At the beginning the company did some exploration related services for long digitization job of oil wells in Southern North Sea project along with Robertson Research international of U.K. In view of improving its technical capabilities the company entered collaboration with many foreign and Indian companies in joint venture. Some of the prominent JV partners the company has are Oil and Gas Corporation, Gujarat State Petroleum Corporation, Mafatlal industries, Premier Oil, Heramec. The company made a tie up with Asia Foundations and constructions ltd to undertake drilling and other oil field services. The company also entered into collaboration with Prakala-Seismos AG of Germany to improve its technical capabilities. In 2005, Burren Energy Plc of London has taken 26% controlling stake in the company from Unocal. The company has a 100% subsidiary HOEC Bardhal India ltd, engaged in the formulation, manufacturing and marketing and marketing of high performance fuel and engine additives.

The company started its operational activities from the year 1991. The company is operating seven Oil & Gas fields at Cambay basin,Assam Arrakkan Basin,Cauvery Basin in India. It is engaged in a wide range of activities including oil and gas exploration,production, processing and marketing. Burren, one of the London based oil exploration and production company acquired 26% stake of this company in the year 2005. In February 2008, Burren was subsequently taken over by ENI UK Holdings plc. The company has a 100% subsidiary, HOEC Bardhal India Ltd, engaged in marketing of high performance Fuel / engine additives. The company entered in to collaboration with Indian and foreign companies to improve its technical capabilities in the areas of oil and gas exploration. Some of the Joint venture partners of the company include oil and natural gas corporation, Indian oil corporation, Mosbacher, Heramec,OIL, GSPCL, TPL. Presently the company has oil exploration in Cambay, Cauvery basin and in Assam. The company has upwards of 40% or more share in these exploration works.

INDUSTRY

The Assam Oil Company in the northeastern and Attock Oil Company in northwestern part of the undivided India were the only oil companies producing oil in India prior to independence. After independence, the Government realizing the importance of oil and gas for economic development and its strategic role in defense went about setting up an exploration and development entity, the Oil and Natural Gas Directorate (the predecessor to ONGC) in 1955, creating state-owned refinery companies (Indian Refineries Limited in 1958 and Indian Oil Company Limited in 1959, both merged to form the IOC in 1964), and forming exploration and development JVs with existing domestic and foreign oil and gas companies (establishing Oil India Limited, or OIL, with the Burma Oil Company and the Assam Oil Company and Indo-Stanvac Petroleum Company Limited, a JV between Government of India and Standard Vacuum Oil Company).

During the 1960s, exploration, development, production and refining continued to grow and the sector became increasingly dominated by state-owned companies and JVs between the Government and private oil and gas companies. With the discovery by ONGC of the large Mumbai High offshore oil field in 1974, the domestic oil and gas industry began a large scale expansion. In the 1970s the Indian oil and gas industry was largely nationalized, as the Government took over the operations of IBP, Esso, Caltex and Burmah-Shell. Following nationalization, only state-owned enterprises were allowed to participate in the oil and gas industry (other than Castrol, which was permitted to remain in the niche lubricant segment). Thus, practically all aspects of the oil and gas industry were under control of the Government.

Beginning in the early 1990s, as India’s reliance on oil imports rose, the Government embarked on a series of reforms aimed at deregulating the oil and gas sector, with a goal of rationalizing the industry, improving efficiency, reducing the cost of government subsidies and encouraging private sector investment. In order to bring down the dependence on import for meeting the energy requirement, the Government took active steps to boost the level of exploration activity in the country, so that, new finds can be made and the level of crude oil and gas production significantly increases in the years to come. It formulated a NELP in 1997-98 to provide a level playing field in which all parties could compete on equal terms for the award of exploration acreage. As a result, there are a number of private companies, both domestic and foreign, currently engaged in exploration and development of oil & natural gas fields along with national oil companies like ONGC and OIL.

The positive impact of liberalization in 1991 and NELP on exploration and development activities are evident from the fact that there are 235 PEL and 300 ML concessions are under operation as on April 1, 2005. Over the years, some of the PEL areas have been converted into MLs in part or fully for production of oil and gas due to which there has been an appreciable increase in the area of ML concessions.

Over the years, significant headway have been made so far private sector participation in exploration and development

Currently, the total hydrocarbon resources in India, inclusive of deep waters, are estimated at around 28 billion tons of oil and oil-equivalent of gas (O+OEG). As on April 1, 2005, initial in-place oil of 8.24 billion tons and ultimate reserves of 3.16 billion tons have been established. The resources estimated by DGH for its ‘internal use’, for the country, are 32 billion tons (O+OEG).Total oil production during 2004-05 was over 33.98 MMT and that of gas 31.764 BCM. The contribution of Private and JV companies was about 17% of the total Oil & OEG production. The strong increase in domestic energy consumption was caused by the significant growth of India’s economy over the past decade. India’s economy has recently registered significant growth, with average real GDP (At factor cost) growth of 6.9% over the year ended March 31, 2005 and growth of 120% from the year ended March 31, 1991. This growth of economy has resulted in growth in consumption of petroleum products. In addition to demand for energy, the oil and gas industry is significantly affected by demand for a variety of refined and processed products derived from crude oil and natural gas, which are used in a variety of industrial, consumer and agricultural applications.

Large investments and increased accent on oil exploration makes the oil and gas industry an attractive destination for the investing persons. The continued growth of Indian economy depends on the secure supplies of oil. India has made many investments abroad to ensure continued supplies of crude. The oil and gas industry contributes to about 45% of the total energy consumption of the country. India is the fifth largest consumer of oil in the world. India’s crude oil production is increasingly steadily. The crude oil production during April-November 2007 is 22.68 mt as against 22.56 mt in the same period last year. India is emerging as the global hub for oil refining. India is one among the four countries which have the richest gas hydrate reserves. With the increasing use of natural gas as a fuel in India, the country is likely to rival both china and Japan in having the largest natural gas demand in Asia by 2025.

The government has been taking many progressive measures to create conducive policy and regulatory framework to attract investments in the oil and gas industry. The government allowed 100% in petroleum products, exploration, gas pipelines and marketing through the automatic route. It also created strategic crude oil storage of capacity about 5 million tones. The government also plans to increase exploration licensing area from 44% of the Indian sedimentary basin in 2007 to 80% by 2011-12 and 100% by 2015.

 Financials

HOEC announced FY 08 performance recently. HOEC posted a net profit of Rs. 74.5 million for the year ended march 2008 with a rise of 175.8 % against a net loss of Rs. 98.2 million in the same period last year. Revenues went up to Rs. 362.1 million in this quarter from Rs. 33.5 million in the last quarter ended December 2007.The company’s standalone operating profit was at Rs. 96.5 million versus net loss of Rs. 215.8 million on YoY basis. This year the company announced a dividend of Re.1/- per equity share of Rs.10 and is issuing right shares to its existing shareholders.

This is in the second place when compared to the non government oil companies. HOEC has a better turnover and operating results over Cairn India helped by continued crude oil price hikes. HOEC is bidding for more projects. Further it is also expanding its production level in the existing blocks to take advantage of the increased oil prices.

Summary

The stock is now trading between Rs. 120-128.

Despite rising crude oil prices HOEC stock is unable to go against declining trend in the stock market. With an impending slow down in Indian and World Economy due to continuous oil price rises it is difficult to visualize steady gains in this stock at current price levels. Near term investors need to be careful to short sell this stock in view of good results. Long term investors can wait till the stock pars of gains it has made in the past months and look at buying into the stock at Rs. 90-100 range and start accumulating over the next few periods.