Hindustan Oil Exploration Company Ltd.
|BSE: 500186||Sector: Oil & Gas|
|NSE: HINDOILEXP||ISIN Code: INE345A01011|
|BSE 15:46 | 16 Feb||120.50||
|NSE 15:48 | 16 Feb||121.00||
|Mkt Cap.(Rs cr)||1,572|
|Mkt Cap.(Rs cr)||1572.40|
Hindustan Oil Exploration Company Ltd. (HINDOILEXP) - Director Report
Company director report
Hindustan Oil Exploration Company Limited
Your Directors have pleasure in placing before you the 33rd Annual Report onthe business and operations of your Company along with the audited financial statementsfor the Financial Year ended March 31 2017.
1. FINANCIAL HIGHLIGHTS
($ in lacs)
2. BUSINESS PERFORMANCE
During the year your Company produced around 0.15 million barrel of oil equivalent(mmboe) of crude oil and gas as against 0.18 mmboe in the previous year. The decrease inproduction is due to natural decline of the existing producing assets.
The lower production has resulted in a reduction in turnover to $ 2502 lacs for theyear in comparison to $ 2834 lacs in the previous year. However the total revenue forthe year was $ 4211 lacs as against $ 3718 lacs in the previous year and the increase ismainly due to interest income and income from financial investments.
On a standalone basis the Profit-After-Tax was $ 3638 lacs as against the profit of $349 lacs 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.
On a consolidated basis the total income has reduced from $ 6070 lacs to $ 4490lacs. This is due to the major reduction in revenue from the subsidiary for the financialyear 2016-17 due to discontinuation of marketing the products of Bardahl ManufacturingCorporation USA. However a Profit-After-Tax of $ 3606 lacs is reported for the currentyear as against the profit of $ 502 lacs in the previous year for reasons as stated in thestandalone accounts.
During the year under review a development expenditure of $ 5310 lacs was incurredfor the gas development project at Assam.
Transfer to reserves
During the year under review no amount was transferred to the capital reserves of theCompany.
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. Statutory clearance Stage-1 Forest clearanceand Environment Clearance for the development phase of Dirok gas field have been obtainedin January 2017.
Your Company has capital requirements to implement its business plans and to continuethe development of Dirok field in Assam revisiting the development of PY-1 field B-80Kherem and other fields in the immediate future which can be met through the existingworking capital by proper scheduling of the project activities.
Your Directors have not recommended any dividend for the Financial Year 2016-2017.
5. DEPOSITS FROM PUBLIC
Your Company has not accepted any deposits from public and as such no amount 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 separate section andforms 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.
During the year the ENI group companies had divested its entire stake in the Companyexcept for nominal shareholding of 5745 shares held through Burren Energy India Limitedand has applied for re-classification of its status as public shareholder. The promotershave declared that they have not pledged any of their shareholding in the Company.
11. SUBSIDIARY COMPANY
Your Company has one wholly owned subsidiary namely Hindage Oilfield Services Limited.
Subsequent to the termination of the Distributorship Agreement by Bardahl ManufacturingCorp. USA in February 2016 the name of the Company has been changed from HOEC BardahlIndia Limited to Hindage Oilfield Services Limited with effect from August 04
2016. Also there has been a change in the nature of business to Oil Field Equipmentand Service Sector.
During the year the following changes took place in the composition of the Board ofDirectors of the subsidiary company.
- Mr. Hashit Rawal resigned from the post of Wholetime Director & COO and as anemployee of the Company with effect from May 24 2016.
- Mr. Pronip Kumar Borthakur nominated by the holding company HOEC was appointed as aNonExecutive Independent Director with effect from July 25 2016.
Due to the termination of the distribution agreement by BMC there has been nomarketing of BMC products which resulted in substantial decline in revenue from thesubsidiary for the financial year 2016-17. However efforts are being taken to reduce suchimpact by entering into new line of business.
During the year the Board of Directors of the Company have reviewed the affairs of thesubsidiary.
Pursuant to Section 129(3) of the Companies Act 2013 the Indian Accounting Standards(Ind AS) and relevant provisions of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 Consolidated Financial Statements of the Company has beenprepared and forms part of this Annual Report.
Also a statement containing salient features of the financial statement of theCompany's subsidiary is appended as Annexure - III to the Board's Report in the prescribedForm 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 . Thedocuments will also be available for inspection at the Registered Office of the Companyduring 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
Your Company has maintained cost records which were duly audited in terms of Section148 of the Companies Act 2013 read with the Companies (Cost Records and Audit) Rules2014.
The Board of Directors have appointed Mr. K. Suryanarayanan a Cost Accountant inPractice as Cost Auditor of the Company for the financial year 2017-2018 at a fee of $200000 (Rupees Two Lakhs only) plus applicable taxes and out of pocket expenses subjectto ratification of the said fees by the shareholders at the ensuing Annual GeneralMeeting.
The cost audit report for the financial year 2017-2018 would be filed with the CentralGovernment within the prescribed timelines.
14. CORPORATE GOVERNANCE REPORT
As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015Corporate Governance Report along with a certificate from a Company Secretary in Practicethereon is attached and forms part of this Report.
15. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of Annual Return in Form MGT-9 as 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 the following changes took place in the composition of the Board ofDirectors.
Mr. Paolo Ceddia and Mr. Filippo Ricchetti NonExecutive & Non-IndependentDirectors resigned from the Board on August 03 2016. Board places on record itsappreciation for their valuable contribution during their tenure.
Based on the recommendations of the Nomination and Remuneration Committee Boardappointed Mr. Pronip Kumar Borthakur as Non-Executive Independent Director with effectfrom June 15 2016. The shareholders approved the said appointment at the 32ndAnnual General Meeting held on September 26 2016.
Mr. K. Premnatha resigned as Company Secretary & Compliance Officer on October 272016 and based on the recommendations of the Nomination and Remuneration Committee Boardappointed Ms. G. Josephin Daisy as Company Secretary & Compliance Officer with effectfrom October 27 2016.
As on March 31 2017 Mr. P. Elango Managing Director Mr. R. Jeevanandam Whole-timeDirector & CFO and Ms. G. Josephin Daisy Company Secretary are the Key ManagerialPersonnel (KMP) of the Company.
17. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each independent director that he /she meets the criteria of independence as laid down under Section 149(6) of the CompaniesAct 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
18. BOARD EVALUATION
Pursuant to the provisions of the Companies Act 2013 and the provisions of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 Board has carried outan annual evaluation of its own performance the Committees of the Board and individualdirectors. The manner in which the evaluation has been carried out is explained in theCorporate Governance Report.
19. NUMBER OF MEETINGS OF THE BOARD
During the year five (5) Board Meetings were convened and held. The details ofmeetings are given in the Corporate Governance Report. The intervening gap between theMeetings was within the period prescribed under the Companies Act 2013.
20. COMMITTEES OF THE BOARD
Currently the Board has five (5) Committees namely Audit Committee Nomination andRemuneration Committee Stakeholders Relationship Committee Risk Management Committee andCorporate Social Responsibility Committee. The composition of the Board and its Committeesare provided in the Corporate Governance Report section of this Annual Report.
21. REMUNERATION AND NOMINATION POLICY
The Board of Directors has framed a policy which lays down a frame work for theremuneration payable to Directors and other Key Managerial Personnel. This policy alsostates the criteria for selection and appointment of Board Members. The details of thepolicy are stated in the Corporate Governance Report.
Nominee Directors of the Company on the Board of Hindage Oilfield Services Limited(wholly owned subsidiary of HOEC) do not receive any remuneration or commission.
22. MANAGERIAL REMUNERATION
The Company has obtained necessary approvals from the Central Government for theappointment and payment of remuneration to Mr P Elango Managing Director and Mr R.Jeevanandam Whole-time Director & CFO for a period of three years with effect fromFebruary 02 2015 to February 01 2018. Also the application filed with the CentralGovernment regarding the payment of remuneration of Mr. Manish Maheshwari in his capacityas the Managing Director for the period from April 01 2014 to October 08 2014 has beenapproved.
23. 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. However no related partytransactions were entered pursuant to Section 134(3)(h) of the Companies Act 2013 readwith the Rule 8 of Companies (Accounts) Rules 2014. Your Directors draw the attention ofthe members to Note 39 to the standalone financial statements which set out the relatedparty disclosures.
24. 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.
25. 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.
26. DIRECTORS' RESPONSIBILITY STATEMENT
In terms of Section 134(5) of the Companies Act 2013 your directors to the best oftheir knowledge and belief and according to the information and explanation obtained bythem state that:
(i) in the preparation of annual accounts for the financial year ended March 31 2017the 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.
27. PARTICULARS OF EMPLOYEES
A statement disclosing the details pursuant to the provisions of Section 197 of theCompanies Act 2013 read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are set out in Annexure - II to this Report.
28. EMPLOYEES STOCK OPTION SCHEME
The shareholders of the Company had at the 31st Annual General Meeting heldon September 25 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 granted or vested under ASOP 2015.
29. STATUTORY AUDITOR
At the 31st Annual General Meeting (AGM) held on September 25 2015 M/s.Deloitte Haskins & Sells LLP (FRN:117366W/W-100018) Chartered Accountants 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.
Accordingly their appointment is placed for ratification by the shareholders of theCompany at the ensuing AGM.
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.
The Auditor's Report issued by them for the financial year ended March 31 2017 formspart of this Annual Report and does not contain any observations / reservations /qualifications.
30. SECRETARIAL AUDIT
In terms of Section 204 of the Companies Act 2013 and rules made there under M/s. S.Sandeep & Associates Company Secretaries in Practice were appointed to conduct thesecretarial audit of the Company for the financial year ended March 31 2017. TheSecretarial Audit Report issued by them is included as Annexure - IV to this Report and itdoes not contain any observations / reservations / qualifications.
31. 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.
32. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
Your Company operates in an environmentally responsible manner for enduring benefit toall stakeholders. During the year under review several steps were taken for conservationof 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 equipmentwith preference for BEE Star rated equipment 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 GreenHouses Gases (GHG) emissions wherever feasible.
3. Minimized environmental impact from its activities with its initiatives on energyand resource conservation and use of renewable energy like solar panels.
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 timers are installed to turn off all lightsautomatically during day hours to help in minimizing the energy consumption.
6. Periodical preventive maintenance and condition monitoring of the aged equipmentthereby increasing life expectancy of assets eliminating premature replacement andlowering energy consumption.
7. Carrying out Environmental Impact Assessment (EIA) study in conformance to HOEC'sEnvironment and Safety Policy to formulate appropriate environmental management plan andmitigation measures to eliminate or minimize pollution environmental disturbances duringthe life-cycle of the project.
b) Steps taken by the Company for utilizing alternate source of energy:
The Company is in the process of formulating a policy for use of solar energy and hasexperimented in its process installation at Assam.
c) Capital investment on energy conservation equipment:
No additional investment is made or implemented for reduction in energy consumption.
d) Impact of the measures at (a) and (b) above for reduction of energy consumption 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) Technology absorption adaptation and innovation: The company has adopted energyefficient Modular approach for Gas Processing Plant at Assam in which Variable FrequencyDrives (VFD) are installed in the equipment and machineries.
(b) No technology import was made during the last 3 years.
(c) No Research and Development expenditure was made during the year.
(d) No benefits were derived like product improvement product development or importsubstitution 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) There were no foreign exchange earnings and outgo during the year.
33. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has in place a CSR policy which is available on the website www.hoec.com .The details of the composition and meetings of the CSR Committee is provided in theCorporate Governance Report section of this Annual Report.
34. RISK MANAGEMENT
The Risk Management Committee identifies and monitors the risks associated with theCompany's operations. The Committee is responsible for reviewing the risk factors andensuring its effective mitigation and management. In addition the Audit Committeeoversees the areas of financial risks and controls.
The development and implementation of risk management policy has been covered in theManagement's Discussion and Analysis Report which forms part of this Annual Report.
35. PROTECTION TO WOMEN EMPLOYEES
The Company has in place a Corporate Policy on AntiSexual 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.
36. HUMAN CAPITAL & MANAGEMENT
The Company continues to pursue the best practices to develop its human capital. TheCompany has a transparent Performance Appraisal System with focus on the organizationalobjectives aligned with Key Performance Indicators. An objective performance measurementwith an assessment of potential and identification of training needs for individual growthare being pursued.
37. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of the Investor Education and Protection Fund Authority(Accounting Audit Transfer and Refund) Rules 2016 the Company has during the yearunder review filed necessary forms with the Ministry of Corporate Affairs and hasinitiated such steps as required under the said Rules for the purpose of effectingtransfer of all shares in respect of which dividend has not been paid or claimed for sevenconsecutive years or more in the name of IEPF
38. LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees for the year 2017-2018 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 Assam Gujarat and Tamil Nadu and the authoritiesworking under them. Your Directors express their gratitude to the Company's stakeholdersshareholders business partners and the bankers for their understanding and support andlook forward to their continued support in future. Your Directors value theprofessionalism dedication and commitment of the HOEC team to overcome any challenges andto drive growth.
For and on behalf of the Board of Directors