Hindustan Oil Exploration Company Ltd (HINDOILEXP) Q4 FY21 Earnings Concall Transcript

Hindustan Oil Exploration Company Ltd (NSE:HINDOILEXP) Q4 FY21 earnings Concall dated Jun. 30, 2021.

Corporate Participants:

Anuj Sonpal — Founder and Chief Executive Officer

Elango Pandarinathan — Managing Director

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Analysts:

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Rohan Shah — Alpha Enterprises — Analyst

Sunil Jain — Nirmal Bang — Analyst

Riddhesh Gandhi — Discovery Capital — Analyst

Nirbhay Mahawar — N Square Capital — Analyst

Rikesh Parikh — Barclays — Analyst

Tejas Shah — Unique Stock Group — Analyst

Sadanand Shetty — True Equity — Analyst

Abhijit Vora — Sharekhan — Analyst

Anek Mudhra — Sonata Research — Analyst

Deepak Goradia — AM Investment — Analyst

Ashwin Reddy — Samatva Investments — Analyst

Rohit Ghotia — Individual Investor — Analyst

Ravi Nanda — Individual Investor — Analyst

Manan Patel — Individual Investor — Analyst

Sharad Sharma — — Analyst

Pankaj Chaddah — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY ’21 Conference Call of Hindustan Oil Exploration Company Limited. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you Mr. Sonpal.

Anuj Sonpal — Founder and Chief Executive Officer

Thank you. Good morning everyone and a warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of HOEC Limited. On behalf of the company, I would like to thank you all for participating in the company’s earnings conference call for the fourth quarter and financial year ended 2021.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings conference 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 decision. The purpose of today’s earnings conference call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Now let me introduce you to the management participating with us in today’s earnings conference call and give it over to them for opening remarks. We have with us Mr. P. Elango, Managing Director and R. Jeevanandam, Executive Director and Chief Financial Officer.

Without much delay, I request Mr. P. Elango to give 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 Q4 and annual FY ’21 earnings call. Jeeva, our CFO and Whole Time Director is with me and Valorem Advisors, our Investor Relations Advisors are also on the call. I hope you all have received our updated earnings presentation. We’ve also uploaded that same on our website for your reference.

For us, in HOEC, FY ’21 has been a year of singular focus on B-80. In April 2020, we were drilling our second well in B-80 in western offshore even as the pandemic wave one was sweeping across the country. Despite many challenges, we did not give up and completed the wells, both the wells together floored during testing 8,000 barrels of oil equivalent per day. Then to bring the field on production, working from home, we had to plan and source multiple long lead project materials and import equipments from many parts of the world. Finding no suitable vessel in India, we mobilized an expensive new generation DP vessel to lay the pipelines and a construction barge to execute the project during the limited weather window. We could complete the mobilization and commenced the project execution only in March.

As the installation works were in full swing, second wave hit us. We again did not give up. We continued by implementing a strict COVID protection code including incurring additional cost and time. We had completed over 95% of the work that pushed us into rough weather window of May. Finally, when just one week work was required to install the Calm Buoy, we received warnings of Cyclone Tauktae and immediately evacuated all our men and vessels to safety. We waited and remobilized again post the cyclone, not wanting to give up, but the weather was rough and visibility was poor. We finally had to give up. I am narrating this to share our deep sense of disappointment. We promised we would deliver and we did not. All I can say is we tried our best, but failed to achieve the target date. The Calm Buoy now is safely docked for the monsoon season. Post-monsoon, we will re-mobilize the marine spread, install the Calm Buoy, connect it to the FSO and commission the process facilities to deliver First Oil in Q3 of this year.

At Dirok too, challenges on the ground of running safe operation during a pandemic year continued. Our first priority has always been to ensure safety of our personnel and the facility. Despite the challenges, we continue to produce consistently at high production levels at Dirok. Average production of gas from Dirok for FY ’21 was about 35 million standard cubic feet per day, which is close to the full plant capacity of 1 million standard cubic meters per day. The performance of Dirok reservoir has been promising and consistent. While we have delivered volume from Dirok over the last three years, our focus has now been to increase value from the gas produced in the context of low government notified gas prices of $1.79 per MMBTU.

As earlier announced, just a few days back we concluded successfully the first ever e-auction of natural gas produced in the Northeast region. The results of the e-auction indicate a very healthy demand with approximately twice the amount of volume available being bid for. The volumes are bid at over $1 premium to the existing six monthly government notified prices. This is a significant development and has the potential to increase realized gas price from Dirok by more than 50% from the current levels. We have provided the details and an illustration in the investor presentation, please take a look at that.

The current arrangement will continue with Oil India to ensure smooth transition using the pipeline infrastructure of Oil India. Once we move to the new arrangement, Oil India will act as a transporter for Dirok gas for which the modalities are being worked out. We are now awaiting DGH and JV approval and hope to complete this process of transition in three months and expect incremental revenues from Dirok to start from Q3 of FY ’22. This pioneering e-auction discovered the market potential for natural gas in the Northeast region and in particular, upper Assam. We are in parallel preparing for the Northeast market being opened up for the rest of India as the Northeast gas grid, Indradhanush is progressing at a rapid pace and is expected to commission the Guwahati-Numaligarh pipeline portion in 2023.

In PY-1, production has declined and offtake has been inconsistent during the pandemic year. Our geological studies have been completed to plan the next drilling campaign in this unique fractured basement reservoir. The next drilling campaign in PY-1 will be planned after First Oil from B-80. Although the current production from PY-1 is very small, we are hopeful of bringing the field back to producing to its potential after the drilling campaign. Final investment decision will be taken after independent technical assessment and derisking.

In our Cambay Assets, we have initiated the environmental clearance process to drill additional wells and the execution of R2 PSC in our Palej block is in final stages.

That’s the overall update of our business operations during FY ’21. I would take few more minutes to briefly outline our growth strategy. At the macro level, effective supply control measures from OPEC and sharp revival in demand are strengthening the oil prices and this trend is expected to continue as more economies get back to normalcy. In India, government policy trust is focused on monetization of assets held by public sector units. In upstream exploration and production sector, HOEC is in advantageous position to capitalize this opportunity with its edge in operating offshore fees. In a highly capital and manpower intensive sector, we chose the right asset and lean team model. Our idea was to emerge as the Uber of oil and gas sector by building world-class competencies in both geoscience and drilling. Both these functions are held by professionals with global experience; Mr. Krishnan and Mr. Robert White.

We chose to explore UK as our strategic partner to build, operate and maintain oil and gas process subsea facilities both in Dirok and in B-80. This strategy has served us well with less than 100 employees contributing about 8,000 barrels of oil equivalent per day to India’s domestic production, developing discovered resources field in B-80 in a pandemic environment during a limited weather window has been a significant experience. We gained expertise in western offshore and learned a few lessons too. HOEC is at the cusp of transformation, looking at the multi-fold increase in revenue from third quarter onwards after we bring B-80 into production.

In FY 21, HOEC’s net entitled production was about 2,300 barrels of oil equivalent, its production mix of almost 90% gas and 10%. When B-80 is on full-year production in FY 23, HOEC net share production will increase to over 7,000 barrels of oil equivalent with a production mix of nearly 50% oil. To drive the next level of growth, we have discovered resources within our existing portfolio that has potential to double this HOEC net share production to 14,000 barrels of oil equivalent per day. Further, we aim to add more resources by participating in the recently launched DSF bid round 3. We will also look for opportunity that shows up from the asset monetization policy of the government.

Growing to the next stage is not without its challenges. We have some immediate cost overrun issues to deal with and there are legacy PSC issues to overcome. What I have outlined is a broad strategy. We will develop and roll-out a clear roadmap and business plan over the next few months.

I now invite Jeeva to share the financials.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Thanks, Elango. We reported the company made a revenue of INR24 crores in the current quarter against INR27 crores in the previous quarter. For the year, the revenue is INR111 crores comparing INR201 crores in the previous year. In consol accounts, it is INR30 crores against INR31 crores in the previous quarter and the annual number is INR125 crores in the current year against INR224 crores in the previous. Virtually, there is a reduction of INR100 crores, reduction in the revenue. The reduction in revenue is mainly from reduction in prices of Assam Gas and the volume reduction in PY-1.

The profit on standalone is INR65 crores, which includes an adjustment towards the exceptional item against INR141 crores in the previous year. And the consolidated accounts of profit after tax for this year is INR53 crores against INR138 crores in the previous year. The total expense of standalone is INR74 crores comparing INR87 crores in the previous year. Operating costs are not linear to the production except statutory levies such as royalty and cess royalty ounces, which is at below them. In the consol accounts, it is INR89 crores comparing INR113 crores in the previous year.

Operating cash flow for the year before working capital change is INR65 crores comparing INR140 crores in the previous year. In the consol results, operating cash flow stands at INR54 crores comparing INR132 crores in the previous year. The company cash and cash equivalent of about INR60 crores as on 31st, March 2021 and the consol accounts cash and cash equivalents is INR92 crores. We have a secured loan facility of INR150 crores from Vyoman to meet the capital towards additional 10% participating in the block and the capital expenditure thereon, which has been fully utilized. And investment on B-80, MOPU, and SBM and Floating Storage Offshore would be on revenue mode only after the commencement of production from B-80. Having substantial investment yet to put on production, get on to revenue more, a meaningful number would be reported after the commencement of B-80 production.

Thanks, Elango.

Elango Pandarinathan — Managing Director

Thank you, Jeeva. Anuj, we can open the floor to the questions, please.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Hardik Jain from White Stone Advisors. Please go ahead.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Yeah. Good morning, sir. Thanks for the opportunity. Sir, in your opening remarks, you mentioned a statement where you said the both the wells were tested in the floor, 8,000 barrels of oil equivalent per day. Can you just elaborate on this?

Elango Pandarinathan — Managing Director

Yeah. So we drilled two wells, which is D1 and D2 in B-80. We tested these wells and both the wells will produce both oil and gas — oil and associated gas. So overall, both the wells together during testing produced 8,000 barrels of oil equivalent per day.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Sorry. I lost your voice in the last statement. Can you please repeat.

Elango Pandarinathan — Managing Director

I said both the wells together produced 8,000 barrels of oil equivalent per day, which means basically oil and gas together, so.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Okay. So when we said that it slowed, that means we tested it and then —

Elango Pandarinathan — Managing Director

Correct.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Then the probability of us not getting that much quantity of oil and gas reduces after this test to a great extent.

Elango Pandarinathan — Managing Director

Correct.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Okay. And sir, now then we see in our balance sheet, the capital work in progress is around INR275 crores and we have one weeks more work that we have to do, we’ll be installing the Calm Buoy and FSO, so how much more investment will be done, so overall.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

The total investment in the project including all the facilities because we have a model of outsourcing at the field level, resulting at the corporate level, we will have an investment of about $100 million there on to it, for our 60% investment and additional investments which we are now looking for it also optimize the cost with the existing facilities in that vicinity or we have to modulate the additional facility from somewhere else. Once we have clear idea, we would be able to estimate the cost properly, which will not be more than $2 million, $3 million.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Okay. And my last question is regarding PY-1 because the production in the PY-1 has been erratic for last few quarters. So is there a possibility where we will have to take some write-off or it will impact our balance sheet, because the asset is not efficiently producing.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

I have nothing in the balance sheet. Virtually, I have got only $12 million over an investment of $383 million made in the block.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Okay. So the pending cost that remains towards the PY-1 is only $12 million?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Little more than $12 million. If you want the exact number, it’s about INR90 plus crores.

Hardik Jain — White Stone Financial Advisors Private Limited — Analyst

Okay, That’s it. Thank you, sir.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Rohan Shah from Alpha Enterprises. Please go ahead.

Rohan Shah — Alpha Enterprises — Analyst

Yeah. Thank you for taking my question. I had a question on the survey that we were about to publish on B-80. So any update on that status. And I also had a question on PY-1. Though I noticed in the notes in the results this time that the extension has not been granted for the next decade, so any idea when that will happen and any idea of is there any risk that this may not happen.

Elango Pandarinathan — Managing Director

Yeah. Okay, let me answer the PY-1 question first. The government has rolled out an extension policy under which there are two important criteria; one is related to the remaining economic life of the field, which is the contractor has to demonstrate through a field development plan which we have submitted and got it approved as well. So we have a field development plan which demonstrate to the government’s satisfaction both economically and technically that the field can continue to produce for 10 years.

The other requirement is the contractor should not owe any amount to the government. So we have issue on the method of calculating the royalty. So that matter has been deferred to the dispute resolution committee. So on that basis, the government has been giving us ad hoc extension. This is the method the government is following in respect of almost all the blocks where the production sharing contract has come to an end, where there is a subsequent extension is [Indecipherable]. So we don’t see any risk in securing that extension. Once this issue is resolved, I think government will extend it on a — for a next 10 years and such.

Rohan Shah — Alpha Enterprises — Analyst

Okay, great.

Elango Pandarinathan — Managing Director

And the question B-80. I think you’re referring to the reserve strategy. We’ve told earlier that we’ve engaged GCA to do the reserve estimate. Finally, GCA required the field to be on production to confirm our full model as such, but meantime — because — and we had thought we will complete all the facilities and bring the field on production during this quarter. But with this delay, we’ve got an initial report which we have taken into account while doing our own assessment of the reserve which will be published as part of the annual report.

Rohan Shah — Alpha Enterprises — Analyst

Okay, great. Yeah. Thank you. I look forward to reading it in the annual report. Thanks.

Elango Pandarinathan — Managing Director

Thanks. Thank you.

Operator

Thank you. The next question is from the line of Tejas Shah from Unique Stock Group. Please go ahead. Mr. Tejas Shah, please go ahead. Your line is unmuted. Mr. Tejas Shah, may we request you to unmute yourself? As there is no response, we’ll move to the next question, which is from the line of Sunil Jain from Nirmal Bang. Please go ahead.

Sunil Jain — Nirmal Bang — Analyst

Yeah. Good morning, sir. Two questions from my side. Hello? One is related to the postponement of the start-up production. So, how much cost overrun will be there because of that?

Elango Pandarinathan — Managing Director

Okay. Now, as you all know that we were in the field till mid-May — mid-May or third week of May [Technical Issues] been under lockdown. We just began [Technical Issues] Can you hear me now?

Sunil Jain — Nirmal Bang — Analyst

Yeah, yeah.

Elango Pandarinathan — Managing Director

Yeah. We will complete the total cost assessment and [Technical Issues] quarterly call, yeah.

Sunil Jain — Nirmal Bang — Analyst

Okay.

Operator

Sorry to interrupt, sir, but your voice is breaking.

Sunil Jain — Nirmal Bang — Analyst

[Technical Issues]

Operator

Mr. Sunil Jain, may we request you to mute your line while the management is answering your question because there is a disturbance from your background.

Sunil Jain — Nirmal Bang — Analyst

Yeah, okay. So my second question is related to e-auction in Dirok. So you said that we will be realizing $1 extra. So how much volume we can sell through e-auction and when we can get full benefit of the same?

Elango Pandarinathan — Managing Director

Yeah. So we went for the e-auction with the full volume under two categories. One is what is called firm commitment. The other is fallback basis. Fallback essentially involves no specific contractual obligation to take or supply the committed volume. The strategy was really not to disturb the existing arrangement we have with Oil India. Currently, whatever production we are — whatever we are producing, which is about 35 million standard cubic feet per day during the last financial year, the entire volume was being sold to Oil India. Oil India, in turn, was comingling that gas with theirs and then distributing.

When we went for e-auction, we gave — we put two options, both fallback and form. On the firm basis, we have received — bid for 30% of 1 million cubic meters per day which is roughly about 10 million standard cubic feet per day. Whatever we are producing, 30% can be sold on a firm basis on a $1 premium over the government notified prices. As and when the government notified prices changes or increases or decreases, this will also — the base price will change. But at every point in time, there will be a $1 premium. That’s a firm committed one. The fallback got bids for almost 70% of the volume. In fact, the total volume demand we received was close to 2 million cubic meters which is double what we had — or close to double of what we offered. Those will be on a fallback basis which means we will stay connected with those customers and whenever they have a demand, this gas will be diverted to meet that demand. Once again, the premium under fallback with higher ranges from about $1.25 million to $1.75 million over the government notified prices. So on an average, we expect to basically clear the entire volume through this method. Of course, fallback doesn’t have any specific obligation. Whenever there is — they don’t take, it will be delivered to Oil India. So the whole purpose was to before we go ahead and expand the capacity of Dirok facilities, we wanted to test the market and discover the market price. Obviously, what we have got in return is, demand has been confirmed for almost 2 million cubic meters per day, which is 70 million standard cubic feet per day and the premium of between $1 to close to 1.75 per MMBtu.

So overall, this quarter we will be doing all the transition because we don’t want the pipeline to the customer’s facilities. We’ll have to use the Oil India pipeline by paying some tariffs to them. So we are in that process. So from Q3 onwards, we expect to commence the sales under this methodology and realize better prices over and above the government notified prices, which should be minimum $1 more.

Sunil Jain — Nirmal Bang — Analyst

Sir, you said, Q3, you will be starting this process of bidding [Phonetic] additional. And whether you need to — Oil India will have any objection to this or any…

Elango Pandarinathan — Managing Director

Oil India being our joint venture partners, they hold 40% stake in Dirok. They are also of course sellers. So we were able to persuade them that this is in the best interest of all the parties to realize better market determined prices. Unfortunately, Oil India, for the gas that they produce, they cannot sell it at a price other than the common notified prices. So everything is being done with full support and cooperation of Oil India.

Sunil Jain — Nirmal Bang — Analyst

Okay. Yeah. Great. That is true. And once the prices increase from October 1, of notified price by the government, so we will be getting additional $1 for that 30% committed.

Elango Pandarinathan — Managing Director

Correct.

Sunil Jain — Nirmal Bang — Analyst

Okay. Great, sir. Thank you very much for clarifying.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Riddhesh Gandhi from Discovery Capital. Please go ahead.

Riddhesh Gandhi — Discovery Capital — Analyst

Hi, sir. I just had a question with regards to your B-80. Just to clarify, do you guys have externally certified reserves that you haven’t received and are you going to be sharing that in the annual report or this is your own internal estimate that you will be sharing in the annual report?

Elango Pandarinathan — Managing Director

In the annual report, we’ll be sharing our own internal estimate, which is verified by the external party.

Riddhesh Gandhi — Discovery Capital — Analyst

Okay. So it is effectively [Indecipherable] certified reserve, is it?

Elango Pandarinathan — Managing Director

Yeah. The reserves in the Annual Report will indicate the total reserves held by the Company across all its assets. The B-80 one which forms the material majority of it has been independently verified by the independent third party, yeah.

Riddhesh Gandhi — Discovery Capital — Analyst

Got it. And so — but any reason we are holding off until the Annual Report if it’s already ready? Any [Technical Issues] disclosing it?

Elango Pandarinathan — Managing Director

So normally we announce the — we disclose the results — that is the practice all the companies also follow along with that of the annual report. So we just wanted to follow the same practice.

Riddhesh Gandhi — Discovery Capital — Analyst

Okay. Got it. And just so I understand, it is actually — I mean, $1 higher price is applicable on how much percent of your Dirok production and for how long is the agreement, given it’s starting in Q3, and let’s say, as expected, there will be — there will be a reservation in prices in October which are being indicated to be reasonably higher — 50% of 70% higher than where they are right now, so there — so will it be $1 higher than that amount?

Elango Pandarinathan — Managing Director

Yes, it will be higher $1 than that amount. And the contract we are initially signing is for a two-year period with the — with all the customers. Because the demand received was close to 175% of the volume that we offered, we expect the offtake to — we expect to sell the — almost the entire volume through this method. The only thing to understand is, one, 30% is on a firm basis when there is a take or pay or firm commitment by the customers. The other 70% is on a fallback basis, so we would be meeting the — depending on the demand, but generally what the e-auction confirm to us is there is unmet demand from the existing customers. All these are existing customers. None of them are new customers. All of them are existing customers of Oil India. Most of them are major players like NTPC, NRL, BCPL, major public sector undertakings. We’re not talking about tea estates and smaller players. Therefore, we expect the volume to be taken at the premium of at least $1 more than the government notified places, whatever that may be.

Riddhesh Gandhi — Discovery Capital — Analyst

Which is in any case lower than what — what are the free [Phonetic] market prices.

Elango Pandarinathan — Managing Director

Yeah.

Riddhesh Gandhi — Discovery Capital — Analyst

And last question, if you could just give us an update on actually Kharsang.

Elango Pandarinathan — Managing Director

Yeah. In Kharsang, the production is — this year’s production is on an average around 550 barrels per day. With the oil prices strengthening, that revenue from there should increase. As far as PSC extension, that field also got ad hoc extension pending resolution of some of the cost recovery issues, some false clearance confirmations, etc., and the operator of that field is handling those lines.

Riddhesh Gandhi — Discovery Capital — Analyst

Got it, got it. Understood. Okay. Thank you.

Elango Pandarinathan — Managing Director

Thank you, Riddhesh.

Operator

Thank you. The next question is from the line of Nirbhay Mahawar from N Square Capital. Please go ahead.

Nirbhay Mahawar — N Square Capital — Analyst

Sir, just wanted to follow up regarding your production growth. You mentioned 2,400 barrel of net production will move to 8,000 post B-80 and 14,000 through other organic field expansions. Is this correct?

Elango Pandarinathan — Managing Director

I said 2,300 will go to about 7,000, but it has the potential to go to 14,000 once we make additional investment in existing portfolio. So what I wanted to outline was our existing portfolio has the capacity to deliver volume. Obviously, this will involve additional investment by way of drilling well, etc., etc.

Nirbhay Mahawar — N Square Capital — Analyst

I know. So B-80’s cash flow, would it be fair to assume that we should be able to do it through — largely through internal accruals?

Elango Pandarinathan — Managing Director

Yeah, post B-80, we will be able to phase it in a manner.

Nirbhay Mahawar — N Square Capital — Analyst

Okay. And wanted to understand your perspective on potential of DSF 3, what kind of opportunities exist for a company like HOEC?

Elango Pandarinathan — Managing Director

Yeah. Overall, there are — after take feedback from the industry, the government has increased the individual acreage size of each block than what it used to be in the previous bid round. So the acreage size is large. Overall, there is close to 13,000 square kilometer of discovered area across the country or in offer. We, as a company having experience — I mean, experienced both in Western offshore and Eastern offshore would be looking at opportunities, particularly in the offshore area as such, which more of a high risk, high reward — fall in the high-risk, high reward category where the competition also would be lower.

Nirbhay Mahawar — N Square Capital — Analyst

Okay. Okay. So you would — would it be fair to assume that in this category, probably number of bidders would be restricted to three, four, five only, because I think very few companies in any case have participated in DSF 1 and 2. So…

Elango Pandarinathan — Managing Director

In terms of the offshore, currently there are only three companies in India other than ONGC. Totally, if you include ONGC, there are only four companies in India with experience in offshore production. One is obviously ONGC, Reliance, GAIL and HOEC.

Nirbhay Mahawar — N Square Capital — Analyst

Okay. Thank you.

Operator

[Operator Instructions] The next question is from the line of Rikesh Parikh from Barclays. Please go ahead.

Rikesh Parikh — Barclays — Analyst

Yeah. Sir, thanks for the opportunity. Sir, can you throw some light on the marketing plan for B-80 gas? Have we done any firm [Indecipherable] by now?

Elango Pandarinathan — Managing Director

Yeah. On B-80, one of the important thing when you do market [Indecipherable] particularly through the e-auction mode, one is, the government policy now makes it mandatory that you can conclude gas sales contract only by following a e-auction route, and one of the requirement in the e-auction is really about when will you specific date, volume, quantity and some quality aspects as such. Now, having done the option exercise for Dirok, we’ve got the whole template now, and within a matter of three weeks we’ll be able to complete the whole e-auction process and conclude the buyer. In terms of the infrastructure, the gas pipeline from the mobile after-process [Phonetic] unit has already been connected to ONGC’s existing pipeline [Indecipherable] work has been completed and ONGC’s pipeline would take the gas all the way to Hazira and Hazira is the delivery point. It’s very — in three weeks’ time, we can conclude that e-tendering process. We will do that closer to commencement of production.

Rikesh Parikh — Barclays — Analyst

And the e-tendering will be like — will be like a government price plus or minus kind of a — kind of a pricing?

Elango Pandarinathan — Managing Director

There is no particular methodology. The different companies have followed different, meaning one can put up LNG as a benchmark and people can quote premium — sorry, a discount to that as such. So different companies have followed. In Northeast, we followed this government pricing benchmark because the Northeast customers are used to the government pricing methodology. In Western, which is a much more freer market, Gujarat market, I know other companies like Reliance followed a different methodology of linking the price to the Asian LNG import as a benchmark. Basically you need to — you need to provide a benchmark and then ask the bidders to [Technical Issues] will do that.

Rikesh Parikh — Barclays — Analyst

Okay. So it will be once we are ready with the infrastructure, we’ll be able to auction, right?

Elango Pandarinathan — Managing Director

Correct, correct.

Rikesh Parikh — Barclays — Analyst

Yeah. Now, coming to this Dirok for auction, I think that was very encouraging that we’re getting some additional demand over there. Just wondered, once we had the second phase up and running, are we under commitment to supply to Oil India or we can use this opportunity to do a direct market, having seen the demand?

Elango Pandarinathan — Managing Director

We can do direct marketing. There is no obligation to supply to Oil India.

Rikesh Parikh — Barclays — Analyst

There is no obligation, that’s helpful. And just last question…

Operator

Sorry to interrupt you, Mr. Parikh, may I request you to please rejoin the queue? We have participants waiting for their turn.

Rikesh Parikh — Barclays — Analyst

Sure.

Operator

Thank you so much. The next question is from the line of Tejas Shah from Unique Stock Group. Please go ahead.

Tejas Shah — Unique Stock Group — Analyst

Can we understand the quality of oil and how much it will get a discount to the Brent for the B-80?

Elango Pandarinathan — Managing Director

Yeah. The quality of oil is pretty, pretty close to Brent. So we expect that discount — we have not done the full benchmarking. The discount will be minimum discount.

Tejas Shah — Unique Stock Group — Analyst

And what is your now average price [Indecipherable] looking at and what will be the revenue if you can tell me in Indian rupees?

Elango Pandarinathan — Managing Director

We had earlier kind of indicated, at a price of about $55, the netback will be about $25 per barrel.

Tejas Shah — Unique Stock Group — Analyst

Now, given the prices being higher, would it be prudent to increase it to $65 or $70 or…

Elango Pandarinathan — Managing Director

This is — whatever is the prevailing price, see, the crude oil prices are — would be determined based on the prevailing international market price at point in time, right. In Q3, whatever is the prevailing price whenever we sell, we will get that. So generally the companies take a longer-term view on that, and it’s basically anyone’s take on what price one want to continue. All we can say is, we have kept the — our cost base such that we will be making margins even at a $35 oil price.

Operator

Thank you. The next question is from the line of Sadanand Shetty from True Equity. Please go ahead.

Sadanand Shetty — True Equity — Analyst

Yeah. Hi. Mr. Elango, what is the profile of customers who have bid in e-auction? My second question is, how is the price trend? Has it been volatile since the time it began? Has there any time it has been in discount also to APM prices?

Elango Pandarinathan — Managing Director

Yeah. Just the first question, in terms of the customer profile, majority of them are Government of India public sector companies such as Numaligarh Refinery, BCPL and NTPC power plant and raise fertilizer plants. So the customers are all — majority of them are — and there is state government power companies are also. But overall, it is all central public sector undertakings. All of them are currently buying gas from Oil India, and Oil India has a track record with all of them and all the facilities are — delivery facilities are already connected — stay connected as such. In terms of the movements, we have not yet commenced the sales under this model. We’ve just opened — closed the e-auction bidding a few days back. We will complete all the transition formalities. But the structure of pricing is such that every six months, the government will notify the government notified prices as it was happening April to September and again October to March. On whatever would be the notified prices which are notified dollar per MMBtu basis, there will be a premium of $1 over and above that price. So there is no fluctuation for that six months period. If the government notified prices fluctuates, accordingly the realization. But at any point in time there will be a $1 premium over that. That’s how the commercial structure is.

Operator

Thank you. The next question is from the line of Abhijit [Phonetic] Vora from Sharekhan. Please go ahead.

Abhijit Vora — Sharekhan — Analyst

Yes, sir. I have two questions. Firstly on, what is our cost of production for gas in MMBtu terms?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah. Cost of production should be around [Technical Issues].

Abhijit Vora — Sharekhan — Analyst

Sorry, sir, your voice is not audible to me.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

$1.4 per MMBtu to $1.5 MMBtu.

Abhijit Vora — Sharekhan — Analyst

Excluding the levies, right?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah, it is including the levies and such.

Abhijit Vora — Sharekhan — Analyst

Including the levy, okay.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Levy here is only the royalty. There is no cess on gas.

Abhijit Vora — Sharekhan — Analyst

Yeah. So [Indecipherable] on the gas, right?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

What is happening is most of the facilities, most of the outflows is not variable. The cost is not varying with production. If the uptake is more and the production is more [Technical Issues] the production is stagnant [Technical Issues] more. We can look at O&M overall price — O&M should be in the order of around $1.4 to $1.5 per MMBtu.

Abhijit Vora — Sharekhan — Analyst

Okay. And my [Indecipherable] question is that you guided on the like your potential to increase your overall production to 7,000 barrels of oil equivalent per day from [Technical Issues].

Operator

Sorry to interrupt you, Mr. Vora, but we cannot hear you. Your voice is coming muffled.

Abhijit Vora — Sharekhan — Analyst

Yeah. Just hold for a minute. Can you hear me now?

Operator

Yes. Please go ahead, sir.

Abhijit Vora — Sharekhan — Analyst

Sir, I just want the time lines. Like when we can achieve our like production guidance which you gave for 7,000 barrels of oil equivalent per day and that can further go to 14,000.

Elango Pandarinathan — Managing Director

Yeah. See, the 7,000 barrels of oil equivalent per day will be achieved as soon as we bring in the B-80 on to production.

Abhijit Vora — Sharekhan — Analyst

Okay.

Elango Pandarinathan — Managing Director

From 7,000 to 14,000 would require additional investment in different fields and as I said in my remarks, we will come with a road map and plan for that.

Operator

Thank you. The next question is from the line of Anek [Phonetic] Mudhra from Sonata [Phonetic] Research. Please go ahead.

Anek Mudhra — Sonata Research — Analyst

I hope I’m audible. Hello?

Elango Pandarinathan — Managing Director

Yes, please, yes.

Operator

Yes, sir, you are.

Anek Mudhra — Sonata Research — Analyst

Thanks for taking my question, sir. I have a question. You mentioned regarding Kharsang oil production, that is around 550 bopd. Sir, you were doing some drilling — like you were planned for doing some drilling of 18 oil wells over there, right, sir. So it will be — like the total production will go to 1,700 to 1,800 bopd, right, sir?

Elango Pandarinathan — Managing Director

Correct.

Anek Mudhra — Sonata Research — Analyst

So what is the time line for that?

Elango Pandarinathan — Managing Director

So right now the PSC extension part is really on an ad-hoc basis pending some resolution of some cost recovery — past cost recovery issues. That is being addressed. Post that, the JV will decide on the timeline of that. Kharsang is not operated by HOEC directly. It is by another operator in which we hold a stake.

Anek Mudhra — Sonata Research — Analyst

Okay, sir. And I have another one question. If I’m not wrong, there was some dip in price in Assam, like which impacted full year revenue. Can you please throw some light on that, how the price came down? As you have some base price declared by the government, so is the premium got affected or how the premium got affected?

Elango Pandarinathan — Managing Director

But clearly in Dirok, whatever gas we had been producing we sell it entirely to Oil India and Oil India in turn sell it to its own customers, and Oil India can buy and sell only at the government notified prices. Now, government notifies the prices every six months based on certain international benchmark. So if you look at our presentation in the last slides, we’ve given the range of prices over a period of time. So, for example, in April — sorry, in October 2014 or April 2015, for that period the price was — government notified prices was $4.66 per MMBtu. So over a period of time, particularly from mid-2016 onwards, it has reduced. And right now, the price that is prevailing from April to September 2021 government notified price is $1.79 per MMBTU. To address this issue only, we went with this e-auction which has thrown us a premium price of roughly of $1 million over and above this. In October 2021, government will revise once again based on the formula, the prices and typically gas prices kind of catch-up with the oil prices with a lag. So we expect to even the government nutrient prices to increase, in whichever scenario, we will get $1 more premium to that.

Anek Mudhra — Sonata Research — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Deepak Goradia from AM Investment [Phonetic]. Please go ahead.

Deepak Goradia — AM Investment — Analyst

Sir, you mentioned that it appears that more or less the sale of the oil will be [Technical Issues] all this date on auction only. Is that the policy, which is going to remain more or less.

Elango Pandarinathan — Managing Director

Yes. The government wants market determined prices to be determined through a transparent e-auction basis, that is the policy of the government for all across India.

Deepak Goradia — AM Investment — Analyst

And this auction [Technical Issues]

Operator

Mr. Goradia, we are sorry, but your voice was breaking sir.

Deepak Goradia — AM Investment — Analyst

[Technical Issues]

Operator

Sorry, Mr. Goradia, but we cannot hear you.

Deepak Goradia — AM Investment — Analyst

Hello. Can you hear me?

Elango Pandarinathan — Managing Director

Yeah. You can repeat the question please.

Operator

Sorry. The line of Mr. Goradia got disconnected. We will move to the next question with this one, the line of Ashwin Reddy from Samatva Investments. Please go ahead.

Ashwin Reddy — Samatva Investments — Analyst

Yeah, hi, good morning. Thank you for the opportunity. I have two questions. Firstly, regarding the capex for the next six months. What would be the total cash outgo you foresee in the next six to nine months. Hello?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

The capital for the next six months we need for B-80 and put together, we need about $20 million, which we have to raise the funds.

Ashwin Reddy — Samatva Investments — Analyst

So you’ll be raising more debt or would you plan to raise equity. What is the project plans of it.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah. So decide on it whichever the more cost of capital gets lower.

Ashwin Reddy — Samatva Investments — Analyst

Okay. Understood. And regarding Dirok, I think you potentially take the e-auction date for the entire current production or there is certain production, which you have to supply at the government prices only?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

No, we can do entire production.

Ashwin Reddy — Samatva Investments — Analyst

All right. And regarding PY-3, is there any progress on PY-3 because right now given where the oil prices are and given that the block did not have any issues in production in the past, is there any traction on PY-3.

Elango Pandarinathan — Managing Director

Yes. The meetings are being held between the JV parties to agree on a forward plan. Right now we don’t have anything to disclose.

Ashwin Reddy — Samatva Investments — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Rohit Ghotia, an Individual Investor. Please go ahead.

Rohit Ghotia — Individual Investor — Analyst

Sir, thank you for the opportunity sir. So I just wanted to know like over the last five years, you have always focused on one big project. First, it was Dirok then we had PY-1, then we had B-80. So going forward, I mean I believe our bandwidth has expanded and we can focus on one or two big things at a time. What are we focusing on next to bring on stream. I believe one would be the Dirok extension by expansion. What are the other things?

Elango Pandarinathan — Managing Director

Yeah. You are right, Rohit. We have built the organization to undertake multiple projects at the same time post B-80 and obviously B-80 has given enormous experience for us to look at some exciting opportunities in the western offshore. So we’d be looking at in the DSF bid round with lot of interest. And secondly, our priority is to really get the PY-1 production back on stream by drilling additional wells. So if you really look at the portfolio, three material assets we see are B-90, Dirok and PY-1. PY-1 is of particular interest for us because we hold 100% stake in the block. Our efforts will be rewarded to corporate. We have developed infrastructure already in place. Of course, technically, it is a challenging block. So we would do whatever it takes to derisk it and do that. So these three are the reality in our portfolio. Of course, other than that we have Cambay and some work is going on, will go on in futures in cost side. We’ve got that flexibility to really do but focus will now onwards would be on more on growing net production and enhancing our value over the volume.

Rohit Ghotia — Individual Investor — Analyst

The timeline of FY 23 for Dirok, do you have a similar timeline for PY-1. When do you expect the work to be completed?

Elango Pandarinathan — Managing Director

As I said, we would really — we have done the initial planning part, which is the [Technical Issues] that we completed and the [Technical Issues] process has been initiated that is ongoing, but we would take the decision in capital [Technical Issues].

Rohit Ghotia — Individual Investor — Analyst

Thank you. My last question sir is, I mean, we’ve talked in the opening remarks about asset monetization of PSUs and DSF bid round 3 to be of particular interest for us. And given our expansion programs to grow to 14,000 and even more maybe in the future, do you see us requiring equity capital in future?

Elango Pandarinathan — Managing Director

No. As we have said, initially we are looking at $20 million fund, initial but once we have the B-80 on stream, then we have the flexibility to manage the capital and if required, we will look at it at that point in time.

Rohit Ghotia — Individual Investor — Analyst

Okay, thank you. I’ll get back into the queue.

Operator

Thank you. The next question is from the line of Ravi Nanda, an Individual Investor. Please go ahead.

Ravi Nanda — Individual Investor — Analyst

Sir, what is the free cash flow, you have generated in this year.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

The operating cash flow is about INR250 crores.

Ravi Nanda — Individual Investor — Analyst

And sir, regarding debt of the company, when do we expect to repay the debt after B-80 commissioned over or later.

Elango Pandarinathan — Managing Director

See, B-80 is — see, substantial investments have got into the block, which is in the order of over INR700 plus crores. So unless this things put on production, the meaningful cash flow will not come now. This will be in the another, say, INR50 crores to INR75 crores, because of the gas rate revision there on to it. But once the B-80 comes into the picture, then we will be reporting good numbers, then that will take care of us on the organic growth of the rest of the asset.

Ravi Nanda — Individual Investor — Analyst

Okay sir. Thank you.

Operator

Thank you. Your next question is from the line of Manan Patel, an Individual Investor. Please go ahead.

Manan Patel — Individual Investor — Analyst

Hello, sir. Thank you for the opportunity. My first question is, you mentioned that for the oil that we sell through e-auction and Dirok, we will have to pay some charges to Oil India. So I wanted to understand like what kind of — like, what is the amount of charges would we need to pay?

Elango Pandarinathan — Managing Director

We expect it to be marginal because even now we are seeing a marginal transportation fees to them, but under this new arrangement to expand, we haven’t yet concluded an arrangement with them. Once we conclude, we will let you know, but we don’t expect it to be a major issue.

Manan Patel — Individual Investor — Analyst

Understood. Sir, my second question is, well, it’s great to know the e-auction demand for the Dirok gas, but we saw the other options that were conducted by RIL and Cairn got significant premium to whatever the government notified prices are. So why are these given very much lower than that for Dirok.

Elango Pandarinathan — Managing Director

Basically, India’s most premium gas market is in Gujarat. If you’re selling gas into the Gujarat, you can get a very high premium, whereas our [Indecipherable] would be restricted to upper Assam area. So there — where the only private sector player is us other than Oil India and ONGC and the buyers are all public sector companies, predominantly and tea estates. Therefore, this itself is a major breakthrough as far as we are concerned. We’ve kind of really made a pioneering effort in opening up the market and change the perception that this is not for market players.

Manan Patel — Individual Investor — Analyst

So the gas prices from B-80 which you will sell into Gujarat will be much better than [Indecipherable]?

Elango Pandarinathan — Managing Director

Correct. Absolutely.

Manan Patel — Individual Investor — Analyst

Thanks a lot, sir. And all the best.

Elango Pandarinathan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Sharad Sharma, an Individual Investor. Please go ahead.

Sharad Sharma — — Analyst

Hi, sir. It’s good to be a part of the journey. Hope you can firm up the dividend policy getting into the next couple of years. Sir, a quick question. Did you have any disruption in April, May, given there was a significant lockdown? Can you spend a moment on Kherem development. I don’t see anything on the deck. And what is your best estimate of the October MMBtu pricing [Indecipherable] given that June is almost over and all factors should be known by now? Thank you.

Elango Pandarinathan — Managing Director

Yeah. First of all, on Kherem, we are still — the PML, the petroleum mining lease has not yet been granted by the government. Still correspondence are going on between the Arunachal Pradesh government and the Government of India. So that’s why we did not give any updates. The PML is going. Our effective date on all commitments start only after the PML.

Your second question on the gas price [Indecipherable] gas price from October, not really — not done any calculation at this point in time, we have done. Not really done any work on that.

Sharad Sharma — — Analyst

April-May — any disruption, sir, April-May?

Elango Pandarinathan — Managing Director

Yeah. In terms of the offtake in PY-1, got disrupted during this period. We’ll share the details really along with the quarterly results.

Sharad Sharma — — Analyst

Got it. And what’s the dividend policy can be [Indecipherable].

Elango Pandarinathan — Managing Director

Thank you.

Sharad Sharma — — Analyst

And, Dirok, sir, you were saying something.

Elango Pandarinathan — Managing Director

No, I said Dirok was continuing.

Sharad Sharma — — Analyst

Thank you, sir. All good luck. And look forward to participating in your success. Thank you.

Operator

Thank you. The next question is from the line of the Rikesh Parikh from Barclays. Please go ahead.

Rikesh Parikh — Barclays — Analyst

Yeah. Thanks for the opportunity. Sir, can you just share what will be our capex plan for FY ’22 and also the funding arrangement for it?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

’21-’22, we have a plan for putting the B-80 on production, that is in the current financial year, right? So as we need total — whatever the work executed, which we have to pay for it, all put together, we are expecting in the order of, say, $20 million.

Rikesh Parikh — Barclays — Analyst

And this will be largely funded or internal will be…

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

We have some internal accrual. We need to get some funding done which we are working on it at the moment.

Rikesh Parikh — Barclays — Analyst

Okay. Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Pankaj Chaddah [Phonetic], an Individual Investor. Please go ahead.

Pankaj Chaddah — — Analyst

Two questions. One is, what would be our discovered and the proved and developed reserves? I mean, last balance sheet showed 26.5. So is there any change in that? And what would be the breakup of the two in terms of approved and probable out of the 26.5 that was reflected last year?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah. We’ll disclose as part of the annual report.

Pankaj Chaddah — — Analyst

Okay, sir.

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah.

Pankaj Chaddah — — Analyst

And so presently — second is, presently PY-1 revenues are zero or we are — in the current quarter there is some revenue on PY-1?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

No, there is some revenue. We are doing small volume. What I said was there were disruptions in between due to pandemic as well.

Pankaj Chaddah — — Analyst

So is it because of demand there were disruptions or there were some technical issues?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

It’s actually both.

Pankaj Chaddah — — Analyst

Okay. But have you overcome the fractured field issues that you’ve been facing?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

Yeah. Feasibility status — to revive PY-1 production, further investment in drilling wells would be required. Currently, with whatever little we are continuing the operations.

Pankaj Chaddah — — Analyst

Okay. And the [Indecipherable] PY-3 is continuing? I mean — or how is it progressing with on that for PY-3?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

For PY-3, we’re not the operator. So we are a nonoperator. We participate in the discussion. So, as and when a firm plan is announced, we will you that.

Pankaj Chaddah — — Analyst

And for B-80, the present estimate is 4,000 barrel equivalent on — when you start or would it be higher than that?

Ramasamy Jeevanandam — Executive Director and Chief Financial Officer

We said 8,000 barrel of oil equivalent and that will be from the start.

Operator

Thank you. The next question is from the line of Tejas Shah from Unique Stock Group. Please go ahead. As Mr. Tejas Shah has placed the call on hold, we’ll move to the next question, which is from the line of Abhijit Vora from Sharekhan. Please go ahead.

Abhijit Vora — Sharekhan — Analyst

Yeah, sir. I have one follow-up question. What was the mix of the oil and gas production at the next 7,000 bopd?

Elango Pandarinathan — Managing Director

Yeah. So when we — right now, our oil and gas production mix is, production is majority is gas which is, the majority is coming from Dirok. So it’s about 90% gas and 10% oil. When we bring B-80 on production, it will be predominantly oil. Therefore the total mix will be approximately 50-50, 50% oil, 50% gas as long as net entitled production of HOEC.

Abhijit Vora — Sharekhan — Analyst

And then with the oil prices moving up, should that improve the overall [Indecipherable] profitability because of the gas we are making currently are lower [Indecipherable]. Will that be right assumption to make?

Elango Pandarinathan — Managing Director

Correct, because we will get the current pricing which is spot market — sorry, international market price for oil with some discount to the benchmark crude, whatever we agreed with [Indecipherable].

Operator

Thank you. The next question is from the line of Ashwin Reddy from Samatva Investments. Please go ahead. Mr. Ashwin Reddy, please go ahead. Your line is unmuted. As there is no response from the line…

Ashwin Reddy — Samatva Investments — Analyst

Hello?

Operator

Mr. Reddy, are you there?

Ashwin Reddy — Samatva Investments — Analyst

Yeah, hi, sorry. That was due to the connectivity. So asking you a question on PY-1. So after you finish your work on PY-1, so is there any — can we sell gas only to GAIL on the same price or can we again have an e-auction for the gas prices [Indecipherable] in PY-1?

Elango Pandarinathan — Managing Director

Yeah. In PY-1, when we — when we drill the new well, some of them would be outside the existing field area but within our block area. So we are under no obligation to sell that volume to GAIL. But whatever is — whatever we build within the existing producing area, that will be sold to GAIL under the existing contract fixed at a price of $3.67 per MMBtu. That’s the fixed price. So once we decide the exact location, we will be accordingly determining. But there is a captive customer in terms of GAIL and they have a connected facility with our plant, so it would be to GAIL predominantly.

Ashwin Reddy — Samatva Investments — Analyst

But the end users for this gas [Indecipherable] power plants in Tamil Nadu and industries there. So what is the demarcation like, I mean at the end user level?

Elango Pandarinathan — Managing Director

At the end user level, I think what we recently heard is the government is — Tamil Nadu government is kind of open to idea of [Technical Issues] selling the power not only to Tamil Nadu Electricity Board but to private players as well. So overall, with the IOC’s pipeline network coming up, we are seeing an increasing connectivity in network, which was a major issue. As long as you don’t have a pipeline network, we are dealing with a very, very limited area. So we don’t see a demand issue as far as the PY-1 production.

Operator

Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand over the conference to the management for closing comments.

Elango Pandarinathan — Managing Director

Thank you. Thank you for joining in large numbers. With our recent transformational B-80 development experience, as a team, we are confident that HOEC will propel from a leading private sector player in northeast to a significant offshore oil and gas developer and operator with a strong balance sheet. We remain committed to add value to all the stakeholders by continuing our growth journey at a faster pace. Thank you, all.

Operator

[Operator Closing Remarks]