Hindustan Oil Exploration Company Ltd
NSE:HINDOILEXP
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
158.7
285.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Hindustan Oil Exploration Company Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the HOEC Limited Q2 and H1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you.
Thank you, Anuj. Good morning. Hope everyone has received the updated earnings presentation. It is on our website for your reference. I have with me Krishnan Raghavan, Chief Technical Officer; Senthilnathan, Chief Financial Officer; and Daisy, our Company Secretary.
I'd like to start with updates on the Northeastern region. Dirok workover has been completed and it achieved its purpose of increase in production from both the wells 1 and 2. In Dirok-4, the extension of hydrocarbon-bearing sands in Sands 22A and 23 is proved to be in the deeper flanks of the structure, where Dirok-4 is shut in and is planned to perform asset jobs with partners' approval before we put the well on production.
Dirok gas sales for the last quarter is 22.65 million standard cubic feet per day, but the offtake in the current quarter reduced to 15.03 million standard cubic feet per day. Therefore, the sales volume of the current quarter is 0.37 Bcf compared to 0.55 Bcf in the previous quarter for our share. Condensate is 5,858 barrels compared to 10,578 barrels in the previous quarter. Though this field can produce about 50 million standard cubic feet of gas per day, we have to restrict the production due to lack of demand.
This quarter was affected by the low demand due to floods in Assam and shutdown of many plants, thereby affecting the offtake. You are aware that OIL and ONGC are selling the gas at the price applicable for nominated blocks with a ceiling of USD 6.5 per mmbtu. And the Dirok JV has to sell the gas at PPAC price, which is about USD 8.2 per mmbtu. Therefore, the gas from the nominated field is sold first and the balance demand is met by us at the PPAC price. We are keenly watching the progress of the Northeastern gas grid. Once the concept of common carrier is accepted and the gas grid connectivity is established, the situation would get reversed. It is difficult to predict the time line, but we believe that it should be operational in all form by '25-'26.
We have received the approval from Assam Pollution Control Board for ND-1 well, that is in North Dirok, and we plan to drill this well up to Barail formation. We are ready to meet the potential increase in demand once the demand constraint is eased out by connecting the Northeast gas grid to the national gas grid. And GeoEnpro, the only one subsidiary, is operated to the block Kharsang and the group has 35% participating interest in the block. Continuous workover is being carried out in the producing wells to maintain the current production. Our program to drill the development wells and exploration wells in the block is delayed due to issue of environmental clearance. Public hearing is mandated before the issuance of the environmental clearance, which is scheduled on 26th November 2024.
On obtaining EC, we will drill one exploration well to the depth of about 4,000 meters, which would unlock substantial value in the block. Our plan to drill 18 wells for upper Girujan would increase the field production at the earliest. We believe substantial upside exists in Lower Girujan, Tipam, and Barail formation. And with the connectivity of the Northeastern gas grid to national grid, monetization of the gas and development would be faster with a better price.
Block 19 adjacent to Dirok, called as a Greater Dirok, is analogue to Dirok structure. The extension has been granted up to 1st February 2025, and we have requested MoP&NG for additional one more year extension to start and complete the committed work program. As rainy season is over, after harvest, we will start the construction of approach road and drill pad to move the rig for drilling. We are hopeful that our application for extension to the additional period will be considered by MoP&NG. In Northeastern region, our capital outlay for the next 2 financial years continues to be at INR 250 crores.
Cambay block. In Cambay, we have secured the environmental clearance after 4 years for North Balol and Asjol. We are in the process of securing the rig and tangibles to commence the drilling of 2 wells in North Balol, followed by Asjol. After the initial drilling, we'll continue with drilling additional development wells to enhance the production. We believe good potential exists in all 3 blocks to enhance production. We are expecting the final clearance of the ring-fenced R2 PSC for signature, which would add additional value to the Cambay blocks.
Now I move on to offshore blocks. We are happy to inform that we participated in the DSF Special Bid Round 2024, wherein we bid for Block B-15 in Mumbai offshore, a discovered small field with an area of about 332.4 square kilometers. We were declared as the sole bidder and on award of the block by Government of India, we will embark on the development of this field. Water depth of the field is about 40 feet.
With regard to B-80, we are back on production from both the wells. However, during this quarter, the wells were shut in for more than 35 days for repair and replacement of houseware. Production in the current quarter is 58,906 barrels of oil and 0.38 Bcf of gas, while it was 67,351 barrels of oil and about 0.4 Bcf of gas in the last quarter. During this quarter, the average gas price realized is USD 9.89 mmbtu compared to USD 10.34 mmbtu in the previous quarter. Now the gas price in the Western region is moving akin to imported LNG price.
In PY-1 offshore, though the facilities for processing and transportation of the gas is in existence, subsurface study is yet to be fully evaluated before the commencement of drilling. We are planning to engage experts in basement resource from Vietnam to review the study and reserve estimations of our in-house team, G&G team and the third-party expert. Before we commence the drilling, we would like to review the uncertainty of the gas-water contact in the north and south of the fields. These studies will give more confidence on our plan for 3 development wells. And if everything goes as per plan, drilling of the first well will commence in April to June 2025.
We are confident about the underlying value of oil and gas reserves and resources in our existing blocks and are continuously adding the resource with the new contracts wherever possible. However, our ability to monetize quickly is hampered due to demand constraints in Northeast and issues faced with the facilities in B-80.
For this quarter, our consolidated turnover is INR 100 crores compared to INR 143 crores in the previous quarter, and our profit before tax of this quarter is INR 13 crores compared to INR 49 crores in the previous quarter. This volatility in our quarterly results are due to factors such as low offtake in Assam and impact of monsoon in Western region, compounded by reduction in oil and gas prices. You would appreciate that these factors are beyond our control. However, we are doing our best to bring the fields on production and monetize to unlock the value potential.
Now I'll request Senthil, our CFO, who will update the financial results. Over to Senthil.
Thanks, Mr. Jeeva. Good morning, all. Stand-alone revenue for this quarter is INR 51.85 crores compared to INR 71.9 crores in the previous quarter. The reduction in revenue is mainly on account of lower offtake in Dirok field due to shutdown of major consumer plants in that area. B-80 revenue for the current quarter is INR 16.96 crores for gas sales compared to INR 18 crores in the previous quarter. Oil in stock is adjusted in the operating cost. Current quarter revenue reduction in B-80 is mainly due to reduction in gas price from USD 10.34 per mmbtu in the previous quarter to USD 9.89 per mmbtu in the current quarter.
In the case of Dirok, revenue for the current quarter is INR 32.33 crores compared to INR 50.58 crores in the previous quarter. During this quarter, 369 mmscf of gas was sold compared to 550 mmscf of gas sold in the previous quarter. Similarly, 5,858 barrels of oil was sold in this quarter compared to 10,578 barrels of oil sold in the previous quarter. During the quarter, offtake of Dirok gas by Oil India Limited was reduced due to the shutdown of its major consumer plants.
Field operating expenses for this quarter in the stand-alone account is INR 49 crores compared to INR 65.81 crores in the previous quarter. Other costs, including DDA, finance costs and others is INR 10.34 crores for this quarter compared to INR 13.06 crores in the previous quarter. Out of the total operating cost in the current quarter, credit adjustment for oil stock is INR 13.6 crores, whereas it was INR 23.43 crores in the previous quarter due to decrease in the net realizable value of crude prices.
Stand-alone EBITDA for the current quarter is INR 9.73 crores compared to INR 20.9 crores in the previous quarter. Profit after tax for the current quarter is INR 1.11 crores compared to INR 7.39 crores in the previous quarter. Major reason for reduction in profit is due to reduction in offtake of gas and Dirok sales and reduction in the NRV of closing stock of crude from USD 82.55 per barrel to USD 73.69 per barrel.
In consolidated accounts, the revenue from operations for the quarter is INR 100 crores compared to INR 143.41 crores in the previous quarter. Total expenses in the consolidated accounts for the current quarter is INR 86.17 crores compared to INR 98.25 crores in the previous quarter. Main reason for this difference is movement in the crude stock price in B-80 block. In consolidated accounts, EBITDA for this quarter is INR 36.47 crores compared to INR 72.98 crores in the previous quarter. Consolidated operating profit before tax is INR 13.41 crores against INR 48.5 crores in the previous quarter. Profit after tax, including exceptional in the previous quarter is INR 41.92 crores and in the current quarter, it is INR 10.81 crores. As on date, the term loan outstanding is about INR 103 crores.
India Ratings has reaffirmed the rating in A and revised the outlook consistent with Positive for INR 500 crores bank loan. With the current cash position and with the continued production, we will meet all our obligations, including the planned capital program for the coming 3 years.
Thanks, and back to Mr. Jeeva.
I think we can open the floor for questions now.
[Operator Instructions] The first question comes from the line of Riddhesh Gandhi from Discovery Capital.
Typically, we have a slowdown in offtake in Dirok in the first quarter. Just wanted to understand the reasons behind the slow offtake in Q2 and if we are going to kind of continue to see the slower offtake going into Q3?
Thanks, Riddhesh. And you know that the second quarter is normally having a rainy season there in Assam. This time, there was a flood about 7 to 8 -- 10 days, continuous flood was there. That affected the offtake. And then you look at Numaligarh refinery was shut in for about 19 days, and Brahmaputra Fertilizer Corporation was about 28 days, and Namrup Thermal Power Station was 24 days, and NEEPCO, that was a major consumer, for about 61 days. This all compounded the wholly share for lower offtake. That's why from 22 million, it has come down to 13 million standard cubic feet per day. I think this situation would get reversed a little better in the third quarter. And if some progress we made, we have been in discussion with Oil India, then fourth quarter would be much better than the third quarter. That's what we believe.
Got it, sir. And the other question is that now that B-80 is up and running, are there any slowdown occasionally happening or any issues happening with the extraction of the oil at all or it's all smooth?
Because there is no weather issues at the moment and the things are moving okay, there should not be any obstruction. That's what we believe.
Okay. And the other question is, is there any, actually, light you can throw on the new block which we have recently actually bid for in terms of the kind of reserves we expect, the kind of return expectations we expect or anything on those lines?
See, normally, as you are aware that we don't get on to any project which gives less than 21% post-tax return to us. And that's what our internal estimate of it is. So based on that, we bid for the block. And the block is closer to [indiscernible] platform, about 22 kilometers from there. It has 2 discoveries. So we believe that should add good value to us. But still the government has yet to announce and we have to get an award.
Got it. Sir, and the last question is with regards to [ HP ]. How much [ HP ] inventory are we holding in the B-80 of the oil? Because I know at around 350,000 to 400,000 is when we can have the auction. So right now, how much is the kind of inventory we are holding?
250,000 barrels above, plus/minus.
The next question is from the line of Vaibhav from Honesty and Integrity Investments.
So from Northeast, you briefly updated on the pipeline status, which will enable gas connectivity to National Grid. But there are 3 phases. So I just wanted to understand whether Phase 1 would be sufficient to provide national grid connectivity or Phase 2 or we have to wait till Phase 3 to get connected to the national grid and the full customer demand will be delivered only after Phase 3. Is it the case?
No, it's not. What will happen is that the GAIL connection up to Guwahati is expected by December. Then the DNPL connections is expected by all means by March '25. And the major connectivity of separate line by IGGL to Numaligarh to Duliajan would be expected a year later. So for us, our volume per se as such, once the Duliajan line gets connected, we will be much better off. That would be expected by this year-end.
Okay. But as per the recent interview given by one of the officials, Phase 1 will be completed by March. And then actually by December, you're right. Yes, I think that's clear.
The next question is from the line of Rishikesh from RoboCapital.
My first question is with respect to the B-80. Sir, we had given a reference production of around 2,500 BOEPD in B-80. So I would like to know where are we currently? And what is our plan, by when and how are we planning to go to a production level of, say, around 3,500 BOEPD?
So currently, we are in the plus/minus of 5,000 of the 2,500 barrel, that is the reference assets. And '26-'27, we are planning to drill 3 additional wells. So that should ramp up the expected level of more than 3,500 barrel as [ anticipated ].
So basically, the 3,500 will come only by drilling additional wells, right, not from the current well that we have?
That's for sure.
Okay. So how much CapEx would that entail?
We are expecting that the 3 well would be somewhere around USD 50 million to USD 60 million, and that's what we are planning for it.
Okay. And also I would like to know currently, our revenue run rate is less, but I think Dirok would be revived in Q3, Q4 later. Going ahead, what is our target of revenues? Say by when can we do around INR 1,000 crores of revenue? And what EBITDA margins, if you could share that, please?
It's an answer depending on many caveats. But our endeavor is '25-'26, we should be able to comfortably reach that number. And our margin remains the same what we are doing now. It's a little better than that, because some of the fixed costs can be leveraged. And in a manner, we'd be meeting the same number, a little better than the previous number, and that will increase in proportion to the turnover assets.
The next question is from the line of Shiva, who is an investor. As there is no response from the line of Mr. Shiva, we move to the next participant. The next question is from the line of Kunal Tokas with Fair Value Capital.
So sir, my first question is related to your operational costs for the Dirok field and the B-80 field. I think I remember reading something that your operational cost per mmbtu was USD 0.5 for Dirok field. Is that correct?
It's not USD 0.5, it is USD 5 when you are reaching to a full volume of production, because these operating costs are not linear. This is more or less at the fixed cost. So if you are -- see, gas cannot be stored, it has to be sold. So whatever we produce, the lesser the volume you produce, your operating cost is more. That's about USD 1 per mmbtu. Now you increase the volume, even you double the volume, then the operating costs come down to USD 0.5. So being the low offtake, then our cost is more at the moment.
So at the 40 to 45 mmscf that you expect after the grid gets connected, your operational costs would come down to USD 0.5?
Yes, it should be somewhere around USD 0.5 to USD 0.6.
Okay. And what would those be for the B-80 field? I'm just trying to understand what level of oil prices you can sustain with still being breakeven?
See, B-80, you have 3 issues which comes out. One about the government share. The government share, irrespective of the price, you have to share with the government. That is the first fact. The second thing, your operating facilities. If you are looking at all operating facilities, a majority of them are owned by us, that is through our subsidiaries, that is a floating production offshore and mobile offshore processing platform is all owned by us. If you take the net cost of all those things, we can sustain even at an oil price of USD 50.
USD 50?
USD 50.
Okay. And sir, about the production sharing contracts, those have a high point and a low point between which the share is linearly interpolated. So from the basic that I understand is that the more you produce, the more you have to share with the government, and that actually hinders people from -- it disincentivizes people from producing more. Is that a correct understanding? And how do you plan to tackle this?
It's basically a revenue sharing contract, not a production sharing contract. In a revenue sharing contract, the costs are immaterial. Only the revenue is getting shared with the government. That goes with the LRP, that is 12%, that is a fixed one. The balance one is proportionate to what you have quoted for it. So more you produce, you'll have to pay more to the government. And that's a fact. So in our case, about 12% is the minimum we have to pay for whatever our revenue we realized. And the maximum goes up to 55%, that is a linear. So essentially, your revenue share to the government should be around, say, 17% to 18%. And then your royalty is about 10%. Total 25% to 30% will go to the government on your revenues. Balance is getting used for your cost and you are making a profit.
Okay. Does it disincentivize producers from producing more? Or does it still make economic sense at the higher sharing level?
It can work it out an optimum level for you, and you cannot put the wells on closed mode. And at the same time, you can't plug the wells. So it depends on the bidding and depends on the contract signed by the respective parties.
[Operator Instructions] The next question is from the line of Jitendra Pethkar, who is an investor.
My question is to Mr. Jeeva. Is there any stake sale by the management or the previous management from the company in the recent past?
No, see, I can't say about what the shareholders will do, but I don't think so. If anything is there, definitely we'll inform you.
Because there are rumors like that. And it appears, since there is no identifiable promoter of this company, the disclosure may not be mandatory, I believe. But it does affect the normal investors.
I just want to tell you, first, you said it is a rumor. That is a fact. And the second thing you are saying actually, it should be mandatory disclosures. Yes. And anybody who's holding more than 5% has to disclose to the exchange. So both are an event. If any event on that, it will get informed to us, and we will in turn inform to the exchange immediately.
The next question is from the line of Rushabh, who's an Investor.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
Mr. Rushabh, may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn.
The next question is from the line of Vaibhav from Honesty and Integrity Investments.
Just continuing in the last thing. So I think Phase 2, as per the interviews publicly given by the officials of this pipeline, Phase 2 is going to be completed in March '26. And what you are saying is March '25 for Phase 2 of the pipeline. So I'm just confused whether it's '25 or '26?
Vaibhav, I'll tell you, honestly, I don't know which phases you are talking about. For us, that one phase is about connecting up to GAIL connection up to Guwahati. So the second connection is from Guwahati to Numaligarh and from Numaligarh to Duliajan, right, through a DNPL line. So this is what's practically making our increase in volume. We are expecting the DNPL line will get connected in March '25. So with that, we will be able to increase our offtake. That's what we believe.
So that will ensure national grid connectivity for us?
Yes. And that will be because this gas goes up to Barauni, Central India. So then obviously, there would be a volume uptick and there is an establishment of grid connectivity. Further augmenting the grid would be through a separate line, IGGL, from Numaligarh to Duliajan.
The next question is from the line of Manan Patel, who's an investor.
Sir, congratulations for B-80. So just wanted to understand, with us being declared the sole bidder, so when can we expect further details on the block from your side?
See, as of the moment, we are just a bidder, right? So we have to wait for the government's formal communication to us, and then we will be going for signing the block. So that will take at least -- I do not know the exact time line. We are expecting within a month's time. Once it is done, then we will update the block, because our evaluation, what we have done, how we have come out value on the block, we will let you know.
Understood. And sir, just wanted to know how does this change our CapEx projections of INR 1,000 crores over next 2 to 3 years? Does it change materially? Or how do we think about this?
Yes. I think it will change our capital plan, because what happens, we are looking at that is, after signing of the PSC, we have got 4 years' time. Within the 4 years' time, we should be able to have enough capital from our side to go for it. And we are looking at a model by which we'll be able to optimize the cost and put it on production in a quicker mode. That's what we are looking at. So if any additional borrowing is required at that point in time, we'll look at that.
The next question is from the line of Kunal Tokas, who is from Fair Value Capital. As there is no response, we will move to the next participant. The next question is from the line of Shiva, who's an investor.
With reference to the B-15, the current bid that has been done, I'm sure that you guys would have seen why the company should run the bid. Being an offshore block, the experience has not been so good in the past 4, 5 years, and the kind of investments that we've made are phenomenal in B-80. It's not getting proper output, like wells getting off and on and off again. And spending a lot of money, time, energy, everything. So what is the logic to bid for another offshore block? Why did our company do that? What is it that you guys found very interesting in this? That is my first question related to this B-15.
The second question here is, B-80, currently, oil production is not that great. So sometimes when there is a leakage in my house, the water comes down when the guy will sweep the floor. But then that water is not there in my house anymore. It goes to the neighbor's house. So can a similar phenomenon also happen with B-80, like the oil is not there anymore in our area, but have gone to the neighbor, like a different land altogether? So the second question is for Mr. Krishnan Raghavan, the technical person. The first one is for Mr. Jeevanandam.
I'll answer both the questions. I don't know about the leak in your house, but the fact remains, we are an offshore operator. We are the only company producing from Mumbai other than ONGC. So we are very proud of it. We are comfortable doing a good job, and we will be able to do it. We'll head on to get on to many offshore blocks when it comes to it. We know how to create a value to our shareholders. We'll continue to do that, okay? That's your first question.
Second question, there is nothing about a leak or anything on it. Every oil and gas block has a certain volume. This volume has to be a plumbing job to come to the surface. It will come when it comes, right? We are on the job of doing the work. We are continuously on production at the moment. We will unlock the value by drilling additional wells. That's all from my side. Thank you. That's all nothing more for you.
Sorry to interrupt you. May we request that you return to the question queue for follow-up questions, please. The next question is from the line of [ Aksha Maheshwari ], who's an investor.
Sir, so my question was basically regarding one of the interview which was given to Mihika Barve on nearby 16th of June. So Mr. Jeeva, you said that the company expects 50% uptick in production in fiscal '25. So where are we right now over there?
So we are on target actually. And see, what happens in oil and gas fields, you can't continuously look at quarter-to-quarter, right? Three factors, because the demand is not in our hand, that will get sorted out by the connectivity is established on the Northeastern side. And B, I see there is a weather impacted about 35 days. That we have already rectified it, and we'll continue to do it. And the third one, our job is more towards creating a value below the ground, which we have already been on the process of getting new acreage. And with this, we will be able to meet our targets. It may be a couple of months this side and that side, but we are on target of getting the things done.
Okay. But the coming -- like the interview was a very recent one. So accordingly, the numbers which came are supposed -- not in line with the interview which was said over there. So...
The number of this quarter, right?
Yes.
Yes, right. But this is what I explained the reasons for the offtake in this quarter, right?
Sorry, I couldn't hear you properly.
So this quarter, the low volume offtake was already explained to you. This has not affected our productivity of the wells, our capability of increasing the production. This has only affected our offtake, right, because there was lack of demand in the region.
The next question is from the line of Rushabh, who is an investor.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
The next question is from the line of Rikesh Parikh from Motilal Oswal Financial Services.
Sir, just want to understand, B-80, what is the current level of production right now in terms of oil and gas?
See, oil about 1,000 barrels and gas is about 8 million standard cubic feet of gas per day.
Okay. So it's back to the normal what we expect or will we see some more improvement in the field as such in terms of production, do we expect?
For reference, this is the one. And if any improvements, we will know by the next quarter.
Okay. And sir, I just want to understand, this B15 block, so probably it will be like -- take 2 years to get it operationalized in terms of taking the approval and studies and all. Is that right understanding?
Basically, being at offshore, we don't require lot many approvals. But it is looking at a more comprehensive development and a cost-effective development. Both are looked at by the team, then we have to engage the right contractor to go ahead with the model with mitigating the risk. And our target is to put it on production in less than 30 months.
The next question is from the line of Ravi, who's an investor.
Yes. Sir, my question is, last time, I think the 400,000 barrels we sold in December, if I'm not wrong. So what is the current storage of oil from B-80? Where are we at?
So the current stock, I told you is about 250,000 barrels. And then [ 400,000 ] barrel is our current production. So you'll be knowing by first quarter of the next year, we'll be able to make an update.
The next question is from the line of Manpreet Arora from Arora Wealth Advisors.
Sir, on the B-80 gas, if we look a couple of years back, we had flows of 12-point-some million, and then it gradually decreased to 5 million and now 4 million. I understand that it was a gas top well. So the earlier years will probably be higher than later in the years. Is that a correct understanding?
Yes, your understanding is correct.
And now you mentioned that we are now flowing 8 million, so that has increased now?
I think you better take the same reference, the 8 million standard cubic feet per day.
Okay. So how should we model this over the next few years, sir? I mean, will this decrease and then the oil will increase? Or this is a...
See, any oil and gas field on a continuous production will have some decline. And it will not decline too much as we are producing very minimal from that field. And by drilling additional wells, we will be able to come back to the normalcy in the block to use its facilities to its optimum potential. That's why we plan for 3 wells in '26-'27.
All right. And sir, on the pricing side, we were at 22% of Brent and then we have again come down from $16 to now $9. So how do you see the pricing playing out? It is more related to the Brent price, how it behaves?
So we were looking at actually the Brent price as the best model. So we went out 22%. Subsequently, it has been brought down to 12% -- 12.2%. Now we are looking at more from an exchange, where the price is moving akin to LNG price. So partly, we are selling at exchange and partly we are selling at the Brent price. Wherever the committed contract, we are selling at the Brent price. And the balance, more than 50%, we are selling at the exchange, which the price is akin to LNG price, a little discount to the LNG price, but the price is much better in the exchange rather than going with the percentage on the Brent at the moment.
The next question is from the line of Jitendra Pethkar, who is an investor.
I have 2 questions. One is a little bit follow-up on the grid connectivity on the East. I would like to know unambiguously, when the final connection will be made and there will be no constraints as to the transportation of gas on the East side? When is that date, in '25; June, July, '26, which exactly, where all connections should be completed, unambiguous?
See, Jitendra, as what you are looking at, the similar way we are looking at them. So when we had discussed with the team, they are expecting that one set of connection should get over by March. So therefore, we are expecting by '25-'26, there should not be any constraint to us.
'25-'26 meaning, shall I put it as by second half of '25?
Yes, that's right. No, no, first half of -- we are expecting them to get the first layer of connections of -- connecting to the national grid should get done by 31st March 2025. Essentially, you get a better offtake from '25-'26. And further augment of the offtake depending on the production from others as well as the demand, and then the connectivity of IGGL laying their own line from Numaligarh to Duliajan. So that we will [indiscernible] in such a manner that we drill additional wells and ready to ramp up the production up to 70 million cubic feet of gas per day.
I understand. So which means after 31st March '25, things are progressively going to increase only, and most of the, let's say, constraints will be removed by 31st March 2025. Am I right?
Yes, you are right. And that's what the assumptions we are also working.
Understood. My second question is about the quality of crude that we get from B-80. It gives the same crack as the other that is domestically found, or can you give any idea from refiner's point of view?
It is actually a Brent. We got the Brent price based on the analysis. Crude assay what they have done, it is equivalent to Brent. So it will continue to be that.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.
Thank you. Our focus remains on achieving the optimum production from B-80 and to increase the offtake from Dirok. We believe the drilling of wells in Kharsang, PY-1 and Western region will add substantial volume of resources to resource as well as increase in production. Our committed in-house team with the support of external experts will ensure our growth targets. We once again thank you all for joining us today. Thank you all.
On behalf of HOEC Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.