The Members of
Hindustan Oil Exploration Company Limited
Your Directors have pleasure in placing before you the 32nd Annual Report onthe business and operations of your Company along with the audited financial statementsfor the Financial Year ended 31 March 2016.
1. FINANCIAL HIGHLIGHTS
|Particulars ||Standalone ||Consolidated |
| ||2015-16 ||2014-15 ||2015-16 ||2014-15 |
|Turnover ||283 ||403 ||487 ||595 |
|Other Income ||74 ||76 ||73 ||74 |
|Revenue ||357 ||479 ||560 ||669 |
|Earnings / (Loss) before Depreciation / Depletion / Amortization / Taxation / and Exceptional items ||138 ||(117) ||160 ||(95) |
|Depreciation / Depletion / Amortization / Exploration write-off ||(124) ||(459) ||(125) ||(460) |
|Exceptional items ||51 ||(11634) ||51 ||(11634) |
|Profit / (Loss) before tax ||65 ||(12210) ||85 ||(12190) |
|Provision for taxation ||1 || ||(6) ||(6) |
|Profit / (Loss) after tax ||66 ||(12210) ||79 ||(12196) |
|Profit / (Loss) brought forward ||(16035) ||(3825) ||(15951) ||(3755) |
|Profit / (Loss) carried forward to the Balance Sheet ||(15970) ||(16305) ||(15872) ||(15951) |
figures have been rounded off.
2. BUSINESS PERFORMANCE
During the year your Company produced 0.18 million barrel of oil equivalent (mmboe) ofcrude oil and gas as against 0.25 mmboe in the previous year. This is due to the declinein production in PY-1 field.
The lower production has resulted in a reduction in turnover to $ 283 million for theyear in comparison to $ 403 million in the previous year which is about 29% reductionover the previous year. Also the total revenue for the year was $ 357 million as against $479 million in the previous year and the decrease is mainly due to the reason as statedabove.
On a standalone basis the Profit-After-Tax was $ 66 million as against a loss of $12210 million in the previous year. This is mainly due to the continuous effort of costreduction the other income and certain exceptional credits realised during the year.
During the year under review the deferred tax asset of $ 4647 million (previous year$ 4478 million) has not been considered as there is no virtual certainty existing for itsrealisation. Accordingly the carried forward business losses and unabsorbed depreciationto the extent of deferred tax liability as at 31 March 2016 stands adjusted.
On a consolidated basis the total revenue has reduced from $ 669 million to $ 560million which is a reduction of 16% over the previous year. However a Profit-After-Taxof $ 79 million is reported for the current year as against a loss of $ 12196 million inthe previous year for reasons as stated in the standalone accounts.
During the year under review the development expenditure of $ 128.41 million wasincurred for the gas development project at Assam.
Measures taken to improve the operational & financial performance
The Company has initiated measures to achieve improvement in operational and financialperformance by focusing on cost optimization in existing producing fields. With respect toDirok field in Assam the Company has mobilised all the resources to complete the existingwells and drill one more development well. Application for various approvals such asenvironmental forest and wildlife have been made and are awaited before the field is puton production.
ICRA has continued the long term stable rating of (ICRA) BBB+ for the line of credit of$ 100 crore.
The Company has capital requirements to implement its business plans and thedevelopment of Dirok discovery in Assam and other fields in the immediate future whichcan be met through the existing working capital.
Your Directors have not recommended any dividend for the Financial Year 2015-16.
5. DEPOSITS FROM PUBLIC
Your Company has not accepted any deposits from public and as such no amount onaccount of principal or interest are outstanding as at the balance sheet date.
6. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY COMPANY
Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 form part of the Notes to the Standalone FinancialStatements provided in this Annual Report.
7. MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT
In terms of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 Management's Discussion and Analysis Report is set out in a separatesection and forms part of this Annual Report.
8. NO CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business being carried out by the Company.
9. SHARE CAPITAL
There is no change in share capital during the year. The company has not issued anyshares with differential rights as to voting dividend or otherwise.
Promoters group companies Eni UK Holding PLC Burren Shakti Limited and Burren EnergyIndia Limited collectively hold 22.42% (previous year 47.18%) of the paid-up equity sharecapital of the Company. The promoters have declared that they have not pledged any oftheir shareholding in the Company.
11. HOEC BARDAHL INDIA LIMITED (HBIL) WHOLLY OWNED SUBSIDIARY OF HOEC
The Board of Directors have appointed Mr. Hashit Rawal as Whole-time Director &Chief Operating Officer with effect from 29 June 2015 up to 30 June 2016. Mr. Minesh Bhatthas resigned as Director effective 18 January 2016.
Distributorship Agreement between HBIL and Bardahl Manufacturing Corp. USA (BMC) wasnot extended beyond 29 February 2016 and in consequence there will be an impact inrevenues from the financial year 2016-17 from the subsidiary but efforts are being takento reduce such impact.
During the year the Board of Directors of the Company have reviewed the operations andaffairs of the subsidiary company.
Pursuant to Section 129(3) of the Companies Act 2013 Accounting Standard 21 (AS-21)issued by the Institute of Chartered Accountants of India and the relevant provisions ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 ConsolidatedFinancial Statements of the Company has been prepared and forms part of this AnnualReport.
Also a statement containing salient features of the financial statement of theCompany's subsidiary is appended as Annexure - IV to the Board's Report in the prescribedformat AOC-1.
Further in accordance with section 136 of the Companies Act 2013 the Annual AuditedFinancial Statements including the Consolidated Financial Statements and relatedinformation of the company and the Audited Financial Statements of the subsidiary companyare available on the company's website www.hoec.com. The documents will also be availablefor inspection at the Registered Office of the Company during normal working hours.
12. UNINCORPORATED JOINT VENTURES
The financial statements of the Company reflect its share of assets liabilitiesincome and expenditure of the joint venture operations which are accounted on the basisof available information on a line-by-line basis with similar items in the Company'sAccounts to the extent of the participating interest of the Company as per various"Production Sharing Contracts". The financial statements of the UnincorporatedJoint Ventures are prepared by the respective Operators in accordance with therequirements prescribed by the respective Production Sharing Contracts.
13. COST ACCOUNTING RECORDS
The Company maintained cost records and audited in terms of Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014.
Board appointed Mr. K. Suryanarayanan a Cost Accountant in Practice as cost auditorof the Company for the financial year 2016-2017 at a fee of $ 200000 (Rupees Two Lakhsonly) plus applicable taxes and out of pocket expenses subject to ratification of thesaid fees by the shareholders at the ensuing Annual General Meeting.
The cost audit report would be filed with the Central Government within the prescribedtimelines.
14. CORPORATE GOVERNANCE REPORT
The report on Corporate Governance as stipulated under the SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 along with a certificate from a CompanySecretary in Practice confirming to compliance of corporate governance is attached to thereport on Corporate Governance.
15. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of Annual Return in Form MGT-9 as requiredpursuant to Section 92 of the Companies Act 2013 is given in Annexure - I and forms partof this Report.
16. DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year under review the following changes took place in the composition ofthe Board.
Mr. Guido Papetti Non-Executive and Non-Independent Director resigned from the Boardon 18 January 2016 and Board places on record its appreciation for his valuablecontribution during his tenure. Mr. Filippo Ricchettti was appointed as Non-Executive andNon-Independent Additional Director on 18 January 2016.
All independent directors have given declarations that they meet the criteria ofindependence as stipulated under Section 149 (6) of the Companies Act 2013 and theprovisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015.
Mr. P. Elango Managing Director Mr. R. Jeevanandam Whole-time Director & CFO andMr. K. Premnatha Company Secretary are the Key Managerial Personnel (KMP) of the Company.
17. BOARD EVALUATION
Pursuant to the provisions of the Companies Act 2013 and the provisions of SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015 the Board hascarried out an annual evaluation of its own performance the Committees of the Board andindividual directors. The manner in which the evaluation has been carried out is explainedin the Corporate Governance Report.
18. NUMBER OF MEETINGS OF THE BOARD
During the year six (6) Board Meetings were convened and held. The details of meetingsare given in the Corporate Governance Report. The intervening gap between the Meetings waswithin the period prescribed under the Companies Act 2013.
19. REMUNERATION AND NOMINATION POLICY
The Board of Directors has framed a policy which lays down a frame work for theremuneration payable to Directors and other Key Managerial Personnel. This policy alsostates the criteria for selection and appointment of Board Members.
The details of the policy are stated in the Corporate Governance Report. NomineeDirectors of the Company on the Board of HOEC Bardahl India Limited (wholly ownedsubsidiary of HOEC) do not receive any remuneration or commission.
20. MANAGERIAL REMUNERATION
The Company has made necessary application to the Central Government for waiver ofexcess remuneration paid to Mr. Manish Maheshwari former Managing Director for the periodfrom 01 April 2014 to 08 October 2014 and also for the proposed remuneration payable toMr. P. Elango Managing Director and Mr. R. Jeevanandam Whole Time Director as per theresolutions passed by the shareholders at the 31st Annual General Meeting andnecessary approvals are expected from the Central Government.
21. RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the year under review wereon an arm's length basis and in the ordinary course of business. The details of therelated party transactions as required under section 134(3)(h) of the Companies Act 2013read with the rule 8 of Companies (Accounts) Rules 2014 are disclosed in the prescribedForm AOC-2 and enclosed as Annexure - II to this report. Your Directors also draw theattention of the members to Note 35 to the standalone financial statements which set outthe related party disclosures.
22. MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments have occurred after the close of the year till thedate of this Report which affect the financial position of the Company.
23. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There were no material orders passed by the regulators or courts or tribunals impactingthe going concern status and the Company's operations in future.
24. INTERNAL FINANCIAL CONTROLS
During the year M/s. Deloitte Haskins & Sells LLP Chartered Accountants wereengaged to report on Internal Financial Controls and their adequacy. The report waspresented before the Audit Committee and suitable corrective actions are being taken asper the directions of the Audit Committee on an ongoing basis to improve the efficiency.
25. DIRECTORS' RESPONSIBILITY STATEMENT
In terms of Section 134(5) of the Companies Act 2013 your directors to the best ofknowledge and belief and according to the information and explanation obtained by themstate that:
(i) in the preparation of annual accounts for the financial year ended 31 March 2016the applicable accounting standards have been followed along with proper explanation formaterial departures if any;
(ii) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(iii) the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
(iv) the directors had prepared the annual accounts on a going concern basis;
(v) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
(vi) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
26. PARTICULARS OF EMPLOYEES
In terms of the provisions of Section 197(12) of the Companies Act 2013 read with Rule5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the name and other particulars of the employee drawing remuneration inexcess of the limits are set out in Annexure - III to this Report.
27. EMPLOYEES STOCK OPTION SCHEME
The shareholders of the company had at the 31st Annual General Meeting heldon 25 September 2015 approved the Employees Stock Option Scheme of the Company namelyAssociate Stock Option Plan 2015 (ASOP 2015) in supersession of the existing HOECEmployee Stock Option Scheme 2005.
During the year under review no options were vested under ASOP 2015.
28. STATUTORY AUDITOR
At the 31st Annual General Meeting (AGM) held on 25 September 2015 M/s.Deloitte Haskins & Sells LLP (FRN: 117366 W/W 100018) Chartered Accountants wereappointed as Statutory Auditors for a period of five (5) years to hold office from theconclusion of that AGM until the conclusion of 36th AGM subject toratification at every AGM of the Company.
M/s. Deloitte Haskins & Sells LLP have confirmed that they are eligible forappointment and that their appointment shall be within the limits prescribed under Section139 of the Companies Act 2013.
Accordingly their appointment is placed for ratification by the shareholders of theCompany at the ensuing AGM.
The Auditors Report issued by them for the financial year ended 31 March 2016 formspart of this Annual Report and does not contain any observations / reservations /qualifications.
29. SECRETARIAL AUDIT
In terms of Section 204 of the Companies Act 2013 and rules made there under M/s. S.Sandeep & Associates Company Secretaries in Practice were appointed to conduct thesecretarial audit of the Company for the financial year ended 31 March 2016. TheSecretarial Audit Report issued by them is included as Annexure V to this Report and itdoes not contain any observations / reservations / qualifications.
30. INTERNAL AUDIT
During the year under review the Company has engaged M/s. Guru & Ram CharteredAccountants as its Internal Auditors. Their scope of work includes review of internalcontrols and its adherence statutory compliances health safety and environmentcompliance compliance towards related party transactions and risk assessments. InternalAuditors findings are discussed and suitable corrective actions are taken as per thedirections of the Audit Committee on an ongoing basis to improve efficiency in operations.
31. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
Your Company operates in an environmentally responsible manner for enduring benefitto all stakeholders. During the year under review several steps were taken forconservation of energy some of which are listed below:
A) Conservation of Energy:
a) The steps taken or impact on conservation of energy are:
1. Due consideration has been given to energy consumption while procuring equipmentswith preference for BEE Star rated equipments wherever feasible.
2. As a responsible Corporate Citizen and in adherence to climate change policy theCompany is continuously taking effective steps to conserve energy and to reduce methaneand other Green Houses Gases (GHG) emissions wherever feasible.
3. Minimized environmental impact from its activities with its initiatives on energyand resource conservation at its PY-1 facilities and use of renewable energy like solarpanels at offshore locations.
4. The Company regularly monitors air emission sources and ambient air quality andensures that emission levels at all times remain lower than the statutory limits.
5. Except the emergency lights all lights and electrical gadgets are turned off afterworking hours and on holidays at office premises of the Company to help in minimizing theenergy consumption.
b) Steps taken by the Company for utilizing alternate source of energy: The Company isin the process of formulating a policy for use of solar energy in its processinstallation.
c) Capital investment on energy conservation equipment: No additional investment ismade or implemented for reduction in energy consumption.
d) Impact of the measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods: Reduction in emission of Green HouseGases as a result of minimal use of air conditioning and reduced consumption of power andfuel.
B) Technology absorption:
(a) During the year the technology absorption adaptation and innovation is nil.
(b) No technology import was made during the last 3 years.
(c) No Research and Development expenditure was made during the year.
(d) No benefits were derived like product improvement cost reduction productdevelopment or import substitution during the year.
C) Foreign exchange earnings and outgo:
(a) Activities relating to exports; initiatives taken to increase exports; developmentof new export markets for products and services; and export plans:
Company is engaged in production of crude oil and natural gas. The existing Governmentpolicies and Production Sharing Contracts (PSCs) to which Company is a party is subjectto domestic market obligations till self-sufficiency in domestic production ofhydrocarbons.
(b) Total foreign exchange earned and used:
|Particulars ||2015-16 ||2014-15 |
|A. Foreign Exchange Earnings || || |
|B. Foreign Exchange for repayment of loan and interest || ||255.88 |
32. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Board of Directors have at their meeting held on 28 May 2015 constituted aCorporate Social Responsibility Committee with Mr. Sunil Behari Mathur as Chairman and Ms.Sharmila Amin and Mr. P. Elango as members. The CSR Committee has formulated a CSR policywhich is available on the Company's website www.hoec.com.
The Company has undertaken various CSR activities along with its joint venturepartners. One such event was contribution of $ 1 lakh towards Chennai Flood Relief inaddition the employees of the Company had also contributed their one day salary withextensive participation in the relief efforts through social organisations.
33. PROTECTION TO WOMEN EMPLOYEES
The Company has in place a Corporate Policy on Anti-Sexual Harassment of Employees interms of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. An Internal Complaints Committee has also been constituted andduring the year under review no complaints were received from any employee.
34. HUMAN CAPITAL & MANAGEMENT
The Company continues to pursue the best practices to develop its human capital. TheCompany has a transparent Performance Appraisal System (PAS) with focus on theorganizational objectives aligned with Key Performance Indicators. An objectiveperformance measurement with an assessment of potential and identification of trainingneeds for individual growth are being pursued.
35. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of the Investor Education Protection Fund (Uploading ofInformation regarding Unpaid and Unclaimed amounts lying with companies) Rules 2012 theCompany has transferred the amount which was due on 30th October 2015 and hasfiled necessary forms and details of unpaid and unclaimed amounts lying with the Companywith the Ministry of Corporate Affairs.
36. LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees for the year 2016-17 toNSE and BSE where the Company's shares are listed.
Your Directors place on record their gratitude for the support and co-operationreceived from Government agencies namely the Ministry of Petroleum & Natural GasDirectorate General of Hydrocarbons Ministry of Defence Ministry of Environment andForests and the State Governments of Gujarat Tamil Nadu Assam Rajasthan and Telanganaand the authorities working under them.
Your Directors express their gratitude to the Company's stakeholders shareholdersbusiness partners and the bankers for their understanding and support and look forward totheir continued support in future. Your Directors value the professionalism dedicationand commitment of the HOEC team to overcome the present challenges.
| ||For and on behalf of the Board of Directors |
| ||S.B. Mathur |
|Date: April 18 2016 ||DIN: 00013239 |
|Place: Chennai ||Chairman |