Hindustan Oil Exploration Company Limited (HINDOILEXP) Q2 FY23 Earnings Concall Transcript

Hindustan Oil Exploration Company Limited (NSE:HINDOILEXP) Q2 FY23 Earnings Concall dated Nov. 11, 2022

Corporate Participants:

Elango Pandarinathan — Managing Director

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Analysts:

Anuj Sonpal — Valorem Advisors — Analyst

Ritesh Gandhi — Discovery Capital — Analyst

Varatharajan Sivasankaran — Antique Limited — Analyst

Rohith Potti — Marshmallow — Analyst

Swechha Jain — A&S Wealth — Analyst

Manan Patel — Airavat Capital — Analyst

Karan Mehta — Nirzar — Analyst

Tejas Shah — Unique Stock Broking — Analyst

Unidentified Participant — — Analyst

Rikesh Parekh — Absolute Advisors — Analyst

Nirbhay Mahawar — N Square Capital — Analyst

Amit Mehendale — RoboCapital — Analyst

Rohit Balakrishnan — ithought PMS — Analyst

Shankar Gopalakrishnan — Motilal Oswal — Analyst

Unidentified Speaker —

Pranav Gandhi — Individual Investor — Analyst

Uday Varankar — Individual Investor — Analyst

Natwar Gupta — Aplite Capital — Analyst

Ashwin Reddy — Samatva Investment — Analyst

Sharath Sharma — Individual Investor — Analyst

Parsha Veer — Individual Investor — Analyst

Presentation:

Operator

Ladies and, gentlemen, good day and welcome to Q2 FY’23 Conference Call of Hindustan Oil Exploration Company Limited.

[Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you sir.

Anuj Sonpal — Valorem Advisors — Analyst

Thank you. Good morning, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Hindustan Oil Exploration Company Limited, HOEC. On behalf of the company, I’d like to thank you all for participating in the earnings call for the company’s second quarter and first half of financial year ending 2023.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Let me now introduce you to the management participating with us in today’s earnings call and hand it over to them for opening remarks. We have with us Mr. P. Elango, Managing Director; Mr. R. Jeevanandam, Executive Director and Chief Financial Officer. Without any further delay, I request Mr. Elango, to start with his opening remarks. Thank you, and over to you sir.

Elango Pandarinathan — Managing Director

Thank you, Anuj. Good morning, everyone. Happy to connect with you all on this Q2 FY’23 earnings call. Jeeva, our CFO and Director is with me, Valorem Advisors, our Investor Relation Advisor are also on the call. I hope everyone has received the updated earnings presentation. We’ve also uploaded it on our website for your reference.

As you all know, in B-80 at block level, HOEC hold 60% through revenue sharing contract. As well as the services to B-80 feet is at arm’s length to the subsidiaries at 100% for MOPU and FSO. According these revenue earned by subsidies are consolidated. During Q2, the Mobile Offshore Process Unit continued to be on revenue mode, SBM FSO unit was on revenue mode only till 15 July and B-80 field could export gas only for 14 days during Q2. The FSO and SBM were on downtime due to the repair of under-buoy hose and connecting hose till 31 October 2022. As we updated on 4 November, we have resumed gas sales from B-80 post completion of under-buoy hose repair and reconnection hose to FSO vessel, while we did not have to pay any penalty for not supplying gas since mid-July. GSPC reported that they are not able to find customers willing to pay $20 per MMBtu, which was the price we could realize in June.

We have therefore agreed to adapt the market prices discovered and published by the Indian Gas Exchange on monthly basis and the price for November 2022 supplies would be about $13.5 per MMBtu. We will be amending the gas sales contract accordingly. And we are currently producing about 11 million standard cubic-feet of gas per day from D2 gas well. This allows us to deliver the full contract volume all 10 million standard cubic-feet per day. After ARC now is to focus on resuming production from D1 oil well. Now that the weather condition at B-80 location has improved, we will attempt to address the hydraulic leak issue in the SSSV line, connecting D1 oil well to a sealant option.

In this method, specialty sealant is injected to seal the leak are. We have consulted technical experts and identified the specialist U.K. Company to carry out the operation. This will involve importing sealant and mobilizing well support vessel and experts. We would make our best efforts to execute the operations in December. We will notify as well as the oil production from D1 is resumed.

As we noted since mid-July as the monsoon whether picked up, we have seen multiple connecting systems failure. The permanent solution will require us engage a reputed form. It’s performed a comprehensive engineering of the system including all required analysis. We need to procure new floating and under-buoy hoses to withstand the roughness of the monsoon weather. And this permanent rectification and replacement work is planned to be carried out during this fade with weather season.

Moving on to Dirok. Dirok has performed well during Q2, both in terms of volumes and revenue. At volume level compared to Q1 average of 25 million standard cubic-feet per day, we achieved average daily gas sales of 34 million standard cubic-feet per day. Further, the share of premium gas sales increase marginally to 45% and the premium gas sales, we realized at minimum $1 premium over the applicable government notified prices of $6.1 per MMBtu. At Dirok, our strategy remains focused on value over volume. We have initiated the site grading work in the difficult forest segment by the proposed 18-inch pipeline that is therefore, Dirok gas with Duliajan marketing cap independently without relying on Oil India pipeline network. This will enable connecting with the Northeast gas grid in future significantly enhancing the market size for Dirok gas.

In our other assets, there are no significant developments during Q2, we are continuing the small volume of gas sales to GAIL from PY-1 that was recommenced in May 2022. In Cambay Assets, while production operations are continuing, final execution of ring fenced PSC for R2 area by government is still awaited. At Kharsang, normal production operations are continuing, government is insisting the contracted parties to accept the government position on cost recovery limit as a condition precedent for PSC extension. With sessions that are still ongoing between government and the operator. In other Northeastern blocks, Kherem and Umatara, the regulatory process for forest and environmental clearances are continuously being pursued with government. In Greater Dirok, Block G&G evaluations are being progressed to the release the NCL drilling locations.

I now invite Jeeva to share the financials.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Thanks, Elango. We reported that the company made a total revenue of INR81.69 crores in the current quarter, again, INR70.19 crores in the previous quarter. In the consolidated accounts, it is INR125.79 crores against INR91 crores in the previous quarter. If you take the revenue for half year for ’22-’23, it is INR216.83 crores comparing INR76.93 crores in the corresponding previous period. This increase in revenues mainly from increase in gas price and B-80 gas sales from 4 June to 14 July for about 40 days, that is INR82.81 crores including the revenue earned by MOPU and FSO. Increase in price cost for that and Oil for Dirok contributed about INR55 crores in the half yearly account of ’22-’23, the increase in the top line, it does not translate into profit due to sudden shutdown of B-80 for over 110 days since 14 July to 31 October. Therefore the standalone profit after tax is INR6.57 crores against INR34.21 crores in the previous quarter.

In the half yearly account, it is INR40.77 crores and the corresponding previous period is INR29.11 crores. In the consolidate accounts, the profit after tax is INR17.71 crores against INR32.35 crores in the previous quarter. In the half yearly consolidate accounts, it is INR50 crores comparing INR28 crores in the corresponding previous period. In essence the continuous production from B-80 is inevitable to have an improved and sustained bottom-line of the company. The total expense of standalone including DDA is INR75.13 crores comparing INR35.98 crores in the previous quarter, half yearly is at INR11.11 crores for ’22-’23, comparing INR35.68 crores in the corresponding period.

The total expenses in the consolidate accounts, including DDA is INR105.72 crores comparing INR59.08 crores in the previous quarter. Half yearly is INR164.79 crores for ’22-’23 comparing INR47.8 crores in the corresponding period. Operating both accounted for B-80 in the consolidated accounts for ’22-’23 including MOPU and FSO, INR72.56 crores, finance cost in DDA is INR35.16 crores, which makes a total of add on INR7.68 crores of INR154.79 crores in the half yearly accounts. The major [Indecipherable] expenditure is flowing through that B-80.

The EBITDA in consolidated accounts for this quarter is INR46.16 crores comparing INR52.97 crores in the previous quarter, half yearly accounts for ’22-’23 is INR99 crores comparing INR41 crores in the previous period. Consequence to the commencement of production from B-80 field with the gas was effective both in November and with the commencement of oil well in B-80, a meaningful profit will be reported in tandem with the top line of the company. As these assets were calculate revenue and cost mismatch are expected to be reduced substantially on commencement of D1 well. As the fact that the costs are not linear to production therefore it is important to put D1 well on production at the earliest opportunity.

Continuous production from B-80 field inevitable to have a revenue for offshore installation MOPU and FSO and the SBM is wholly-owned subsidiary. On full production from B-80 with the support of ongoing high oil prices and there the company can meet its obligations. Revenue mismatch is being addressed, the company is in the process of raising equity and debt capital to sort of the working capital leases and to embark on the development of government assets in the Western region and PY-1. It is submitted that the GNP review has been completed for PY-1 and locations were released.

Thanks, Elango.

Elango Pandarinathan — Managing Director

Thank you. We can now open the forum for questions please.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We take the first question from the line of Mr. Ritesh Gandhi from Discovery Capital. Please go ahead.

Ritesh Gandhi — Discovery Capital — Analyst

Hi, sir, just to clarify on the B-80, you guys gave a clarification on the third of November to the exchanges that the trials were on and that you would inform us when the sales would have started and I think in the press release and in the presentation you’ve implied that on the 4 of November, sales have started so. I just wanted to understand, has the sales actually started or other trials still on and how should we be looking at it.

Elango Pandarinathan — Managing Director

Actually, the sale is started.

Ritesh Gandhi — Discovery Capital — Analyst

Okay, Okay. Just a small request, sir, because you wouldn’t share your press release also that you would inform the exchanges that sales would start and we didn’t get the clarification until the results? So if you could just keep us updated would be extremely helpful. The other question is with regards to effectively speaking, Dirok, and so obviously, we’ve had a whole host of problems with the actual execution of B-80, if you could just — what is giving us the confidence that we can complete this but by end of December given effectively historically we’ve been inconsistent in actually achieving our target?

Elango Pandarinathan — Managing Director

Yeah, thank you, Ritesh. Just to clarify, in our exchange release, what we mentioned — meant was that we will notify as and when D1 oil production resumes that is what we meant, because when we notified on 4 November the sales has commenced already. Anyhow maybe we are not clarified it properly. So what we meant was whenever we resume production from D1 Oil we will release — we will notify the exchanges. Coming back to D1, what we’ve kind of learn this what — connecting system that set it out were not able to withstand the roughness of the monsoon that is the fact. And what we have tried to do unsuccessfully during the monsoon was to fix the problem through our employee distributions. When the weather improved, we were able to fix the connection for to resume the gas production. We’ve also found a solution that can fix — hopefully can fix the problem for the oil well as well. In terms of execution, it is not a complex execution but whether the methodology works or not need to be seen as such.

So that is the explanation for where our concerns come as far as December timeline is concerned the execution of the sealant option is not very complex, but it’s effectiveness need to be tested only after we inject the sealant. That’s — but as we explained in my opening remarks, the permanent solution will require an engineering, engineering which would to ensure that we upgrade the system by replacing some of the connecting courses, et cetera, to withstand the monsoon weather, next monsoon. So overall, our expectation is now that the weather is reasonably good, we don’t anticipate any problem.

I just want to add —

Ritesh Gandhi — Discovery Capital — Analyst

Just to be clear. So effectively, if I understand what we will be able to complete in December is effectively, just doing sort of like quick fix if you will to get the production going, and then we will undergo a more and longer process for a permanent solution. Is that understanding, right?

Elango Pandarinathan — Managing Director

No. If this solution works, which we believe, it’ll work and that will fix the problem permanently, there’s no other changes require.

Ritesh Gandhi — Discovery Capital — Analyst

Okay. And in the event it does not then?

Elango Pandarinathan — Managing Director

Then we’ll have to go back to a more permanent solution looking at other engineering solutions as far.

Ritesh Gandhi — Discovery Capital — Analyst

Okay. And then if we have this level of confidence around being able to complete this, I mean, December, which then given effectively increases in prices FM which have started from Q3 onwards, plus effectively, cash on board and hopefully, D1 to start, is there an actually really a need for an equity raise? Because I mean, ideally speaking [Indecipherable] at these levels would not be IVs, right?

Elango Pandarinathan — Managing Director

I’ll ask Jeeva to answer this question.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Ritesh, we are running oil and gas company, and we have got assets, we have got 11 assets in the company. So we are not running alone B-80. So whenever, we raise capital at an appropriate price to put all the blocks on the development and to monetize the blocks at the current high oil prices, that’s why we will be raising an equity and debt as appropriate considering with developing opportunities, which we want to do.

Ritesh Gandhi — Discovery Capital — Analyst

Is it debt? Are we monetizing actually the oil block at these prices or are we raising equity at the company level?

Elango Pandarinathan — Managing Director

It’s said to be in both assets. We have already taken AGM approval for raising debt as well as equity as appropriate for us at the price. Equity should be at the price, and debt should be at a cost.

Ritesh Gandhi — Discovery Capital — Analyst

Got it. But this would be equity at the listed entity, keeping on looking at exhibiting at the asset level, which is what you, I think, indicated?

Elango Pandarinathan — Managing Director

No. No, it’s not stated, which is — what, see oil and gas companies, wherever they’ve got a higher participation, if you wanted to bring a partner, they will bring the partner there.

Ritesh Gandhi — Discovery Capital — Analyst

Okay. Okay. So we are evaluating —

Operator

Sorry to interrupt Mr. Gandhi, I request you to please return to the question queue as we have follow-up questions, sir?

Ritesh Gandhi — Discovery Capital — Analyst

Yeah. Okay.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Mr. Sivasankaran from Antique Limited. Please go ahead.

Varatharajan Sivasankaran — Antique Limited — Analyst

Thanks for the opportunity, sir. A couple of questions. One on the cost of repairs after the September month, so October so far and November, whatever we have spent and what do you plan as an estimate for fixing the D1 well as well? So if I were to look at the overall cost or having like normal production in B-80, what is the cost we are looking at before the normal production starts?

Elango Pandarinathan — Managing Director

Yeah, just one second on that. The cost of repairs, which we are anticipating for the D1 well should be in the order of around $250,000, roughly about INR2 crores. The expenditure for fixing the repair in the November, which is also in the order of the INR2.5 crores to INR3 crores, because this was a margin, we have to have a wait for some period. So it was about INR3 crores. Now the intended repair to be carried out for the D1 should be around INR2 crores.

Varatharajan Sivasankaran — Antique Limited — Analyst

Fair enough. And in the case of subsidy, if you — if it is possible to give us a top line and EBITDA for last quarter?

Elango Pandarinathan — Managing Director

It’s too much to predict at this stage. We wanted to put the field on production and it’s having a three combination works. We have to put all the wealth on production. And second thing, we wanted to know what would be the gas price, what would be the oil price. So I leave it to you to make a rough number consideration about it.

Varatharajan Sivasankaran — Antique Limited — Analyst

No, I was not asking for — we just talking the subsidiary in 2Q. What was the top line in EBITDA?

Elango Pandarinathan — Managing Director

2Q of subsidiary?

Varatharajan Sivasankaran — Antique Limited — Analyst

2Q for the subsidiary?

Elango Pandarinathan — Managing Director

That is difference between the —

Varatharajan Sivasankaran — Antique Limited — Analyst

Let’s just say a difference between the two. Okay, I got it.

Elango Pandarinathan — Managing Director

[Indecipherable]

Varatharajan Sivasankaran — Antique Limited — Analyst

Got it. Yeah, sure. Thanks.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Mr. Rohith Potti from Marshmallow. Please go ahead, sir.

Rohith Potti — Marshmallow — Analyst

Thank you for the opportunity. So just to continue on B-80, so D1, from what I understand if it works will be a permanent solution and D2 right now is a temporary solution, sir, is that correct?

Elango Pandarinathan — Managing Director

I think, Rohith, I would like to tell that, because there was a leak, leak got fixed. Now what has happened that we don’t have a spare hose with us at that point in time now, we would be procuring the spare hose for the under-buoy as well as the floating that we will be getting stock with this. Even if there any subsequent leak there on, we will be able to use the new hose immediately. That’s a logic of it. That cost around $250,000 to $300,000. Now we’ll be placing an order product and get it on board to vessels.

Rohith Potti — Marshmallow — Analyst

So this is, you’re talking about D2, right, the gas well?

Elango Pandarinathan — Managing Director

No, no, but — what — both the wells D2 and D1 both has an oil production. So to have a continued production from the field, we need to have the FSO bearing and as well as under-buoy hose and the floating hose. So there was a problem in the under-buoy hose and floating hose, which we fixed it now, but now we will be having a spare hose procured and ready, if any subsequent problem arise that we will be able to install it.

Rohith Potti — Marshmallow — Analyst

Understood. Just — so there’s a little bit of confusion, because in the AGM, it was mentioned that we are looking for a temporary solution in D2 and we are procuring some additional material which have — which requires six to nine months to procure it because of supply chain issues, or delay because it takes time to produce that particular material and bring. So is that — does that situation remain and follow-up to what you said was, if there is an issue in the next monsoon, it’ll be a similar issue, right, where in the rains we are not able to change it?

Elango Pandarinathan — Managing Director

What we are planning as such, this will be continuing according to us. And if any problem occurs and before the month of May itself, we will be changing with the new hoses in a way that we don’t want to take risk of the margin.

Rohith Potti — Marshmallow — Analyst

Okay. And this new hose that you’re talking about is, I mean, it’s the same hose that we have put right now or is it a better product or something?

Elango Pandarinathan — Managing Director

It is a different type of hoses, which is being engineered in a manner that suits to our requirements by a company in Dubai. [Indecipherable] energy is doing the work on it. Once they come out of the specifications, we will place an order for it.

Rohith Potti — Marshmallow — Analyst

Perfect. Okay. So this is helpful. So just a couple of questions on the capital raise? So in the AGM, it was mentioned that in mid-December, I don’t remember the date, but somewhere in December we are looking to close the equity raising and maybe some amount of debt raising as well. So I was just — I was just trying to reconcile the cash flows with the requirement for funds. So we have Dirok, which is functioning well and it providing us a lot of cash flows and we have D1 also providing cash flows with the — D2 providing cash flows and D1 also will provide cash flows and these two will provide material cash flows along with the subsidiary. So if I could understand this better, so the gas capital raise, is it primarily going to be for expansion or is it going to be for maintenance of — or is it going to be for B-80 repair or any other statutory payments? Because I remember numbers of 75 and 50 that you had shared for statutory payments, if I’m not mistaken. So if you could explain further on how much cash we need exactly, because it seems like the operations are generating — will generate consider amount of cash along with Dirok?

Elango Pandarinathan — Managing Director

I think Rohith, we have a working capital issues and we need to have money for expansion by drilling well. We can’t keep the assets document for it. So we equally conscious about we raise the issue in the AGM itself that we are really conscious about the dilution impact at the price only, we will raise the equity and at the same time we are endeavoring to raise some debt in such a manner to overcome the working capital issues. Then with the new capital we will share, that will go only for the expansion of the development of — the development of the assets, which requires on the marginal capital like D1.

Rohith Potti — Marshmallow — Analyst

Okay. Okay. Understood. And we expect the —

Operator

Sorry to interrupt, Mr. Rohith, may we request you to return to the question queue sir, for your follow-up question?

Rohith Potti — Marshmallow — Analyst

Thank you.

Operator

I have several participants waiting for their turn. Thank you, sir. We take our next question from the line of Swechha Jain from A&S Wealth. Please go ahead.

Swechha Jain — A&S Wealth — Analyst

Hi sir. Thanks for giving this opportunity. Actually, I just need clarification. I think I joined the call a little late. So I may have missed it. I think somebody was asking about confirming the sales in D1 well, right, so gas sales have started again right from 4 of November is what I wanted to understand.

Elango Pandarinathan — Managing Director

Yes. Gas sales have started from 4 of November. In our announcement, we only mentioned about we will notify, again, as and when the oil production starts.

Swechha Jain — A&S Wealth — Analyst

Okay. Okay. And so next clarification, actually a little bit of understanding, I’m a bit confused. I think what we are planning now is the temporary fix has been done, right? So now we are going to do an additional hose for which we are going to place an order with some company in Dubai. But I think you were also mentioning that, we are planning to do some permanent fix and for which we are tying up with the U.K. Company? So I am a bit confused, like are we looking at a temporary solution right now and then we are going to work towards a permanent solution or what we will do in December that will be the permanent solution. So I’m bit confused as to how we are going to deal with this.

Elango Pandarinathan — Managing Director

Thank you. Let me clarify for — everyone see what we have — what we’ve observed is the system, whatever we have set it out, would not withstand the rough weather of the monsoon season, right? So as the weather calm down, we have fixed the gas valve and we will fix the oil well also with the solution. And we are confident that this solution will work during the fair weather period. And before that, as Jeeva was explaining, we will procure replacement materials and we will do whatever instruction required to prepare the systems to withstand the next monsoon. That will involve certain level of engineering, certain level of spares and processes based on what are the failures that we witness. So that clarifies.

Swechha Jain — A&S Wealth — Analyst

Okay. Okay. So for the U.K. company that we’re looking to engage, what will fact work on? Is that, that work on the D2 well, because of which you’re not able to extract the oil?

Elango Pandarinathan — Managing Director

No, both the wells or both oil and gas to flow through — first of all, I think everybody need to understand that both the wells produce certain amount of oil also, the gas well also produces certain amount of oil, whatever oil that we produce need to be exported to the floating storage facility that we have in the field through the SPM through which need to function through the connecting hoses, right? So these are very critical system for production from either of the well site. So on the U.K. company, what we are — what we mentioned was that the U.K. companies has a specialist — specialized sealant, which is injected will seal the leak areas. That is what we are going to do in December. Once that is then, then the entire system will function. Now before the next monsoon, we just want to ensure everything is inspected thoroughly for the — to send the monsoon, any changes, any replacement that need to be done, then so that we get ready for that.

Swechha Jain — A&S Wealth — Analyst

Okay. Okay. And the total cost that you mentioned was approximately INR5.5 crore, right? INR2.5 crores, INR3 crore to fixing the repair and then we are going to spend additional INR2 crores?

Elango Pandarinathan — Managing Director

Correct.

Swechha Jain — A&S Wealth — Analyst

Okay. Okay. Thank you sir. Thank you so much. That helps a lot.

Operator

Thank you. We take the next question from the line of Manan Patel from Airavat Capital. Please go ahead, sir.

Manan Patel — Airavat Capital — Analyst

Thank you for the opportunity, sir, and congratulations for putting D2 back online. Sir, the first question is, if I understand correctly, you mentioned that GSPC, the sales contract with GSPC has some changes in the pricing and the 22% of oil, which they bid has now changed to one month price of IGX. So is that understanding correct?

Elango Pandarinathan — Managing Director

Yes. What we have agreed with the GSPC is in the Indian Gas Exchange, the prices are discovered through a competitive process, for monthly sales, weekly sales, daily sales. We have agreed that we will adopt those prices to govern the sales in future. So what you have agreed is exactly what you said?

Manan Patel — Airavat Capital — Analyst

So does that not defeat the purpose of e-auction that we conducted? So GSPC might have bid extra and bought the contract and now they’re saying that they cannot sell at these prices, so wouldn’t any other player would’ve been ready to like either it is at a substantial loss almost of $8, $9 to us at this point. So isn’t that like problem for us and does that — does this result in renegotiating contracts of B-80 with the subsidiaries for the operating cost as well? So if you can clarify on this?

Elango Pandarinathan — Managing Director

Current what we did through the e-auction is we went into a two-year contract with GSPC, during the first year, both the parties, we agreed that contracts — gas sales contracts typically have a provision called take our pay, which is if the buyer is not taking the welding, he still need to pay. Normal standard is 75% on an annual basis, and if we don’t deliver the volume, we need to pay penalty for that. So take our pay, pay our pay are the corresponding classes. So when we went with the e-auction, we put it out there that in the first year, because we are aware when you commission a large offshore facility, there would be teething problems. So we put that there will be no take our pay or no supplier pay obligation in the first year, which means both the parties will do reasonable interval to supply and take the oil.

So we are in that first year, at the end of the first year period, which would be in April 2023 until March, 2022, sorry, ’23. The first year continues from April, 2023, the second year continues comes into picture, there the obligation for them to take the volume at the 75% on an annual basis at the committed price comes into force. During the first year, both the parties have to. So what happened flip side is because we did not supply from mid-July to end October, we didn’t have to pay any penalty to GSPC because of that class that protected us, when we went back. GSPC is not a consumer, they’re only an aggregator. They said look at $20, there’s no consumer in India now willing to take the gas. Therefore we can sell it to anyone we want. We thought the best way to deal with the situation is take the price of the exchange or I can go to the exchange and get the market prices. But we agreed on this and we will see, we’ve got option to raise the volume after things stabilize to automate customers also or get to a point where we will see how — because we’ll see how the market prices play out. Ultimately as a company, we cannot expect more than what the market is willing to do.

Manan Patel — Airavat Capital — Analyst

Understood, sir. That’s very helpful. And the second question is, so there was a substantial jump if I noticed from their annual report in other financial liability. So almost INR90 crores and then there are other payables of INR57 crores. So these are entirely new items on our balance sheet. So if you can help us understand what are these things were?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah, just hold on. So this is basically the working capital issues and we have to settle some of those liabilities to the financial liabilities, which is a long-term borrowing, which is any, any, because our HDFC loan, which is the left period of 17 months, say, 18 months out of the 12 months we has to move into the, from long-term to short-term. So that is where the short-term liabilities are more actually involved. Other than that, some of the working capital issues which we have to address, that is where the liabilities are — current liabilities are more.

Manan Patel — Airavat Capital — Analyst

Okay. Okay. And that will be largely taken care from the cash flows that you — or debt raising that we do that you explain, right?

Elango Pandarinathan — Managing Director

I think, I agree there is a working mismatch. There is a cost and revenue mismatch which has to be corrected.

Manan Patel — Airavat Capital — Analyst

Okay, sir. Thanks a lot and wish you all of best.

Operator

Thank you. Let me take the next question from the line of Mr. Karan Mehta from Nirzar. Please go ahead.

Karan Mehta — Nirzar — Analyst

Hello?

Elango Pandarinathan — Managing Director

Yes, please.

Karan Mehta — Nirzar — Analyst

Yeah, good morning sir and thank you for the opportunity. So I just wanted some clarification related to permanent solutions, so any major challenge that you foresee while implementing before?

[Foreign Speech]

Hello?

Operator

Mr. Karan, go ahead with your question, sir. We can hear you.

Karan Mehta — Nirzar — Analyst

Yeah, yeah. So I just wanted some clarification related to the permanent solution, so any major challenge that you foresee while implementing the permanent solution?

Elango Pandarinathan — Managing Director

Not, I think the word temporary and permanent got created some conclusion. What — all we are trying to do is to, ensure the system performs without any failures, both during fair weather window period as well as the rough monsoon period. So based on our initial experience, whatever we have created in the first time could not fully withstand the roughness of the monsoon. Now as it weather improve, we were able to fix some of the issues and bring one well on production. We will do, what is the right technical solution for us to bring the other well on production. Then we will — before the next monsoon comes, which is typically May, June before that we will ensure that all other replacement or certification, engineering is all performed, so that the facilities are ready for this full monsoon to handle the full production level.

Karan Mehta — Nirzar — Analyst

Sir, I’ll just clarify once again. So are we quite confident of the outcome while implementing the permanent solution? I got the temporary solution part. After we implement the permanent solution, are we quite confident of the outcome?

Elango Pandarinathan — Managing Director

Obviously, when we choose a solution, we do consult the experts and take their recommendation and implement, right? So unless we are confident, we will not choose an option.

Karan Mehta — Nirzar — Analyst

Okay. Okay. That was helpful. And sir, just wanted some details on the progress of the fund raising activity that we were to conduct after the AGM. And also one clarification that whether this fund raising will be on company level or field level?

Elango Pandarinathan — Managing Director

The one — any equity raising could be only at the company level and that’s what the plan for — any debt raising is at the company level, both at the company level and at pays, as a running oil and gas company, wherever we have got more participating in this, which we want to dilute and reduce our risk exposures at asset level, we will be doing the farming as appropriate at a right price.

Karan Mehta — Nirzar — Analyst

Okay. And so we have begun this, so have we found out the investors? I mean, like if you can throw some light on the progress of the fund raising activity?

Elango Pandarinathan — Managing Director

I think, it is a process research and it’ll continue at the moment. So as soon as we read some conclusions, we will let you know.

Karan Mehta — Nirzar — Analyst

Okay. And sir, lastly, if I can squeeze in one more question —

Operator

Sorry to interrupt, Mr. Karan. May request you to return to the question queue, sir.

Karan Mehta — Nirzar — Analyst

Okay. Okay.

Operator

We take the next question from the line of Mr. Tejas Shah from Unique Stock Broking. Please go ahead, sir.

Tejas Shah — Unique Stock Broking — Analyst

Hi, see, lot of confusion is there between the investors for permanent, temporary. I think you need to clarify. One is like your D1 accurate line issue, which was supposed to be replaced for the D1 oil to flow, which was using pressure that is one part not connected with your weather window. And second is the hose buoy which is connecting to the, from the manufacturing of oil to your ship storage. There is a different part. So people are still confuse over there. So if you can throw proper light on that, people will all get addressed. Okay. So the problem right now what you’re facing is your oil, which is to be shipped from the manufacturing to the ship, that line connecting pipe that has problems. Now that is getting solved. What I’m understanding, by ordering new and temporary fix is done. Now ordering new, I mean, expecting from your conversation is, it’ll be there before year month of May. It is still not order — on the process of order, but you will receive it by the month of May and you will fix it before your weather window gets over and can you show some light on the D1 actually which are line, which was supposed to be replaced by getting it on the surface and replacing some parts and again, putting it back if you can. So this is my first picture, please.

Elango Pandarinathan — Managing Director

Thank you, Mr. Shah. Let me answer the last part first, which is the D1 line. D1 line, as you rightly observed had a pressure loss. The pressurization is required to keep the well on open condition. The pressure was not holding, and we did some driving identified. There is a hydraulic pressure loss. Now there were two solutions for that. One is you list it and completely replace the line. The other — what we have found from the market is to inject the sealant that will seal the leak area because the leak is very, very minor in nature. And this is hydraulic leak. So after consulting expert, this solution is found to be working in other parts of the world, and we want to implement that solution. In December, we identified the firm, we identified the chemicals, we have consulted the expert. We will do that. Once that sealant fixes — the leak is fixed through the sealant option, then that will hold, there is no reason for any kind of replacement in the line at all. Then the oil production comes back into stream.

Now the other part of your question, which is the whole FSO SPM system is required for both the wells. If hoses got damaged and it has been fixed now. So it can now take care of both the wells, as in when both the wells on production mode, one of them is already on production mode, as soon as this D1 wells are comes on production mode. The FSO SPM system is fully functional now. So that clarifies.

Tejas Shah — Unique Stock Broking — Analyst

That will take the pressure of that 4,000 barrels of oil which we are planning to produce. Am I right?

Elango Pandarinathan — Managing Director

Correct.

Tejas Shah — Unique Stock Broking — Analyst

Okay. So fine. And if like say in December the first solution does not work, do we have the chance to get that uplift of the surface and replace the part and put it back before the month of June?

Elango Pandarinathan — Managing Director

Yes, we will be able to do that.

Tejas Shah — Unique Stock Broking — Analyst

Okay. So I hope that’s all. Everybody’s thought about not that D1 well will start. And second question is, now the gas price, Indian gas section, what you said now that is going down to $13.5. If you can share what is the average price for the last four, five months? What will be the average price that we normally will get from this thing, like $10, $11? What is the history? If you can throw some light, so we understand, from where price to — what price we’ll be able to get the money out of it and if we can throw some top what we can generate?

Elango Pandarinathan — Managing Director

I don’t have the data on the last four months exchange prices, but overall currently the market is, there is a volatile market. There is some excess volume in the market, once that gets absorbed, then the prices is expected to go up further because the government notified prices itself is at $9 now and we are seeing a general swimming of about $5 more than the government prices at the exchange level. Now exchange also in the last six months only good volumes being catered in the exchange after ONGC come on the exchange. So over the next six months, we will get a better idea on how the prices would be.

But having said that for the remaining, we are only concerned about the remaining period between now and March 2023 and we are delivering to Gujarat which is the most premium market.

Unidentified Participant — — Analyst

So basically you are saying, on the government notified on average is get $4 to $5 premium, so for the next six months I think the price is fixed around $9 correct, so around $13 to $14 we will get by default? Okay, sir. Thank you.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you, sir. We take the next question from the line of Rikesh Parekh from Absolute Advisors, please go ahead.

Rikesh Parekh — Absolute Advisors — Analyst

Thanks for the opportunity sir. Sir just firstly on the B-80 side, on the D2, since we had given this — so awarded to GSPC based on that auction, so want it be the second-best first beta would have been deferred rather than accepting a lower for dollar or the market mechanism price?

Elango Pandarinathan — Managing Director

The — right now the participants in our e-auction were mainly aggregators of the gas, let’s say, three parties then who were bid at high-level, the last two participants is I can disclose, they were putting competing bids was between GSPC and G and both are aggregators, they are not actual consumers. One of the important thing for us is to ensure there is a continuous production and update that takes place, that is that reliable offtake when we ensure only by aggregator who has capacities booked or ability to book capacities in game, if I reach one individual consumer, then I’ll be exposing our steel production, let’s say that consumer blend stand off, so I will exposing to the fact. So our presence will be to aggregate it.

Now between both these aggregators just is volume base on the market prices. We are convinced that they exchange — this discovers the current market price in India through very wide participation, the volume traded in the exchange is almost 10 times of our volume. After figuring out all that only, we agreed for this arrangement.

Rikesh Parekh — Absolute Advisors — Analyst

Secondly, regarding D1, so means we are still under process or means we have to place the order for D1 rectification as such?

Elango Pandarinathan — Managing Director

So we will place the order, we with have the process only now.

Rikesh Parekh — Absolute Advisors — Analyst

But we are confident that it will be ready by December end?

Elango Pandarinathan — Managing Director

Correct.

Rikesh Parekh — Absolute Advisors — Analyst

Second is relating to over…

Operator

Sorry to interrupt Mr. Rikesh, may we request you to join the question queue sir, we have other participants waiting for their turn.

Rikesh Parekh — Absolute Advisors — Analyst

Okay, yeah. I’ll join the queue.

Operator

[Operator Instructions] Thank you. We take the next question from the line of Nirbhay Mahawar from N Square Capital. Please go ahead sir.

Nirbhay Mahawar — N Square Capital — Analyst

Yeah, good morning, sir. Sir, we have had close to one and a half year of delay in B-80. And I mean delay in offshore oil projects is very normal thing, so I’m not disappointed with that, but the way management has handled that delay we talk about quick fixes, we talk about working capital challenges and I mean the whole seems to be very short-term, shows lack of commitment of management as well as Board. So is there any gap in my understanding and why is this happening because the prices we are getting is definitely going to be grade beyond what we had anticipated?

Elango Pandarinathan — Managing Director

Mr. Nirbhay, those are very strong words, I cannot — these are pure perception, so I will leave it at that.

Nirbhay Mahawar — N Square Capital — Analyst

But I mean short-term working capital challenges to execute offshore oil project seems very, very short-term ish approach, why are we not capitalizing our balance sheet, these delays were very much expected. I mean it can happen in any of the oil project. So why are we not fixing it, why are we not adequately capitalizing our balance sheet? Any word on that?

Elango Pandarinathan — Managing Director

Balance is fully capitalized, adequately capitalized as required and then unforeseen situation comes out of — the revenue from INR11,000 crores assets for four months that got the mismatch, the mismatch is being addressed. If you call that is incompetency and so…

Nirbhay Mahawar — N Square Capital — Analyst

No, I’m not talking about incompetency.

Elango Pandarinathan — Managing Director

I’m sorry about it, that’s your perception you can leave it with that.

Nirbhay Mahawar — N Square Capital — Analyst

Sir, I’m not talking about incompetency, sir, I’m just saying that should lack of commitment is there any, I mean are we listing as an investor when we are — so optimistic about the opportunity, why Board and management is not so committed that’s what I’m trying to understand.

Elango Pandarinathan — Managing Director

Let’s move to the next question please.

Nirbhay Mahawar — N Square Capital — Analyst

Thank you.

Operator

We take the next question from the line of Mr. Amit Mehendale from RoboCapital, please go ahead sir.

Amit Mehendale — RoboCapital — Analyst

My question is on the equity fund raise, sir. I think earlier participants had asked the question and probably the response were already sent, but since I have the opportunity I ask one bit again. The equity fund raise that you’re doing and I think we appreciate that the prices are better in terms of realizing the asset value of the block, but is there a possibility that we could dilute at the block level or is it technically or legally not possible?

Elango Pandarinathan — Managing Director

See the dilution at the block level is an ongoing process and at a right price at the right things, we don’t have any block which has so greatly which we hold around, only one block we hold maximum of 60 person, another one exploration block before 100 person, another on producing block we work under this. These are the blocks are there. So we will be continuously discussing with the people and at the appropriate time, at the appropriate price we will be able to get a farm-in partner, similarly we will go farm-out also, farm-in and farm-out is a regular process. So we cannot give a timeline and we cannot say that this is being done, but at the same time to correct the mismatch in the working capital, we will be raising debt as the effort for it and to embark on a development program, we will be raising equity.

Amit Mehendale — RoboCapital — Analyst

Okay, sure. Thanks.

Operator

Thank you. We take the next question from the line of Mr. Rohit Balakrishnan ithought PMS, please go ahead sir.

Rohit Balakrishnan — ithought PMS — Analyst

Am I audible?

Operator

Yes, absolutely.

Elango Pandarinathan — Managing Director

Yes, please.

Rohit Balakrishnan — ithought PMS — Analyst

Yeah, sir. So sorry to belabor on this point again but on this point on you taking a good fiction then just to clarify, I know you clarified it well, but I think in the opening remark you mentioned that just to be you are also appointing reputed engineering firm, so that there is no — so that they can evaluate and give you a report, so that in the next monsoon the systems and the processes are — we are better equipped. And I think in the AGM also you had mentioned this. And I think you had also given the name of the contractors. So I mean — so can you just clarify — this is in addition to whatever you mentioned this is in parallel to whatever you make in terms of seal in the approach that you’re taking for D1 and the other thing that you, I mean the overall approach to electrifying D1 and undergoing holes that you are planning as to replace it completely, this is in addition to the entire process, is that understanding correct or?

Elango Pandarinathan — Managing Director

Correct, in addition to that.

Rohit Balakrishnan — ithought PMS — Analyst

And what would the cost entail on…

Elango Pandarinathan — Managing Director

Cost on to replacement. [Speech Overlap].

Rohit Balakrishnan — ithought PMS — Analyst

No, no I’m saying sir this consulting engagement that you are planning to do that to get to an overall view, what would be the cost of that any idea right now?

Elango Pandarinathan — Managing Director

Overall we have that one year-one small umbilical hydraulic hose issue in the D1, that is umbilical asset core up about 10 course are there which get connected to that subsidiary. Out of the same course, one core is adding a weak that goes to the surface control, subsurface safety valve, right, that we are going to fix it through a statement, that is a one-type of a job on that D1.

Right now when we come to producing from the D1 and D2 well, we need the floating storage offshore that is our reference, so it’s duly connected with single point moving, right? So single-point moving is connected with the pipeline end manifold through an under by force right? And from the SBM there is a floating hose get connected. Now what has happened, there is an under by hose below the on the end-of-the under by hose there was a small leak to avoid any issues, we shut the production down then we repair it.

Now what we are planning, we will be having substantial quantity of — this will be in pieces that is 30 meters each of that we will be number of pieces which can be assembled and get it into a floating hose as well as under by hose, we will procure and stock it there before the monsoon to ensure abundant caution we will replace it. And in the west we will have another five or six of small pieces of hoses will be there which we will get connected to avoid the longer longer shutdown as happened in the past.

Rohit Balakrishnan — ithought PMS — Analyst

Right. So you mentioned that all these cause somewhere around INR5 crore to INR6 crores right, I mean…

Elango Pandarinathan — Managing Director

That’s the math.

Rohit Balakrishnan — ithought PMS — Analyst

And I’m asking sir, we are also planning some in general overall overview of our readiness and overall preparedness of overall systems for the next monsoon we are going for a engineering firm. What would that cost is what I’m trying to understand?

Elango Pandarinathan — Managing Director

Engineering firm it will be more or like goes with the job which we will be giving it to them right, if put that man hour, they will be charging man hour basis, right, if they mobilize a person to come to India and that person in India for the day as such we will pay him $2500 per ex-pat. For the smaller low-quality person, I mean low qualified person or the inexperienced out-of-market — I’d say it’s not the right word to call inexperience the young guy comes along with him, it will be costing around $700 to $800 per day, so normally we mobilize an expert which will be having about the contingent of two to three guys which will be casting about $4000 a day when he is in India. And similarly when he does a review work at his place in Dubai, it will be little lesser cost and depends on the manpower he spends on, this is not going to be a high cost item, the total exposure would be let’s say around $100,000 per season you assume, in an year it will be around $200,000 math.

Rohit Balakrishnan — ithought PMS — Analyst

Sure. Understood, clear sir. And sir on the fund raising part…

Operator

Sorry to interrupt, we may request you to come into a question queue sir.

Rohit Balakrishnan — ithought PMS — Analyst

Ma’am, this was — my questions were, I mean there was just one follow-up if I can…

Operator

There are all several participants waiting in the question queue for their turn sir.

Rohit Balakrishnan — ithought PMS — Analyst

Okay.

Operator

We take the next question from the line of Mr. Bhanu Doshi, Individual Investor. Please go ahead sir.

Unidentified Participant — — Analyst

Hello?

Operator

Ma’am, you are audible, please go ahead.

Unidentified Participant — — Analyst

Yeah. Sir, kindly any update on the PY-1 extension and feasibility study that we were to conduct before drilling?Hello?

Elango Pandarinathan — Managing Director

PY-1 extension is there up to 5th December and before that we will try to secure the further extension of the block. And we carried out an extensive G&G review and now we have got locations ready. And once on when we are having adequate capital, then we will be embarked on the drilling of the well.

Unidentified Participant — — Analyst

Okay, thank you.

Operator

Thank you. We take the next question from the line of Mr. Shankar Gopalakrishnan from Motilal Oswal Private Equities, please go ahead.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

Yeah Mr. Elango hello, am I audible?

Elango Pandarinathan — Managing Director

Yeah, Shankar please.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

Yeah, so on PY-1 you said that we would do the expansion only after raising equity. Did I get it correctly?

Elango Pandarinathan — Managing Director

Yes, I’ve explained to you that we will be raising some equity and we have to have an internal accrual that to meet with the entire expenses which cannot be sorted down. So as soon we raise the equity, we will go in this.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

So that can be a investment of about INR200 crores, INR300 crores?

Elango Pandarinathan — Managing Director

Not INR200 crores, INR300 crores, we initially start with about $24 million expenses, followed by another $26 million, that is both $50 million, but initial we start with the first well it should be about $8 million.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

Sorry, can you repeat, I didn’t hear you like…

Elango Pandarinathan — Managing Director

$8 million.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

$8 million for the first value, okay? So, the earlier investment which we made in those two wells have they been written-off?

Elango Pandarinathan — Managing Director

So that has paid-off as such, but that is on deepening the existing well, now this would be a new well and the new in an area little other than the old well as such, so this would be our value creation for us for getting back the money invested in the block which is in the order of around $383 million, so…

Shankar Gopalakrishnan — Motilal Oswal — Analyst

Okay. And this therefore can take couple of years?Hello?

Elango Pandarinathan — Managing Director

Yeah.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

It can take couple of years to execute?

Elango Pandarinathan — Managing Director

Each well takes about 30 days drilling, so if continuous drilling back-to-back, it should be about three months and installing facilities would be taking about six months between the weather window is there another six months, so total about 18 months project max.

Shankar Gopalakrishnan — Motilal Oswal — Analyst

Okay, okay. All right, thank you so much.

Operator

Thank you sir. [Operator Instructions] We’ll take the next question from the line of Mr. Siddhant [Phonetic] from Optimum Securities, please go ahead sir.

Unidentified Participant — — Analyst

Yes, hello can you hear me?

Elango Pandarinathan — Managing Director

Yes, please, hello?

Unidentified Participant — — Analyst

Yeah, thank you for the opportunity. I just wanted to ask like ones we have got the wells running and we are going to be expensing all the items on the P&L, since the gas has already started flowing in, do we expect like breakeven at even $13 or do we see that till the time oil doesn’t start we’ll be probably operating the ATR loss?

Elango Pandarinathan — Managing Director

Sorry, our operating cost at, we produce 10 million cubic-feet of gas with an oil of about say 350 barrels, 300 barrels, it will be about $12 per mmbtu at the block level, at the B-80 level. And if we take the revenue which we’ll be generating from our FSO and MOPU, this will be reduced to $5. In effect at the console level, we’d be making contribution even at the $14, even by — growing by only one well production that is D2 well alone.

Unidentified Participant — — Analyst

Got it. At — by this operating the gas well as a whole like we got initiative thing that we can breakeven on B-80 considering that the well is slowing. So just wanted to understand in terms of cost and income let’s say from the core R&D or why is that is still breaking in or are we probably going to — still the oil well doesn’t come online we’ll probably be operating at a loss?

Elango Pandarinathan — Managing Director

See, I have explained to you that at a consolidated level because the majority of the facilities are owned by us that is an FSO and MOPU and a single point [Indecipherable]. Our operating cost that is actually operating cost that is actually the marginal cost service production that is $5.35, okay? So anything beyond that is our contribution margin [Speech Overlap].

Unidentified Participant — — Analyst

So you have the gas shell that is started from the next quarter onwards we should see higher bottom line also?

Elango Pandarinathan — Managing Director

That’s right.

Unidentified Participant — — Analyst

Okay. Thank you so much.

Elango Pandarinathan — Managing Director

Thanks.

Operator

Thank you, sir. We take the next question from the line of Mr. Varun Agarwal from Aegis [Phonetic] Capital, please go ahead sir.

Unidentified Participant — — Analyst

Thanks for the opportunity. Sir, can you also clarify that with the new pricing that exist for Dirok announced on 1st October, what will be the revenue and contribution from the Dirok on a quarterly basis?

Elango Pandarinathan — Managing Director

See any increase in revenue, you can actually — that would be the additional revenue towards ARPU 60%, the balanced growth has to be royalty and other cess to the oil produced well then. So if you look at that previously talked about $7 and this is about $9, there is — that is the percentage increase in that you can take 60% would be the contribution, additional value we created out of it. Those are the two KVAs continuing uptakes from the customers wallet, so that is to some extent seasonal at one quarter maybe high, one quarter maybe less.

Unidentified Participant — — Analyst

Understand, that is helpful. And just to clarify on B-80 you mentioned that you’ll have a — we expect with the — in December and there will be a permanent solution up and running by May. So for this permanent solution, have we identified what will be the permanent solution or that is something that once that engineering firm representative comes and we do the study and then we will figure out, what the solution is or is it fairly straightforward to do it. And second is around that the parts are costing only INR6 crores, INR7 crores and given that have so much capital start here, why do we just not order the parts, why have we not ordered the parts in advance since a while back end and have those parts ready to be fixed earlier maybe we have tried it is a long lead time, but just wanted to clarify that.

Elango Pandarinathan — Managing Director

Thanks for this question, actually we would like to clarify that, see in offshore and subsea any leak comes and the leak is to be addressed, how the leak is to be addressed go into the deeper water that through the subsea diving team and get it fixed. And another one is where the leak is smaller one like a hydraulically leak fluid leak efforts, we apply some Sealant and see that Sealant goes, it goes for it, right? So the Sealant cost nothing, it is about $30,000, but to have the work at the subsea, you need the dive support vessel, right, that causes smaller amount, that also in the overall gaming is a smaller amount, but monsoon is not in our control.

So once a monsoon goes up and we have a better weather we can get some dive support vessel and go down and fix it and in offshore, whatever the fixation we do it, whatever the repair we carried out, most of them are permanent at that point in time, if subsequently something leaks on it, we have to again fix it up, that is the nature of the business per se and we will do that, but these are not hose repair or something is not an unusual to the business, this is normal to the business as you rightly observe, now we will be having enough stock of those hoses in the FSO and well as in KGP to have some sealant or some other material with engaging with the right consultant to do the job when an situation occurs around.

Unidentified Participant — — Analyst

Thank you, sir. And the permanent solution and the permanent solution has been identified or we will be identifying it in the next one?

Elango Pandarinathan — Managing Director

This is a solution, every solutions which we work on it is more or less permanent there at that point in time, so there is nothing called if any small leak comes, we have to look at whether we put a sealant or we go and tighten the leak or change the thing. This is an umbilical live hose, ten small hoses, if one hose leaks on it and we have to go and fix it up, if all the hoses like there is a problem which is umbilical direct, but we have not reached to that stage as such.

Unidentified Participant — — Analyst

So you are essentially saying that the permanent solution is to keep a stock of sealant [Speech Overlap].

Elango Pandarinathan — Managing Director

What you can assume that the fixations which we are going to make is a permanent one.

Unidentified Participant — — Analyst

Understand, which is essentially keeping the stock of sealant and hoses to solve as and when problems arrive?

Elango Pandarinathan — Managing Director

Problem comes, we wanted to have one spare hose of about 225 meters as such and we are going to procure at a cost of $250,000 which will be on-board the vessel to address the next any such episode happen.

Unidentified Participant — — Analyst

Got it.

Operator

Thank you. Sorry to interrupt Mr. Varun may we request you to return to the question queue.

Unidentified Participant — — Analyst

Sure, thank you.

Operator

We take the next question from the line of Mr. Jayshad [Phonetic] Shah, Individual Investor, please go ahead.

Unidentified Speaker —

What is the expected top line after December from the D1 and D2 and bedrock. If you can throw some light approximately in terms of INR? Sir, what will be the top line from your B-80 and the Dirok after December? Hello?

Operator

Sir, the disturbance is from the line of Mr. Shah, Mr. Shah, I’m muting your line. Management sir, you may go ahead with your response.

Elango Pandarinathan — Managing Director

Assam we have — right now the revenues in the order of INR62 crores. So that may increase with the increased gas price, subject to the uptake of the gas, right? So accordingly if the price difference is say 20% that will be the increase in — INR62 crores will become 20% more, right? So these two things are there, the price is now known for next six months, you rightly observed that is about [Technical Issues. So it should be around 30% expected revenue we’ll be having on Assam, provided the uptake is significant is continuing as happened in the last quarter.

And B-80 is that, there are two in front of us, one we have to fix the D1 and the second thing we should know the oil price as such and third one we should know the gas price as such, there’s three things that unless get done, projecting something is not correct on our side and we will let you know next quarter which is a prepared number then.

Unidentified Participant — — Analyst

Hello?

Operator

Mr. Shah, there’s a lot of disturbance from your line sir, may I request you to disconnect and call back. We take the next question from the line of Mr. Pranav Gandhi, Individual Investor. Please go ahead sir.

Pranav Gandhi — Individual Investor — Analyst

My question is just been answered, so you can just take me out of the line.

Operator

Thank you, sir. We take the next question from the line of Mr. Uday Varankar, Individual Investor. Please go ahead sir.

Uday Varankar — Individual Investor — Analyst

Hello? Hello?

Operator

Sir, you are audible, please go ahead.

Uday Varankar — Individual Investor — Analyst

Yeah, regarding PY-3, there has been update I think the operator is trying to secure one FPSO from Norway. So since you are also a shareholder in that, do we have any additional update if we have secured that FPSO or we are planning something on that side, PY-3?

Elango Pandarinathan — Managing Director

I think PY-3, we have no update as such, so any update has come, we’ll let you know in the next quarter.

Uday Varankar — Individual Investor — Analyst

Okay, thanks. Additionally any new fields we are going to auction, I mean we are planning to bid for?

Elango Pandarinathan — Managing Director

As such nothing has been announced, if anything bid that comes, then our team will evaluate it.

Uday Varankar — Individual Investor — Analyst

Okay, thanks.

Operator

Thank you. We take the next question from the line of Sushil Agarwal from MCC [Phonetic], please go ahead sir.

Unidentified Participant — — Analyst

Yeah, sir congratulations for set of production again. I have only two points. One is regarding this FFO and this subsea born in actuator. We are operating in a construction company of oil and gas construction company normally whenever we are getting equipment, these are designed for 100 year strong conditions and they are factory tested at site, so that there is no offshore failures or leakages. So whether why these equipments are failing in the first year itself? This is my first question.

Elango Pandarinathan — Managing Director

Yeah, a good question Mr. Agarwal, you’re right, a company like ONGC would adapt that kind of a standard. I think we all need to keep in mind, this sealed B-80 were discovered sometime in the mid 80s and ONGC founds in economical to develop, so that is why it came under bidding arrangement other discover small seal. So obviously, we need to keep in mind during the development process, overall economics of the seal which means overall cost as such. Now on that basis we are allowed particular model and after the monsoon we understood that yes there are certain things we need to do slightly different thing which we will do. But overall our objective was to ensure how do we develop the steel in the most cost effective manner and also as early as possible, right, this is how we started the journey, obviously there will be in delays that happen because of multiple reasons, but the approach that we chose was this — so it’s conscious selection process, otherwise steel itself would not have come for development.

Unidentified Participant — — Analyst

Okay. Sir, other thing like umbilical has 10 cores and there is leakage in one core, can we means if a sealant is not working, then can we use other core for operating them because this actuator or we will have to essentially replace the umbilical itself and if it keep activation, just a second sir, if that is the case then better to order that umbilical because otherwise we may miss this good weather period again?

Elango Pandarinathan — Managing Director

See this total, if I explain to you properly, the umbilical is less than a kilometer, right, that’s length of the umbilical. The umbilical force which each core is having different sizes for chemical injection depending on the subsea, the surface comes out safety valve differently and other each one is having a different size, that we don’t have any spare for the subsurface safety valve. So that’s why we are looking for sealant and if sealant should work and if sealant doesn’t work as such and then we will be using — we’ll be going for tree side as such to tighten the leak as such. So we wanted to look for an optimum solution that’s of sealant that will work for us, in either case we need a DSP to go down, so for that saturation diving is required, so that’s why we are waiting for the fair weather, now the fair weather starts in December, so we’ll be doing at that point.

Unidentified Participant — — Analyst

So if this does not work means my point was only for this that if this doesn’t work and we will be in December…

Elango Pandarinathan — Managing Director

It will work, it’s nothing if it doesn’t work, we put the tree cap and then we’ll tighten that. [Speech Overlap]. See, you have to understand this we have not only having an umbilical, we have a flying leak, the leak is only at flying lead. So we will change the flying lead and in a manner that gets connected.

Operator

Thank you.

Unidentified Participant — — Analyst

Okay. thank you.

Operator

We take the next question from the line of Mr. Natwar Gupta from Aplite Capital, please go ahead sir.

Natwar Gupta — Aplite Capital — Analyst

Hi, my questions relate to the fund raising, so what is the timeline for it and what quantum of money are you planning today? And then if you can break it down to the use of the funds, how much in capex, how much in working capital and how much do we pay [Technical Issues]. So if you can just throw some light on that.

Elango Pandarinathan — Managing Director

See the quantum approved by the shareholders are INR250 crores. So that is the number. And the intent to raise this within a period of say three months. The in due there in if for major portion goes for the development of PY-1 drilling well and working capital needs about say INR100 crores, so if we are able to continue production from the three-well, sorry this G2 well and other some comes on it. We’ll be having at the end of the three months some surplus gas which will be again put for the development, so in essence over a period of six months the entire equity capital raise would be put on a development base.

Natwar Gupta — Aplite Capital — Analyst

So now the first the INR250 crore that you’re planning to raise is that totally going to be equity or you did mention that it could be that as well, now what is the threshold for the equity, what is the price at which you will issue equity. And would it be a right issue or is it with new shareholder?

Elango Pandarinathan — Managing Director

You will disclose all this and hence decisions are taken and I think…

Natwar Gupta — Aplite Capital — Analyst

But I’m sure you have a threshold in mind to issue equity?

Elango Pandarinathan — Managing Director

So if I disclose the threshold in the line then it will be difficult, nothing we [Indecipherable], right?

Natwar Gupta — Aplite Capital — Analyst

So when do we come to know?

Elango Pandarinathan — Managing Director

So we have to create value to our stakeholders or we have to say — when we look at a fund raising, equity fund raising, we should be fair both to the new equity holders who are coming into the business, as well as the long-term existing shareholder. Keep that in mind…

Natwar Gupta — Aplite Capital — Analyst

If you’re going to, so look I’m a minority shareholder if you are so I get a lower-price, I would like to participate, rather than someone new coming in and I’m getting diluted down at a very low-price.

Elango Pandarinathan — Managing Director

I fully agree with you, our dilution per value and not for a cost. So that’s what we keep it in mind and when we do the funding…

Natwar Gupta — Aplite Capital — Analyst

So certainly won’t be a rights issue then, it certainly won’t be a rights issue, it will be new shareholder?

Elango Pandarinathan — Managing Director

Thing, it has to be in a — we will come back with you with as appropriate stand.

Operator

Sorry to interrupt Mr. Gupta, may we request you to join the question queue sir, we have several participants waiting for their turn.

Natwar Gupta — Aplite Capital — Analyst

Sure.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Mr. Rohith Potti from Marshmallow.

Rohith Potti — Marshmallow — Analyst

No, thank you my questions have been answered, thank you.

Operator

Thank you, sir. We take the next question from the line of Mr. Manan Patel from Airavat Capital, please go ahead.Mr. Manan, your line is unmuted sir, please go ahead with your question. As there is a response from the line of Mr. Manan, we’d move to the next question from the line of Mr. Shankaran from Antique Limited, please go ahead sir.

Varatharajan Sivasankaran — Antique Limited — Analyst

Thank you for the opportunity. Sir, the D2 well when you’re producing gas, as of now you said there is some oil also coming, so is there some number like currently you’re producing and storing?

Elango Pandarinathan — Managing Director

At 10 million cubic feet we are getting around 300 barrels per day.

Varatharajan Sivasankaran — Antique Limited — Analyst

So currently that is being stored in the…

Elango Pandarinathan — Managing Director

Yeah, that is stored in [Technical Issues].

Varatharajan Sivasankaran — Antique Limited — Analyst

And as far as the GSPC contract is concerned, this IJX basis is only for the next five to six months once the second year kicks-in, you go back to the original contract or how is it?

Elango Pandarinathan — Managing Director

Correct.

Varatharajan Sivasankaran — Antique Limited — Analyst

Fair enough, sir. Thank you.

Operator

Thank you very much. We’ll move to the next question from the line of Ashwin Reddy from Samatva Investment, please go ahead.

Ashwin Reddy — Samatva Investment — Analyst

Yeah, hi good afternoon, sir. The first question is on Dirok, so right now can you comment on the volumes at Dirok as on date as we speak so far in this quarter, so how is the volume has been in Dirok?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Volume has been pretty similar to the last quarter one.

Ashwin Reddy — Samatva Investment — Analyst

But have we added any new customers in Dirok in terms of customer-base increasing if at all?

Elango Pandarinathan — Managing Director

Not new customers but the existing customers are continuing to take the volume similar to the last quarter at least in a context.

Ashwin Reddy — Samatva Investment — Analyst

Got it. And second question is on PY-3, so last-time so want to recall, there was a plan that was given to you or the costing was given to you from the existing operators for PY-3, which you thought was too high is what I understood in the last time you mentioned. Has there been any progress in how you would want to deal with PY-3?

Elango Pandarinathan — Managing Director

Not really, we’ve been focused on B-80, not fairly with — involved in the PY-3 those developments.

Ashwin Reddy — Samatva Investment — Analyst

Got it. And the last question is on B-80, so for the D1 is it safe to assume that irrespective of the first solution was sealant or the second solution that you plan to do, will this get done before, will this get done before March-April of next year?

Elango Pandarinathan — Managing Director

Yes.

Ashwin Reddy — Samatva Investment — Analyst

Okay, great. Thank you so much sir and good luck.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you, sir. We move to the next question from the line of Mr. Karan Mehta from Nirzar, please go ahead sir.

Karan Mehta — Nirzar — Analyst

Hello?

Elango Pandarinathan — Managing Director

Yes, Karan, please go ahead.

Karan Mehta — Nirzar — Analyst

Yeah, sir, all my questions have already been answered and thank you for the — for all your clarifications.

Elango Pandarinathan — Managing Director

Thank you, Karan.

Operator

Thank you, Karan. We take the next question from the line of Mr. Sharath Sharma, Individual Investor. Please go ahead sir.

Sharath Sharma — Individual Investor — Analyst

Hi sir, given the high prices we have seen and we’ve lost that window, are we getting damages to the delay on account of B-80 from the supplier or any other manufacturer or service provider?

Elango Pandarinathan — Managing Director

No.

Sharath Sharma — Individual Investor — Analyst

Okay. Okay and sir just as a suggestion, if your D1 plans get delayed or it gets pushed out or something, can I please request at least a communication coming out on the status rather than date of value please, I think communication could have been better and should be better please, just as a timely suggestion and all the best.

Elango Pandarinathan — Managing Director

Sure, thank you, sir.

Operator

Thank you very much. We take the next follow-up question from the line of Mr. Manan Patel from Airavat Capital, please go ahead sir.

Manan Patel — Airavat Capital — Analyst

Am I audible sir?

Elango Pandarinathan — Managing Director

Yes, please.

Manan Patel — Airavat Capital — Analyst

Thank you for the opportunity again sir and sir one question on Dirok. So now I have seen some update that we have started grading and site clearing for the pipeline. So is that laying off pipeline contingent on the Indradhanush gas grid or we will start laying pipeline and also drilling [Technical Issues] the additional wells that we talked.

Elango Pandarinathan — Managing Director

It is not contingent on that, this pipeline when we complete would allow us to connect with all our customer directly, right now we’re using the Oil India pipeline and obviously Oil India would give when there is a demand, Oil India of course would allocate its own volume before allowing our volume to be supplied. By having our own independent line, that issue will be addressed. So with irrespective of Indradhanush, but most important thing is this will it ensures in future, we will have a connectivity in Indradhanush.

Manan Patel — Airavat Capital — Analyst

Okay. And but the wells we would drill after the Indradhanush pipeline comes online, right?

Elango Pandarinathan — Managing Director

Right, after consistent offtake is established only we will do the live.

Manan Patel — Airavat Capital — Analyst

Okay. And sir the last question, there was some update on Kirit Parikh committee that the new changes will apply to all types of gas including the APM. So does that apply to our B-80 gas as well if you have some idea and thoughts on that?

Elango Pandarinathan — Managing Director

Right now, I believe the committee is only deliberating — no recommendations have been made got it, so we really don’t have any clue. As far as this six months price has really been notified by the government, that is effective 1st October $8.57 per mmbtu price has been notified, that will be valid till March 10.

Manan Patel — Airavat Capital — Analyst

Okay sir, wish you all the best for D1 well as well and look forward to your next communication. Thank you, sir.

Elango Pandarinathan — Managing Director

Thank you, thank you Manan.

Operator

Thank you. We take the next question from the line of Parsha Veer, Individual Investor. Please go ahead.

Parsha Veer — Individual Investor — Analyst

Good afternoon sir. Am I audible?

Elango Pandarinathan — Managing Director

Good afternoon.

Parsha Veer — Individual Investor — Analyst

Well, just wanted to understand on the equity raising, would the current shareholders of the company be allowed to participate in the same or would it be on an at a high-level?

Elango Pandarinathan — Managing Director

We have not come out with any piece of more of raising equity, we will inform you at the appropriate time.

Parsha Veer — Individual Investor — Analyst

And is rights issue also an option that can be…

Elango Pandarinathan — Managing Director

Options are being evaluated and all options are being evaluated and we come out which is the right option at the right time.

Parsha Veer — Individual Investor — Analyst

All right. Thank you so much, one more thing. I really appreciate all the hard work put in by the management and the entire team of HOEC because this is not an easy thing you know from past five years you guys have been continuously walking towards it with very good commitment levels. So really appreciate the efforts and the commitment that the Company has been showing towards the assets and to create value for the shareholders. Thank you so much.

Elango Pandarinathan — Managing Director

Thank you, thanks.

Parsha Veer — Individual Investor — Analyst

Yes.

Operator

Thank you sir. We take the next question from the line of Jangu Fiter [Phonetic], Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hello, sir. My question is regarding PY-1 field, is hardly the operator now also because they had filed a suit against HOEC and or HOEC has got the operator ship of PY-1 filed because it’s a old producing field because of small problem — regarding that floating much that field was shut in 2011. So that’s what I want you — yes sir.

Unidentified Speaker —

There are two fields in Eastern offshore. One is PY-1 which is 100% owned and operated by HOEC.

Unidentified Participant — — Analyst

I’m sorry, I’m sorry that I mixed up sir, I got mixed, PY-1 is a gas field which we supply gas through GAIL India, previously it was through we were supplying it to a power plant and because of there, there were lot of issues, I’m sorry, okay, okay. Okay, sir. So what would be the status of PY-1 field, sir?

Elango Pandarinathan — Managing Director

See, as you are saying, PY-1 is 100% owned and operated and we are supplying, we explained our earlier plan, PY-3 is operated by another company. We have legal dispute with that, that is in court, so we can’t provide any update on that, the legal — it is in the court, so matter [Technical Issues].

Unidentified Participant — — Analyst

But sir, PY-3 field is now producing oil or it was shut down in 2011, after that they had stopped.

Elango Pandarinathan — Managing Director

It is remained shut down.

Unidentified Participant — — Analyst

It has remained shut down, so any — there is no chance of that getting sorted out early? Hello?

Elango Pandarinathan — Managing Director

No, we really don’t have any update on PY-3, as I said we have a legal case and all we know is that field is not on production as on date.

Unidentified Participant — — Analyst

Buy PY-1 is a previous two well which we had drilled from where there was gas been produced, are those gas now also operational or the well is operational sir?

Elango Pandarinathan — Managing Director

Yes, yes, we are operating the wells and supplying the gas to GAIL from PY-1.

Unidentified Participant — — Analyst

Okay. Thank you very much sir for the information.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for the day, I would now like to hand the conference over to Mr. Elango for closing comments. Thank you and over to you sir.

Elango Pandarinathan — Managing Director

Thank you. Our top most priority is to achieve sustained and stable production from both oil and gas sales of B-80. Our portfolio consist of significant discovery, but yet to be developed resources across PY-1, Dirok, Assam and Cambay Assets. For the last few years, all our capital investment and management focus have gone exclusively to B-80, delaying development and monetization of other discovered resources in our portfolio. Purpose of the proposed fund raise is to have access to capital, so that all project can be progressed simultaneously rather than sequentially. Once the company is infused with additional capital and technical resources, it can embark on it’s next phase of production growth comfortably. Thank you for joining.

Operator

[Operator Closing Remarks]