auditors for the financial year ending March 31, 2024:Statutory Auditor
At the 36th AGM of the Company held on September 30, 2020, the Members approved re-appointment of
M/s. Deloitte Haskins & Sells LLP (FRN: 117366 W/W 100018), Chartered Accountants, as Statutory Auditors
for a second term of five (5) years to hold office from the conclusion of the 36th AGM of the Company until the
conclusion of 41st AGM.
In terms of Section 204 of the Companies Act, 2013 and rules made there under M/s. S. Sandeep & Associates,
Company Secretaries in Practice are appointed to conduct the secretarial audit.
The Board of Directors have appointed Mr. K. Suryanarayanan, a Cost Accountant in Practice, as Cost Auditor of
the Company at a fee of $ 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 Board has engaged M/s. Guru & Ram LLP, Chartered Accountants, as its Internal Auditors. 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.
28. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
The details in respect of internal financial control and their adequacy are included in the Management Discussion
and Analysis section of this Annual Report
29. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Your Company embraces technological innovation and operates in an environmentally responsible manner to provide
tangible benefit to all stakeholders. During the year under review, several steps were taken towards conservation
of energy and technological advancement. A few of these are listed below:
a) In an effort to become more energy efficient, the Company has taken the following steps:
1. BEE Star rated equipment has been procured, wherever feasible, to minimize energy consumption.
2. To fulfil its duty as a responsible corporate citizen and to adhere to climate change policy, the
Company is continuously taking effective steps to reduce Green Houses Gas (GHG) emissions,
wherever feasible.
3. As far as possible, in-house power requirements in all operating Blocks are met using natural gas-
based generators, with diesel-based generators only being utilized in emergency situations. The
Company is exploring the option of solar energy and is assessing its viability in meeting operational
requirements.
4. The Company regularly monitors air emission sources and ambient air quality to ensure that emission
levels are below statutory limits.
5. All lights, except emergency lights, have automatic timers installed, which turn them off during
daytime, thereby minimizing energy consumption.
6. Ain compressors and fire water jockey pumps are timer controlled to reduce their runtime.
7. Periodical preventive maintenance and condition monitoring of ageing equipment is carried out to
increase life expectancy of assets, eliminate premature replacement and lower energy consumption.
8. Designing and project planning are carried out in a way so as to minimize environmental damage and
maximize resource efficiency during project execution and life cycle.
9. Installed solar streetlights at various selected locations of our operational areas.
10. Rainwater harvesting carried out to recharge ground water resource at operational areas.
11. Ground water samples in HOEC operational areas are analysed to ensure that quality levels are
within the statutory limits.
12. All air conditioner temperatures are set to 250C to optimise power consumption.
13. Calculating Greenhouse gas emission and declaring HOEC Dirok own benchmark of GHG emission
reported every year.
14. As part of energy conservation, changing of sodium vapour lamps with LED fittings has been initiated
at PY-1 site.
b) Steps taken by the Company for utilizing alternate source of energy: The Company is in the process
of formulating a policy for use of solar energy and on pilot basis has successfully experimented by
installing solar street lamps at our operational areas in Assam Block.
c) Capital investment on energy conservation equipment: Replaced Manual operated choke valve with
remote operated choke valve on one of the high producing well at Dirok field of Assam which helps
to reduce frequent travel to wellsites & reduce fuel consumption.
d) Impact of the measures mentioned in (a) and (b) above for reduction of energy consumption and
consequent impact on the cost of production of goods: Reduction in energy consumption and GHG
emissions, as a result of minimal use of air conditioning and deployment of energy efficient systems.
This in turn, has led to reduced consumption of power and fuel, thereby resulting in lower costs.
(a) Technology absorption, adaptation and innovation:
The Company has adopted an energy efficient Modular approach for its Gas Processing Plant in
Assam, with Variable Frequency Drives (VFDs) installed in the Plant''s equipment and machineries.
HOEC is following leak detection and repair (LDAR) program to monitor the gas leaks if any and to
arrest the same through standard repair program to control the emission.
To protect an Elephant Corridor in Assam, the Company laid a 21 km long pipeline, 1.5 metres below
the ground, from its Gas Gathering Station (GGS) to its Modular Gas Processing Plant (MGPP). This
also led to HOEC being able to reduce its footprint in the eco sensitive zone.
A sonic, natural draft, horizontal flare system provided with an enclosure, is being used at the
Company''s MGPP in Assam, in an effort to reduce harm to the surrounding environment.
HOEC is in process of reducing carbon footprint by major and minor process changes, supplying
surplus power to state grid, tea factories etc, and also by creating additional carbon sink through
plantation, adopting green energy sources to the extent possible.
Conversion of existing conventional lightings to energy efficient LED lights in a phased manner.
We also plan to adopt new technology like surface jet pump (ejector) to increase well production
efficiency.
(b) Remote operated choke valve was imported and installed on one of the high producing well.
(c) No Research and Development expenditure was incurred during the year.
(d) No benefits like product improvement, product development or import substitution were derived
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.
30. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has in place a CSR policy which is available on our website at https://www.hoec.com/growing-
responsibly/csr/ A brief outline of the CSR policy of the Company and the initiatives undertaken on CSR
activities during the year are set out in Annexure V of this Report as per the format prescribed under the
Companies (Corporate Social Responsibility Policy) Rules, 2014. The details of the composition and meetings
of the CSR Committee are provided in the Corporate Governance Report section of this Annual Report.
The Risk Management Committee identifies and monitors the risks associated with the Company''s operations.
The Committee is responsible for reviewing the risk factors and ensuring effective mitigation and management.
In addition, the Audit Committee oversees the areas of financial risks and controls.
The development and implementation of risk management policy has been covered in the Management''s Discussion
and Analysis Report, which forms part of this Annual Report.
32. HUMAN CAPITAL AND MANAGEMENT
The Company continues to pursue the best practices to develop its human capital. The Company has a
transparent Performance Appraisal System 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.
The total permanent employee count, as on March 31, 2023, was 89 and the annualized attrition rate for the
year stands at 11.6 %.
33. PROTECTION TO WOMEN EMPLOYEES
The Company has in place a Corporate Policy on Anti-Sexual Harassment of Employees, in terms of the Sexual
Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints
Committee has also been duly constituted and during the year under review no complaints were received from
any employee.
34. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer
and Refund) Rules, 2016, (as amended from time to time), all unpaid or unclaimed dividends are required to be
transferred by the Company to the IEPF, after completion of seven years. Further according to the said Rules,
the shares on which dividend has not been paid or claimed by the shareholders for seven consecutive years or
more shall also be transferred to the demat account of the IEPF Authority.
Accordingly, the Company has duly transferred all unclaimed and unpaid dividends and the
corresponding shares as per the above requirements to the IEPF. Details of the same are provided in the
Shareholder information section of the Corporate Governance Report and are also available on our website at
https://www.hoec.com/grow-with-us/shareholder-information05/
Your Company has filed necessary forms with the Ministry of Corporate Affairs in this regard.
35. LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees as applicable to National Stock Exchange of India
Ltd. and BSE Ltd. where the Company''s shares are listed.
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 Assam, Gujarat, Maharashtra and
Tamil Nadu 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 any challenges and to drive growth.
For and on behalf of the Board of Directors
Date : 25-05-2023 P Elango R Jeevanandam Deepika CS
Place: Chennai Managing Director Director & CFO Company Secretary
Mar 31, 2018
To
The Members
Hindustan Oil Exploration Company Limited
The Directors have pleasure in placing before you the 34th Annual Report on the business and operations of your Company along with the audited financial statements for the Financial Year ended March 31, 2018.
1. FINANCIAL HIGHLIGHTS
(Rs. in lacs)
Particulars |
Standalone |
Consolidated |
||
2017-18 |
2016-17 |
2017-18 |
2016-17 |
|
Revenue from operations |
4,871.25 |
2,502.29 |
4,871.25 |
2,556.66 |
Other Income |
1,143.72 |
1,708.69 |
1,183.72 |
1,932.86 |
Revenue |
6,014.97 |
4,210.98 |
6,054.97 |
4,489.52 |
Total Expenses |
2,680.03 |
3,079.69 |
2,751.54 |
3,382.77 |
Profit before exceptional items and tax |
3,334.94 |
1,131.29 |
3,303.43 |
1,106.75 |
Exceptional items |
448.67 |
2,894.64 |
448.67 |
2,894.64 |
Profit before tax |
3,783.61 |
4,025.93 |
3,752.10 |
4,001.39 |
Tax expense |
- |
387.58 |
- |
394.91 |
Profit for the year |
3,783.61 |
3,638.35 |
3,752.10 |
3,606.48 |
Other comprehensive income |
(16.09) |
(4.23) |
(16.09) |
(4.23) |
Total comprehensive income for the year |
3,767.52 |
3,634.12 |
3,736.01 |
3,602.25 |
Note: The above figures are extracted from the audited standalone and consolidated financial statements as per Indian Accounting Standards (Ind AS)
2. BUSINESS PERFORMANCE
During the year, your Company produced 0.34 million barrels of oil equivalent (mmboe) of crude oil and gas as against 0.15 mmboe in the previous year. The increase in production is due to the commencement of commercial production from the Dirok field of Assam Block AAP-ON-94/1 on August 26, 2017.
Consequently, there is an uptrend in the revenue to Rs. 4,871.25 lacs as against Rs. 2,502.29 lacs for the previous year which is expected to continue, while the operating cost incurred during the year was Rs. 1,304.48 Lacs.
Other income is reduced from Rs. 1,708.69 lacs to Rs. 1,143.72 lacs, which is mainly due to reduction in the overall investment in mutual funds and the returns thereon.
Overall, there is no increase in the operating cost of other blocks. There is no increase in employee cost except for a one-time non-cash charge of Rs. 450.21 lacs towards share-based payment in respect of those options vested under the Companyâs Associate Stock Option Scheme, 2015.
On a standalone basis, the profit after tax is Rs. 3,783.61 lacs as against the profit of Rs. 3,638.35 lacs in the previous year. This is mainly due to the increase in operational profit in addition to the continuous effort of cost reduction. Cash balance in the Company as on March 31, 2018 is Rs. 13,334.83 lacs and the gross working capital is Rs. 19,325.64 lacs.
On a consolidated basis, the subsidiary has not carried out any business activity during the financial year 2017-18. However, on a consolidated basis the total income has increased from Rs. 4,489.52 lacs to Rs. 6054.97 lacs and a profit after tax of Rs. 3,752.10 lacs is reported for the current year for reasons as stated in the standalone accounts.
Your Company maintains a debt-free status as on the date of this Report.
Capital Expenditure
During the year under review, a development expenditure of Rs. 4,811.36 lacs was incurred for the gas development project at Assam, PY-1 drilling campaign and B80 development. An expenditure of Rs. 814.72 lacs was incurred to secure the PSC for the adjoining area of Block CB-ON/7 during the year
Transfer to reserves
During the year under review, no amount was transferred to the capital reserves of the company. An ASOP reserve of Rs. 450.21 lacs has been created towards share-based payment in respect of those options vested under the Companyâs Associate Stock Option Scheme, 2015.
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. With respect to Dirok field in Assam Block, the Company has mobilised all the resources and completed the existing wells and drilled three more development wells. With respect to Block PY-1, jack-up rig, associated materials services was secured to commence the re-entry, side track and completion of the wells Earth and Mercury in the first quarter of FY 2018-19.
3. OUTLOOK
Your Company has capital requirements to implement its business plans and to continue the development of Dirok field in Assam, revisiting the development of PY-1 field, B80, Kherem and other fields in the immediate future, which can be met through the existing working capital by proper scheduling of the project activities. If necessary, additional capital will be raised to develop the blocks in the existing portfolio and for the inorganic opportunities.
4. DIVIDEND
Your Company is positioned on a growth trajectory and is actively pursuing both exploration opportunities and appraisal / development of discoveries established in its existing portfolio. To finance this growth, the Company needs financial resources in the immediate term and hence your Directors do not recommend any dividend for the year.
5. DEPOSITS FROM PUBLIC
Your Company has not accepted any deposits from public and as such, no amount on account of principal or interest are outstanding as at the balance sheet date.
6. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the Notes to the Standalone Financial Statements provided in this Annual Report.
7. NO CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business being carried out by the Company.
8. SHARE CAPITAL
There is no change in share capital during the year. The company has not issued any shares with differential rights as to voting, dividend or otherwise.
9. PROMOTERS
During the year, M/s Burren Energy India Limited holding 5,745 shares in the Company made an application to the Company for re-classification of its status as public shareholder and the same was approved by the shareholders by way of passing a special resolution at the 33rd Annual General Meeting of the Company and is subject to the approval of the Stock Exchanges.
The promoters have declared that they have not pledged any of their shareholding in the Company.
10. SUBSIDIARY COMPANY
Your Company has one wholly owned subsidiary, namely Hindage Oilfield Services Limited.
Subsequent to the termination of the Distributorship Agreement by Bardahl Manufacturing Corp. USA in February 2016, the name of the Company has been changed to Hindage Oilfield Services Limited with effect from August 04, 2016 and there is a change in the nature of business to Oil Field Equipment and Services (OFES). The subsidiary has contemplated various business proposals in the OFES and will be commencing its operations during FY 2018-19.
During the year, no changes have occurred in the composition of the Board of Directors of the subsidiary company and the Board of Directors of your Company have reviewed the affairs of the subsidiary.
Pursuant to Section 129(3) of the Companies Act, 2013, the Indian Accounting Standards (Ind AS) and relevant provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Consolidated Financial Statements of the Company has been prepared and forms part of this Annual Report.
Also, a statement containing salient features of the financial statement of the Companyâs subsidiary is appended as Annexure - III to the Boardâs Report in the prescribed Form AOC-1.
Further, in accordance with Section 136 of the Companies Act, 2013, the Annual Audited Financial Statements including the Consolidated Financial Statements and related information of the company and the Audited Financial Statements of the subsidiary company are available on the companyâs website http://www.hoec.com/annual-report/. The documents will also be available for inspection at the Registered Office of the Company during normal working hours.
11. 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 Companyâs Accounts, to the extent of the participating interest of the Company, as per various âProduction Sharing Contractsâ (PSCs) and âRevenue Sharing Contractsâ (RSCs). The financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective PSCs and RSCs.
12. MANAGEMENTâS DISCUSSION AND ANALYSIS REPORT
In terms of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Managementâs Discussion and Analysis Report is set out in a separate section and forms part of this Annual Report.
13. CORPORATE GOVERNANCE REPORT
As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Corporate Governance Report along with a certificate from a Company Secretary in Practice thereon is attached and forms part of this Report.
14. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of Annual Return in Form MGT-9, as required pursuant to Section 92 of the Companies Act, 2013, is given in Annexure - I and forms part of this Report.
15. DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year, the following changes took place in the composition of the Board of Directors.
Inductions:
Based on the recommendations of the Nomination and Remuneration Committee, Board has appointed Mr. Ashok Kumar Goel and Mr. Rohit Rajgopal Dhoot as Additional Directors (Non-Executive NonIndependent) with effect from March 01, 2018 and March 10, 2018 respectively. The said appointments will be placed for approval of the members at the ensuing Annual General Meeting.
Re-appointments:
The Nomination and Remuneration Committee and Board of Directors of the Company have recommended for approval of the members, the re-appointments of Mr. Elango Pandarinathan as Managing Director of the Company and Mr. Ramasamy Jeevanandam as Executive Director & CFO of the Company with effect from February 02, 2018, upon expiry of their previous term, for a period upto September 30, 2021.
In accordance with the provisions of section 152(6) of the Act and the Articles of Association of the Company, Mr. Elango Pandarinathan, retires by rotation at the ensuing Annual General Meeting (AGM), and being eligible seeks re-appointment.
The Board recommends the appointments / re-appointments as aforesaid.
Necessary information including the details of Directors being appointed / re-appointed, the terms and conditions and the proposed remuneration are given in the respective Resolutions and the explanatory statements included in the Notice convening the ensuing AGM.
During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, commission and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company.
Key Managerial Personnel:
As on March 31, 2018, Mr. P Elango, Managing Director, Mr. R. Jeevanandam, Executive Director & CFO and Ms. G. Josephin Daisy, Company Secretary are the Key Managerial Personnel (KMP) of the Company.
16. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each independent director that he/she meets the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
There has been no change in the circumstances affecting their status as an Independent Director during the year.
17. BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013, the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017, Board has carried out an annual evaluation of its own performance, the Committees of the Board and individual directors. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report.
18. NUMBER OF MEETINGS OF THE BOARD
During the year, five (5) Board 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.
19. COMMITTEES OF THE BOARD
Currently, the Board has five (5) Committees, namely Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Risk Management Committee. The composition of the Board and its Committees are provided in the Corporate Governance Report section of this Annual Report.
20. 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 are stated in the Corporate Governance Report.
Nominee Directors of the Company on the Board of Hindage Oilfield Services Limited (wholly owned subsidiary of HOEC) do not receive any remuneration or commission.
21 . DIRECTORS REMUNERATION
Details of the remuneration paid to the Executive and Non-Executive Directors of the Company are given in the Corporate Governance report Section of this Annual Report.
22. RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the year under review were on an armâs length basis and in the ordinary course of business. However, no related party transactions were entered pursuant to section 134(3)(h) of the Companies Act, 2013 read with the rule 8 of Companies (Accounts) Rules, 2014. Your Directors draw the attention of the members to Note 37 to the standalone financial statements which set out the related party disclosures.
23. 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. However, the following event has occurred between the end of the financial year and the date of Report.
Your Company entered into a Share Purchase Agreement to acquire the entire share capital of Geopetrol International Inc., a Company incorporated in the Republic of Panama, which is a party to various production sharing contracts in India, including a producing oil field âKharsangâ in the state of Arunachal Pradesh, with 30% participating interest both directly and indirectly.
24. 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 the Companyâs operations in future.
25. DIRECTORSâ RESPONSIBILITY STATEMENT
The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS), the relevant provisions of the Companies Act, 2013 and the Rules made thereunder, guidelines issued by SEBI and guidance note on Accounting for oil and gas producing activities (Ind AS) issued by the Institute of Chartered Accountants of India.
The financial statements are prepared under the historical cost convention on accrual basis except for certain financial instruments that are measured at fair values, and guidelines.
In terms of Section 1 34(5) of the Companies Act, 2013, your directors, to the best of their knowledge and belief and according to the information and explanation obtained by them, state that:
(i) in the preparation of annual accounts for the financial year ended March 31, 2018, 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 at the end of the financial year and of the profit and loss of the Company for that period;
(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 and detecting fraud and other irregularities;
(iv) the directors had prepared the annual accounts on a going concern basis;
(v) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(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.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory and secretarial auditors, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by the Board and Audit Committee, the Companyâs internal financial controls were adequate and effective during the year under review.
26. PARTICULARS OF EMPLOYEES
A statement disclosing the details pursuant to the provisions of Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are set out in Annexure - II to this Report.
27. EMPLOYEES STOCK OPTIONS
The details of employee stock options vested under ASOP 2015 during the year ended March 31, 2018 form part of the Notes to the Standalone Financial Statements and are provided in the Corporate Governance section of this Annual Report.
Subsequently, based on the recommendations of the Nomination and Remuneration Committee, the Board at its meeting held on May 12, 2018 terminated the remainder of the ASOP 2015.
28. AUDIT REPORTS AND AUDITORS
Audit Reports for the financial year ended March 31, 2018:
- The Auditors Report on the standalone and consolidated financial statements forms part of this Annual Report and does not contain any observations / reservations / qualifications.
- The Secretarial Audit Report issued is included as Annexure IV to this Report and it does not contain any observations / reservations / qualifications. The Company complies with all applicable secretarial standards.
- Your Company has maintained cost records which were duly audited in terms of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014. The cost audit report for the financial year ended March 31, 2018 was filed with the Central Government within the prescribed timelines.
- The Internal Auditors findings are discussed, and suitable corrective actions are taken as per the directions of the Audit Committee on an ongoing basis to improve efficiency in operations.
- Neither the Statutory Auditors nor the Secretarial Auditors have reported to the Audit Committee under section 143(12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would be required to be mentioned in the Boardâs Report.
Auditors for the financial year ending March 31, 2019: Statutory Auditor
M/s. Deloitte Haskins & Sells LLP (FRN:117366 W / W 100018), Chartered Accountants, were appointed as Statutory Auditors for a period of five (5) years to hold office from the conclusion of the 31st AGM of the Company held on September 25, 2015 until the conclusion of 36th AGM.
Secretarial Auditor
In terms of Section 204 of the Companies Act, 2013 and rules made there under M/s. S. Sandeep & Associates, Company Secretaries in Practice are appointed to conduct the secretarial audit.
Cost Auditor
The Board of Directors have appointed Mr. K. Suryanarayanan, a Cost Accountant in Practice, as Cost Auditor of the Company at a fee of Rs. 2,00,000 (Rupees Two Lacs 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 for the financial year 20182019 would be filed with the Central Government within the prescribed timelines.
Internal Auditor
The Board has engaged M/s. Guru & Ram, Chartered Accountants, as its Internal Auditors. 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.
29. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Your Company operates in an environmentally responsible manner for enduring benefit to all stakeholders. During the year under review, several steps were taken for conservation of energy, some of which are as follows:
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 with preference for BEE Star rated equipment, wherever feasible.
2. As a responsible Corporate Citizen and in adherence to climate change policy, the Company is continuously taking effective steps to conserve energy and to reduce Green Houses Gases (GHG) emissions, wherever feasible.
3. Minimized environmental impact from its activities with its initiatives on energy and resource conservation and use of renewable energy like solar panels.
4. The Company regularly monitors air emission sources and ambient air quality and ensures that emission levels at all times remain lower than the statutory limits.
5. Except the emergency lights, timers are installed to turn off all lights automatically during day hours to help in minimizing the energy consumption.
6. Periodical preventive maintenance and condition monitoring of the aged equipment thereby increasing life expectancy of assets, eliminating premature replacement and lowering energy consumption.
7. Carrying out Environmental Impact Assessment (EIA) study in conformance to HOECâs Environment and Safety Policy to formulate appropriate environmental management plan and mitigation measures to eliminate or minimize pollution, environmental disturbances during the life-cycle of the project.
b) Steps taken by the Company for utilizing alternate source of energy: The Company is in the process of formulating a policy for use of solar energy and has experimented in its process installation at Assam.
c) 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) Technology absorption, adaptation and
innovation: The company has adopted energy efficient Modular approach for Gas Processing Plant proposed at Assam in which Variable Frequency Drives (VFD) are installed in the equipment and machineries.
(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, 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.
30. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has in place a CSR policy which is available on the website http://www.hoec.com/csr/. The details of the composition and meetings of the CSR Committee is provided in the Corporate Governance Report section of this Annual Report.
31. RISK MANAGEMENT
The Risk Management Committee identifies and monitors the risks associated with the Companyâs operations. The Committee is responsible for reviewing the risk factors and ensuring its effective mitigation and management. In addition, the Audit Committee oversees the areas of financial risks and controls.
The development and implementation of risk management policy has been covered in the Managementâs Discussion and Analysis Report, which forms part of this Annual Report.
32. PROTECTION TO WOMEN EMPLOYEES
The Company has in place a Corporate Policy on Anti-Sexual Harassment of Employees, in terms of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has also been constituted and during the year under review no complaints were received from any employee.
33. HUMAN CAPITAL & MANAGEMENT
The Company continues to pursue the best practices to develop its human capital. The Company has a transparent Performance Appraisal System 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.
Over the last year, we have added more prospective employees taking the total strength to 90 at the end of previous year and the annualised attrition rate for the year stands at 5.84 %.
34. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (as amended from time to time), all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF after completion of seven years. Further according to the said Rules, the shares on which dividend has not been paid or claimed by the shareholders for seven consecutive years or more shall also be transferred to the demat account of the IEPF Authority.
Accordingly, the Company has during the year under review, transferred the unclaimed and unpaid dividends of Rs. 6,29,219 and 7,55,564 shares as per the requirements of the IEPF Rules. Details of the same are provided in the Shareholder information section of the Corporate Governance Report and are also available on our website at http://www.hoec.com/unclaimed-dividend/.
Your Company has filed necessary forms with the Ministry of Corporate Affairs in this regard.
35. LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees for the year 2017-18 to NSE and BSE where the Companyâs shares are listed.
36. 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 Assam, Gujarat and Tamil Nadu and the authorities working under them. Your Directors express their gratitude to the Companyâs 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 any challenges and to drive growth.
For and on behalf of the Board of Directors
S.B. Mathur P. Elango
Chairman Managing Director
DIN: 00013239 DIN: 06475821
Date: June 1 5, 2018
Place: Mumbai
Mar 31, 2017
To,
The Members,
Hindustan Oil Exploration Company Limited
Your Directors have pleasure in placing before you the 33rd Annual Report on the business and operations of your Company along with the audited financial statements for the Financial Year ended March 31, 2017.
1. FINANCIAL HIGHLIGHTS
(Rs, in lacs]
Particulars |
Standalone |
Consolidated |
||
2016-17 |
2015-16 |
2016-17 |
2015-16 |
|
Turnover |
2,502.29 |
2,834.43 |
2,556.66 |
5,164.62 |
Other Income |
1,708.69 |
883.99 |
1,932.86 |
905.07 |
Total Income |
4,210.98 |
3,718.42 |
4,489.52 |
6,069.69 |
Total Expenses |
3,079.69 |
3,889.93 |
3,382.77 |
6,019.39 |
Profit before exceptional items and tax |
1,131.29 |
(171.51) |
1,106.75 |
50.30 |
Exceptional items |
2,894.64 |
514.82 |
2,894.64 |
514.82 |
Profit before tax |
4,025.93 |
343.31 |
4,001.39 |
565.12 |
Tax expense |
387.58 |
(6.18) |
394.91 |
63.21 |
Profit for the year |
3,638.35 |
349.49 |
3,606.48 |
501.91 |
Other comprehensive income |
(4.23) |
(0.45) |
(4.23) |
(1.64) |
Total comprehensive income for the year |
3,634.12 |
349.04 |
3,602.25 |
500.27 |
2. BUSINESS PERFORMANCE
During the year, your Company produced around 0.15 million barrel of oil equivalent (mmboe) of crude oil and gas as against 0.18 mmboe in the previous year. The decrease in production is due to natural decline of the existing producing assets.
The lower production has resulted in a reduction in turnover to Rs, 2,502 lacs for the year in comparison to Rs, 2,834 lacs in the previous year. However, the total revenue for the year was Rs, 4,211 lacs as against Rs, 3,718 lacs in the previous year and the increase is mainly due to interest income and income from financial investments.
On a standalone basis, the Profit-After-Tax was Rs, 3,638 lacs as against the profit of Rs, 349 lacs in the previous year. This is mainly due to the continuous effort of cost reduction, the other income and certain exceptional credits realized during the year
On a consolidated basis, the total income has reduced from Rs, 6,070 lacs to Rs, 4,490 lacs. This is due to the major reduction in revenue from the subsidiary for the financial year 2016-17 due to discontinuation of marketing the products of Bardahl Manufacturing Corporation, USA. However, a Profit-After-Tax of Rs, 3,606 lacs is reported for the current year as against the profit of Rs, 502 lacs in the previous year for reasons as stated in the standalone accounts.
Capital expenditure
During the year under review, a development expenditure of Rs, 5,310 lacs was incurred for the gas development project at Assam.
Transfer to reserves
During the year under review, no amount was transferred to the capital reserves of the Company.
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. With respect to Dirok field in Assam, the Company has mobilised all the resources to complete the existing wells and drill one more development well. Statutory clearance Stage-1 Forest clearance and Environment Clearance for the development phase of Dirok gas field have been obtained in January 2017.
3. OUTLOOK
Your Company has capital requirements to implement its business plans and to continue the development of Dirok field in Assam, revisiting the development of PY-1 field, B-80, Kherem and other fields in the immediate future, which can be met through the existing working capital by proper scheduling of the project activities.
4. DIVIDEND
Your Directors have not recommended any dividend for the Financial Year 2016-2017.
5. DEPOSITS FROM PUBLIC
Your Company has not accepted any deposits from public and as such, no amount on account of principal or interest are outstanding as at the balance sheet date.
6. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the Notes to the Standalone Financial Statements provided in this Annual Report.
7. MANAGEMENTâS DISCUSSION AND ANALYSIS REPORT
In terms of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management''s Discussion and Analysis Report is set out in a separate section and forms part of this Annual Report.
8. NO CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business being carried out by the Company.
9. SHARE CAPITAL
There is no change in share capital during the year. The company has not issued any shares with differential rights as to voting, dividend or otherwise.
10. PROMOTERS
During the year, the ENI group companies had divested its entire stake in the Company except for nominal shareholding of 5,745 shares held through Burren Energy India Limited and has applied for re-classification of its status as public shareholder. The promoters have declared that they have not pledged any of their shareholding in the Company.
11. SUBSIDIARY COMPANY
Your Company has one wholly owned subsidiary, namely Hindage Oilfield Services Limited.
Subsequent to the termination of the Distributorship Agreement by Bardahl Manufacturing Corp. USA in February 2016, the name of the Company has been changed from HOEC Bardahl India Limited to Hindage Oilfield Services Limited with effect from August 04, 2016. Also, there has been a change in the nature of business to Oil Field Equipment and Service Sector.
During the year, the following changes took place in the composition of the Board of Directors of the subsidiary company.
- Mr. Hashit Rawal resigned from the post of Whole time Director & COO and as an employee of the Company with effect from May 24, 2016.
- Mr. Pronip Kumar Borthakur, nominated by the holding company HOEC, was appointed as a Non Executive Independent Director with effect from July 25, 2016.
Due to the termination of the distribution agreement by BMC, there has been no marketing of BMC products which resulted in substantial decline in revenue from the subsidiary for the financial year 2016-17. However, efforts are being taken to reduce such impact by entering into new line of business.
During the year, the Board of Directors of the Company have reviewed the affairs of the subsidiary.
Pursuant to Section 129(3) of the Companies Act, 2013, the Indian Accounting Standards (Ind AS) and relevant provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Consolidated Financial Statements of the Company has been prepared and forms part of this Annual Report.
Also, a statement containing salient features of the financial statement of the Company''s subsidiary is appended as Annexure - III to the Board''s Report in the prescribed Form AOC-1.
Further, in accordance with section 136 of the Companies Act, 2013, the Annual Audited Financial Statements including the Consolidated Financial Statements and related information of the company and the Audited Financial Statements of the subsidiary company are available on the company''s website www.hoec.com. The documents will also be available for inspection at the Registered Office of the Company during normal working hours.
12. 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.
13. COST ACCOUNTING RECORDS
Your Company has maintained cost records which were duly audited in terms of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014.
The Board of Directors have appointed Mr. K. Suryanarayanan, a Cost Accountant in Practice, as Cost Auditor of the Company for the financial year 2017-2018 at a fee of Rs, 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 for the financial year 2017-2018 would be filed with the Central Government within the prescribed timelines.
14. CORPORATE GOVERNANCE REPORT
As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Corporate Governance Report along with a certificate from a Company Secretary in Practice thereon, is attached and forms part of this Report.
15. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of Annual Return in Form MGT-9, as required pursuant to Section 92 of the Companies Act, 2013, is given in Annexure - I and forms part of this Report.
16. DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year, the following changes took place in the composition of the Board of Directors.
Mr. Paolo Ceddia and Mr. Filippo Ricchetti, NonExecutive & Non-Independent Directors resigned from the Board on August 03, 2016. Board places on record its appreciation for their valuable contribution during their tenure.
Based on the recommendations of the Nomination and Remuneration Committee, Board appointed Mr. Pronip Kumar Borthakur as Non-Executive Independent Director with effect from June 15, 2016. The shareholders approved the said appointment at the 32nd Annual General Meeting held on September 26, 2016.
Mr. K. Premnatha resigned as Company Secretary & Compliance Officer on October 27, 2016 and based on the recommendations of the Nomination and Remuneration Committee, Board appointed Ms. G. Josephin Daisy as Company Secretary & Compliance Officer with effect from October 27, 2016.
As on March 31, 2017, Mr. P Elango, Managing Director, Mr. R. Jeevanandam, Whole-time Director & CFO and Ms. G. Josephin Daisy, Company Secretary are the Key Managerial Personnel (KMP) of the Company.
17. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each independent director that he / she meets the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
18. BOARD EVALUATION
Pursuant to the provisions of the Companies Act,
2013 and the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Board has carried out an annual evaluation of its own performance, the Committees of the Board and individual directors. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report.
19. NUMBER OF MEETINGS OF THE BOARD
During the year, five (5) Board 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.
20. COMMITTEES OF THE BOARD
Currently, the Board has five (5) Committees, namely Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee and Corporate Social Responsibility Committee. The composition of the Board and its Committees are provided in the Corporate Governance Report section of this Annual Report.
21. 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 are stated in the Corporate Governance Report.
Nominee Directors of the Company on the Board of Hindage Oilfield Services Limited (wholly owned subsidiary of HOEC) do not receive any remuneration or commission.
22. MANAGERIAL REMUNERATION
The Company has obtained necessary approvals from the Central Government for the appointment and payment of remuneration to Mr. P Elango, Managing Director and Mr. R. Jeevanandam, Whole-time Director & CFO for a period of three years with effect from February 02, 2015 to February 01, 2018. Also, the application filed with the Central Government regarding the payment of remuneration of Mr. Manish Maheshwari, in his capacity as the Managing Director for the period from April 01, 2014 to October 08,
2014 has been approved.
23. RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the year under review were on an arm''s length basis and in the ordinary course of business. However, no related party transactions were entered pursuant to Section 134(3)(h) of the Companies Act, 2013 read with the Rule 8 of Companies (Accounts) Rules,
2014. Your Directors draw the attention of the members to Note 39 to the standalone financial statements which set out the related party disclosures.
24. 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.
25. 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 the Company''s operations in future.
26. DIRECTORSâ RESPONSIBILITY STATEMENT
In terms of Section 1 34(5) of the Companies Act, 2013, your directors, to the best of their knowledge and belief and according to the information and explanation obtained by them, state that:
(i) in the preparation of annual accounts for the financial year ended March 31, 2017, 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 at the end of the financial year and of the profit and loss of the Company for that period;
(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 and detecting fraud and other irregularities;
(iv) the directors had prepared the annual accounts on a going concern basis;
(v) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(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.
27. PARTICULARS OF EMPLOYEES
A statement disclosing the details pursuant to the provisions of Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are set out in Annexure - II to this Report.
28. EMPLOYEES STOCK OPTION SCHEME
The shareholders of the Company had at the 31st Annual General Meeting held on September 25, 2015, approved the Employees Stock Option Scheme of the Company namely, Associate Stock Option Plan 2015 (ASOP 2015), in supersession of the existing HOEC Employee Stock Option Scheme 2005.
During the year under review, no options were granted or vested under ASOP 2015.
29. STATUTORY AUDITOR
At the 31st Annual General Meeting (AGM) held on September 25, 2015, M/s. Deloitte Haskins & Sells LLP (FRN:117366W/W-100018), Chartered Accountants, were appointed as Statutory Auditors for a period of five (5) years to hold office from the conclusion of that AGM until the conclusion of 36th AGM, subject to ratification at every AGM of the Company.
Accordingly, their appointment is placed for ratification by the shareholders of the Company at the ensuing AGM.
M/s. Deloitte Haskins & Sells LLP have confirmed that they are eligible for appointment and that their appointment shall be within the limits prescribed under Section 139 of the Companies Act, 2013.
The Auditor''s Report issued by them for the financial year ended March 31, 2017 forms part of this Annual Report and does not contain any observations / reservations / qualifications.
30. SECRETARIAL AUDIT
In terms of Section 204 of the Companies Act, 2013 and rules made there under M/s. S. Sandeep & Associates, Company Secretaries in Practice were appointed to conduct the secretarial audit of the Company for the financial year ended March 31, 2017. The Secretarial Audit Report issued by them is included as Annexure - IV to this Report and it does not contain any observations / reservations / qualifications.
31 . INTERNAL AUDIT
During the year under review, the Company has engaged M/s. Guru & Ram, Chartered Accountants, as its Internal Auditors. 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 the Audit Committee on an ongoing basis to improve efficiency in operations.
32. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Your Company operates in an environmentally responsible manner for enduring benefit to all stakeholders. During the year under review, several steps were taken for conservation of energy, 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 with preference for BEE Star rated equipment, wherever feasible.
2. As a responsible Corporate Citizen and in adherence to climate change policy, the Company is continuously taking effective steps to conserve energy and to reduce Green Houses Gases (GHG) emissions, wherever feasible.
3. Minimized environmental impact from its activities with its initiatives on energy and resource conservation and use of renewable energy like solar panels.
4. The Company regularly monitors air emission sources and ambient air quality and ensures that emission levels at all times remain lower than the statutory limits.
5. Except the emergency lights, timers are installed to turn off all lights automatically during day hours to help in minimizing the energy consumption.
6. Periodical preventive maintenance and condition monitoring of the aged equipment thereby increasing life expectancy of assets, eliminating premature replacement and lowering energy consumption.
7. Carrying out Environmental Impact Assessment (EIA) study in conformance to HOEC''s Environment and Safety Policy to formulate appropriate environmental management plan and mitigation measures to eliminate or minimize pollution, environmental disturbances during the life-cycle of the project.
b) Steps taken by the Company for utilizing alternate source of energy:
The Company is in the process of formulating a policy for use of solar energy and has experimented in its process installation at Assam.
c) 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) Technology absorption, adaptation and innovation: The company has adopted energy efficient Modular approach for Gas Processing Plant at Assam in which Variable Frequency Drives (VFD) are installed in the equipment and machineries.
(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, 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) There were no foreign exchange earnings and outgo during the year
33. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has in place a CSR policy which is available on the website www.hoec.com. The details of the composition and meetings of the CSR Committee is provided in the Corporate Governance Report section of this Annual Report.
34. RISK MANAGEMENT
The Risk Management Committee identifies and monitors the risks associated with the Company''s operations. The Committee is responsible for reviewing the risk factors and ensuring its effective mitigation and management. In addition, the Audit Committee oversees the areas of financial risks and controls.
The development and implementation of risk management policy has been covered in the Management''s Discussion and Analysis Report, which forms part of this Annual Report.
35. PROTECTION TO WOMEN EMPLOYEES
The Company has in place a Corporate Policy on Anti-Sexual Harassment of Employees, in terms of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has also been constituted and during the year under review no complaints were received from any employee.
36. HUMAN CAPITAL & MANAGEMENT
The Company continues to pursue the best practices to develop its human capital. The Company has a transparent Performance Appraisal System 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.
37. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the Company has during the year under review, filed necessary forms with the Ministry of Corporate Affairs and has initiated such steps as required under the said Rules for the purpose of effecting transfer of all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more in the name of IEPF.
38. LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees for the year 2017-2018 to NSE and BSE, where the Company''s shares are listed.
39. 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 Assam, Gujarat and Tamil Nadu 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 any challenges and to drive growth.
For and on behalf of the Board of Directors
S.B.Mathur
Place: Chennai Chairman
Date: April 18, 2017 DIN: 00013239
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 Â
Impairment and additional
depletion 11,634 Â
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 Â
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  Â
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 Â
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]
AÂ 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
Mar 31, 2010
The Directors have the pleasure in placing before you the 26th Annual
Report including the Audited Statement of Accounts for the year ended
March 31, 2010.
1. FINANCIAL HIGHLIGHTS
Rs. million
Particulars Standalone Consolidated
2009-2010 2008-2009 2009-2010 2008-
2009
Turnover 1,450 830 1,607 964
Other Income 139 462 144 465
Profit before Depreciation/ 1,123 752 1,160 766
Depletion/Amortisation/
Write Offs/ Taxation
Less : Depreciation/Depletion/ 472 118 473 119
Amortisation
Less : Provisions &Write Offs 0 0 0 0
Profit Before Tax 651 634 687 647
Less : Provision for Tax 235 99 247 102
Profit After Tax 416 535 440 545
Profit/(Loss) brought forward 1,454 919 1,490 945
Profit available for Appropriation 1,870 1,454 1,930 1,49
0
Balance
carried to the Balance
Sheet 1,870 1,454 1,930 1,49
0
The higher turnover of the Company during the year was mainly on
account of commencement of commercial production from PY-1 Field with
effect from November 27, 2009.The increase in turnover was registered
despite PY-3 Field being under shutdown for almost seven months from
July 2009 to January 2010 on account of unscheduled repairs and
maintenance of offshore mooring facility.
Depreciation/depletion/amortization charge was higher due to charge of
PY-1 depletion to the P&L upon commencement of production of natural
gas from this Field.
The profit-before-tax was marginally better though the same has not
increased in tandem with growth in turnover primarily due to other
income (by way of dividend and interest earned on investment of surplus
funds) being significantly lower as the Company has deployed such funds
towards planned capital expenditure programme.
Provision for tax was higher because of higher taxable income in the
current year as also the fact that the income from dividend, which
contributed a considerable income in previous year, was not taxable in
the hands of the Company.
2. DIVIDEND
The Directors have not recommended any dividend for the year 2009-2010
as the Companys PAT was lower than the previous year. However the
Directors are having a positive outlook for the next fiscal year in
Terms of revenue and profitability growth with PY-1 going on stream and
resumption of production from PY-3 Field.
3. CAPITAL EXPENDITURE
During the year under review, the Company invested capital expenditure
of Rs. 5,550 million towards development expenditures, predominantly
PY-1 Field and Rs. 70 million towards exploration expenditure covering
appraisal activities in Block AAP-ON-94/1.
4. RIGHTS ISSUE
The Company has Completley utilized the proceeds of the Right Issue
2008. IDBI Bank Limited the Monitoring Agency, appointed by the Company
in Terms of the Securities and Exchange Board of India (Disclosure and
Investor Protection) Guidelines, 2000, to monitor the utilization of
the proceeds of the Rights Issue 2008, has given report of utilization
of Rs. 6,105 million consistant with the objects of the issue and
authorisation by the Board.
5. OPERATIONAL HIGHLIGHTS
Operations review has been provided in the Management Discussion and
Analysis Report.
6. START OF GAS PRODUCTION FROM PY-1 FIELD
During the year, your Company accomplished commercial production of
natural gas from PY-1 Field on November 27, 2009. Upon receipt of
various statutory approvals, the Company successfully commissioned the
project in a safe and secured manner entailing in excess of 5 million
manhour efforts. PY-1 Field is currently producing around 41,500 mmbtu
of gas and 260 barrels of condensate per day.
7. COMMENCEMENT OF DRILLING OF APPRAISAL WELL IN ASSAM
Your Company, as Operator of AAP-ON-94/1 consortium, has commenced the
drilling of first appraisal well in Block AAP-ON-94/1.The Company has a
40.323% participating interest during exploration/appraisal period in
the said Block.
8. TECHNICAL SUPPORT FROM ENI (PROMOTERS OF THE COMPANY)
In order to augment the know-how and Technical expertise available to
the Company and to pursue state of the art exploration and petroleum
operation practices, the Company has entered into a Petroleum Service
Agreement (PSA) with ENI India Limited United Kingdom (Eni), which is a
part of ENI Group, the PROMOTERS of the Company. This Agreement allows
your Company to seek Technical support from Eni on Terms compliant with
various regulations including the Production Sharing Contracts,
transfer pricing, and related party transactions. Such Technical
support from Eni is requisitioned by the Company with due authorization
by the Board.
9. 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.
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.
The Board of Directors have taken cognisance of the ÃCORPORATE
Governance Voluntary Guidelines 2009, issued by the Ministry of
CORPORATE Affairs in December 2009. Recognising the importance and need
to constantly assess governance practices thereby ensuring a
sustainable business environment, the Board has adopted certain
provisions of the said guidelines.
11. COST ACCOUNTING RECORDS
The Company has maintained cost records as required by Cost Accounting
Records (Petroleum Industry) Rules, 2002 notified on October 8, 2002.
12. HOEC BARDAHL INDIA LIMITED (HBIL), SUBSIDIARY OF HOEC
During the year, net income of HBIL, HOECs wholly owned subsidiary,
was Rs. 169 million, being marginally higher than the previous year.
The net profit was Rs. 24 million during the year, registering a net
profit margin of 14.9%.
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 2009-2010 are appended to and form part of this
Annual Report.
14. CREDIT RATING
ICRA had assigned a rating of LA+ 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. ICRA has not
revised this rating during the year.
15. AUDITORS REPORT AND DIRECTORS EXPLANATION
Auditors have made an observation vide para 7 to the Auditors Report
about the accrual and provisioning of Rs. 160,438,827 on account of
services rendered by ENI India Limited as development expenditure to
one of Unincorporated joint ventures (PY-1), where the Company is the
Operator.
With reference to this observation we have to state that the Company
has entered into a Petroleum Service Agreement (PSA) with ENI India
Limited ("ENI"), one of the Promoter Group Companies. As per the terms
of the PSA, ENI shall provide petroleum operation related services on
"cost basis".The Audit Committee and Board at their meeting held on
April 30, 2010, reviewed and confirmed that the charges for such
services by ENI are for comparable technical services of equal quality
being provided by the peers, of comparable qualification in the
industry. Board further required that each job order to be issued under
this PSA shall be approved by the Board. Pursuant to the PSA, the
Company has issued certain job orders for specific services subsequent
to Board approval. As per the Boards directive, the Company has
accrued the charges of Rs. 160,438,827 as of March 31, 2010 for the
services based on ENIs Invoices. However, payment to ENI shall be made
only upon receiving: (a) ENIs statutory auditors Certificate for "at
cost" charge out rates; and (b) Certified timesheets from ENI
supporting the man-day efforts charged. The Company is in the process
of receiving the aforesaid documentation from ENI to satisfy the above
defined conditions. The Company expects that there should not be any
material impact on the results for the year ended March 31, 2010 on
account of the above.
16. 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 line by
line basis with similar items in the Companys 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.
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. Deepak S. Parekh and Mr.
Paolo Carmosino will retire by rotation and being eligible have offered
themselves for re-appointment.
The term of appointment of Mr. Luigi Ciarrocchi as Managing Director
will expire at the conclusion of the ensuing Annual General Meeting. He
has offered himself for re-appointment and accordingly terms of his
re-appointment forms part of the Notice of Annual General Meeting for
your consideration and approval.
Further, the Company has received a notice with the requisite deposit
as prescribed in the Section 257 of the Companies Act, 1956 from a
member proposing the appointment of Mr. Marcello Simoncelli as a
Director of the Company on a term liable to be retiring by rotation.
The Board of Directors recommends aforesaid re-appointments/
appointment at the ensuing Annual General Meeting.
Further, Mr. Santo LaganÃÂ , Director of the Company retires at the
ensuing Annual General Meeting of the Company and has expressed his
unwillingness to be re-appointed as Director due to other business
commitments. Mr. Santo LaganÃÂ has contributed significantly to the
deliberations of the Board. The Board of Directors herein places its
appreciation for his
valuable services, guidance and support during his association with the
Company.
19. EMPLOYEES STOCK OPTION SCHEME
The status of ESOS is as below:
PARTICULARS 2009-2010 2008-2009
(a) Option Granted refer note* : 16,828 17,613
(b) Pricing Formula : Nil Nil
(c) Options Vested : 15,069 Nil
(corresponding to previous
year grant refer note **)
(d) Options Exercised : 15,069 Nil
(corresponding to previous
year grant refer note **)
(e) The total number of shares : 16,828 17,613
arising upon/ After
exercise of Option
(f) Options Lapsed : Nil Nil
(g) Variation in terms of : Not Not
Options Applicable Applicable
(h) Money realized by exercise : Nil Nil
of Options
(i) Total number of Options in : 16,828 17,613
force
(j) Employee wise details of
Options Granted to:
Senior Management Personnel
Mr. R. Vasudevan : Ã 9,274
Mr. Mukesh Butani 2,775 -
Mr. S. B. Mathur 2,775 Ã
Mr. Manish Maheshwari : 4,895 4,498
Any other employee who received
a grant in any one year of Options
amount to 5% or more of Options
Granted during that year
Mr. K. N. Prabhakar : 972 927
PARTICULARS 2009-2010 2008-2009
Mr. Sagar Mehta : 1,401 1,369
Mr. Rajiv Hura : 967 refer note***
Identified employees who : None None
were Granted 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.
(k) DiluThed Earnings Per Share : Rs. 3.19 Rs. 4.10
(EPS) before exceptional items
pursuant to issue of shares on
exercise of Options calculaThed
in accordance with Accounting
Standard (AS) 20 ÃEarning Per
Share refer note****
notes:
*The number of options Granted during the year 2009-2010 is net of
12,215 options (Previous Year: Nil) originally Granted to a grantee,
who declined to accept the grant of options.
** Represent options which were Granted for Financial Year 2006-2007.
*** Less than 5% of the total option Granted to the individual during
the year in reference.
**** Under the ESOS Scheme approved by the Shareholders, the exercise
of options have no dilution impact on the EPS.
20. CONSERVATION OF ENERGY,TheCHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
A. Conservation of energy:
(a) energy conservation measures taken :
During the year, Company has initiated several measures for energy
conservation. Some of them are:
1. Facilities engineered for production in normal course with
minimalistic gas flaring in PY-1 Field.
2. Reducing the flaring of associated natural gas from producing field
in Cambay basin by:
(i) Internal
utilization of associated natural gas as fuel; & (ii) Sale of associated
natural gas to end user(s).
(b) additional investments and proposals, if any, being implemented for
reduction of consumption of energy: Company has installed gas based
power generators utilising low pressure gas to operate PY-1 onshore
facilities and solar panels for offshore facilities thereby ensuring
clean and efficient source of power for Internal use. This has also
made PY-1 Project self reliant for its power requirements.
(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) due to minimalistic
flaring; use of gas and solar cells for power generation for Internal
consumption.
(d) total energy consumption and energy consumption per unit of
production as per Form A of the annexure in respect of industries
specified in the schedule thereto:The Company is not part of the
industries/nor engaged in activities specified in the Schedule. A small
fraction of gas production is being utilized for Internal consumption.
B. Thechnology absorption:
Efforts made in technology absorption as per Form B of the annexure:
The following technology initiatives were taken during the year:
(i) Company used control beam migration processing, a state-of-the-art
technology, to precisely image the sub- surface in a highly complex and
tectonically disturbed area of AAP-ON-94/1 Block.
(ii) ERP software like IBM Maximo and Sun System are implemented for
budgeting, material/service requirement procurement and accounting
respectively which have resulted in putting these functions centralized
and web based.
(iii) Secured wireless link between PY-1 Onshore Gas terminal and
Offshore unmanned Platform has been implemented to monitor and control
unmanned platform. CCTV Cameras are installed on unmanned platform and
which are controlled and monitored from the Onshore Gas terminal.
(iv) Geophysical and Geological work stations have been equipped with
software suites like Hampson-Russell and Eclipse. The Hampson-Russell
software suite is used for all aspects of seismic exploration and
reservoir characterization from pre-and-post-seismic inversion.
Eclipse black oil software is utilized for reservoir modeling and
simulation with a view to define and optimize production.
(v) Seismic Data Interpretation software, GeoFrame, has been upgraded
for comprehensive and advanced Interpretation and modeling.
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 one of the Party do not allow
Company to export its production till India achieves self sufficiency
(b) total foreign exchange used and earned:
Rs. million
Particulars 2009-2010 2008-2009
A. Foreign Exchange Earnings 10.69 1.88
(see note 1)
B. Foreign Exchange Used
- Cash Call Payment to 5,748.47 1,815.96
Joint Ventures
- Farm in Consideration
(See note 2) 134.87 -
- Expenditure in Foreiqn
Currency (See note 3) 192.21 31.96
- Repayment of Foreiqn Currency Loan (See
note 4) 243.24 163.16
Total Foreign Exchange used 6,318.79 2,011.08
notes: 1.The above includes interest received in foreign currency
amounting to Rs. 7.82 million (Previous Year Rs. 1.88 million) netted
off against Borrowing Cost in accordance with the Accounting Standard
16.
2. This refers to the final milestone payment to Mosbacher India LLC
as per of the agreement.
3. The above includes interest paid in foreign currency amounting to
Rs. 28.08 million (Previous Year Rs. 31.48 million) capitalized as
Borrowing Cost in accordance with the Accounting Standard 16.
4. The above excludes drawdown of foreign currency loan amounting to
Rs. 6,165 million (Previous Year Rs. Nil).
21. HUMAN CAPITAL & MANAGEMENT
The Company continues to pursue best practices to develop human capital
to attract and retain talent. Company has implemented a web based
Performance Appraisal System incorporating KRAs, deliverables,
performance measurement matrix, assessment of potential and
identification of training needs. During the year, Company has
sponsored training of its operational and technical personnel at Enis
facilities in Italy.
22. 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.
23. AUDITORS
The Auditors, M/s. Deloitte Haskins & Sells, will retire at the
forthcoming Annual General Meeting. M/s. Deloitte Haskins & Sells, have
expressed their unwillingness to be re-appointed as Auditors at the
ensuing Annual General Meeting. Your Directors place on record their
appreciation for valuable professional services rendered by M/s.
Deloitte Haskins & Sells, to the Company.
In view of the foregoing and based on the recommendation of the Audit
Committee, the Board has at its meeting held on August 12, 2010
proposed and recommended the appointment of M/s. S. R. Batliboi & Co.
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 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 Ãgoing concern
basis.
25. ACKNOWLEDGEMENTS
Your Directors place on record their gratitude for the support and
co-operation received from Government agencies namely, Ministry of
Petroleum & Natural Gas, Directorate General of Hydrocarbons,
Government of Gujarat, Government of Tamil Nadu, Government of Assam,
Government of Andhra Pradesh and Government of Rajasthan and the
authorities working under them. Your directors express their gratitude
to the Companys 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 committment of the HOEC team, which has contributed to
the growth of the organization.
For and on behalf of the Board
R. Vasudevan
date : August 12, 2010 Chairman