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Oil India Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of Oil India Limited, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.I would now like to hand over the conference to Mr. Sabri Hazarika from Emkay Global Financial Services. Thank you, and over to you, sir.
Yes. Good afternoon, everyone. On behalf of Emkay Global Financial Services, I welcome you all to the Q2 FY '22 post earnings conference Call of Oil India Limited. We have Mr. Harish Madhav, Director of Finance; Mr. P.K. Goswami, Director of Operations; and other senior management of Oil India Limited. So today, I request the management for opening remarks, and then we will move over to the question-and-answer round.Without any further delay, I hand over now to Mr. Madhav. Over to you, sir.
Thank you, Mr. Sabri for this opportunity for interaction with the investor and analyst community. We have declared our Q2 financial results only yesterday. And the results were e-mailed and also [indiscernible] I hope everybody have had successful access to the results and the detailed analysis that we share with the investors. My director officials who was supposed to be on this conference, he had to suddenly go out to some other meeting, so Mr. Goswami, he's not available. Me and our ED finance, Mr. Sanjay Choudhuri, we are available. I will request Mr. Sanjay to kindly proceed with the opening remarks, and then we can straight away go for the question and answer. Sanjay a quick word?
Good afternoon, dear friends. We appreciate the interest shown by you in the company and in the financial results for Q2 2021, '22 have been shared and also posted to the website as well. I will briefly give some indications about the performance of the company both in terms of physical and financial. The consolidated turnover of OIL for half year ended 30th September 2021 is INR 13,456 crore vis-à-vis INR 9,656 crores for the half year ended last year. The consolidated PBT for the half year ended 30th September 2021 is [ INR 3,735 crores ] vis-à-vis INR 1,851 crore for the corresponding period last year. The profit after tax at the group level of the company for the half year ended September 30, 2021 is INR 2,669 crores vis-à-vis INR 1,436 crores for the corresponding period last year.Now coming to the standalone results and beginning from the production front. The crude oil production for Q2 2021 is 0.760 MMT vis-à-vis 0.746 MMT for Q2 of 2020, '21, which has increased by 1.78%. Fuel production for the half year has increased by 0.61%. Natural gas production for Q2 '21, '22 is 806 MMSCM compared to 638 million standard cubic meters for Q2 of 2021, which is an increase of 26.38%. On a half yearly basis, the increase is of -- in the range of 15%. On the financial side, the company's profit after tax in Q2 2021 is INR 504.46 crores vis-à-vis INR 238.95 crores in Q2 2021. For the half year ending 30th September 2021, PAT is INR 1,012 crores versus a loss of INR 9.66 crores in the half year of the last year. The company's EBITDA in Q2 2021 is INR 1,280.99 crores vis-à-vis INR 848.48 crores in Q2 of 2021. And EBITDA for the half year ended this year is INR 2,577.91 crores versus INR 1,176.24 crores for the first reporting period last year.The EPS has increased to INR 4.65 per share in the second quarter of this year as compared to INR 2.20 in the same quarter of the last year. For the half year this year, the EPS is INR 9.34 per share versus a negative EPS of INR 0.09 per share for the half year last year.The Board of OIL has recommended an interim dividend of INR 3.50 per share for 2021, '22. The average crude oil price realization for Q2 '21, '22 is USD 71.35 per barrel vis-à-vis $42.75 per barrel for Q2 of 2021, which is an increase of almost 67%. The crude oil price realization for the half year ended September 30, 2021, is in the -- is USD 69.28 per barrel vis-à-vis $36.48 per barrel for the half year ended September 30, 2020, which is an increase of almost 90%. There's been a spike in these prices, let's say, increase in turnover by almost INR 2,500 crores and profitability by in excess of INR 1,200 crores for the half year ended September 30, 2021. The average cash interest price for the half year ended 30 September 2021 is USD 1.79 per MMBtu versus USD 2.3 per MMBtu for the half year ended September 30, 2020, which has decreased by $0.60 per MMBtu. This decreasing price has led to decreasing turnover by INR 229 crores and profitability by INR 156 crores for the half year ended September 30, 2021.In the current quarter, OIL has taken a provision of write-off of instruments to the tune of [ INR 581 crores ] in the second quarter of this year compared to INR 8.3 crores in the second quarter of the last year. [ The factor performance in ] [indiscernible] versus [indiscernible] our material subsidiary has also improved its financial performance in the current quarter. [indiscernible] for Q2 is INR 957 crores against INR 831 crores in the corresponding period. NRS GRM dollar per barrel has improved to $13.47 per barrel in Q2 compared to USD 6.68 per barrel in Q2 of last year. The EPS too has also improved to INR 13.01 per share from INR 11.35 per share in the Q2 in previous years.Well with this, my opening remarks on the performance is over, and we are now open to the question and answers.
[Operator Instructions] Your first question is from the line of Probal Sen from Centrum Broking.
I had 2 questions. One was I think you just mentioned that there was additional provision for write-offs in this quarter. And the exploration write-off number is also slightly higher on a Q-o-Q level. Can you tell us which or where this pertains to? Or is there anything exceptional or any onetime large write-off has been taken on any expiration asset?
Actually, a write-off to the tune of about INR 150 to INR 200 crores per quarter is a normal happening. However, this year, we had to take a larger write-off of around INR 450 crores for a particular well in [ Kartigara ]. This well was an expensive well. It was a high pressure and high capital well [indiscernible] kind of a well, which had to be written off because it did not show commercial prospectivity. So that is the reason.
Okay. And the second question was just a clarification that the higher miscellaneous income is because of the sale proceeds of international subsidiaries being booked in the other income this time, right? So just wanted to clarify that, that is because of the booking of that international subsidiary sale, correct, in this?
No. This is typically the accounting of the dividend that we have received from Indian Oil Corporation and GCPL also first dividend, they have declared this time. So the dividend has come and plus dividends come out of the Singapore subsidiary, which is holding the Russian assets, Vankor and Taas. So this actually dividend.
Okay. Okay. Okay. Right. And sir, last question I had was typical -- I mean, about Baghjan, just wanted to get a sense of what the production has ramped back up to and an overall guidance if you can give for oil and gas output for the next couple of years?
Production, I think we are back to the normal level of production. That particular well, of course, it has been scaled. But there are other wells in the area, and we have drilled a new well in Baghjan also, which is on production. So the production level's around 3.1 MMT this year we are expecting to finish by the end [ of this year ].
Okay. And sir, overall, for our company, any guidance you would like to hazard for '22 and -- I mean for FY '23?
FY '22, '23, should not be much increase, maybe around 3.2%, not beyond that. But we are working on some -- basically faster development program on a few of our assets, 2 in Rajasthan and mainly in Assam. So by '23, '24, we expect a significant increase in the production. At least for the current year and next year, offshore production will be in this range.
Got it, sir. Sir, one last question, if I may. What is the reason for the sharp drop in the average gas realization in this year?
Gas realization?
You said that H1 realization was $1.8 versus $2.3 last year. That's the normal gas price formula-led drop.
Yes, yes absolutely.
The next question is from the line of Ankur Sharma from HDFC Standard Life Insurance.
My questions have been answered.
The next question is from the line of Vidyadhar Ginde from ICICI Securities.
So my question is related to this provision. So if you look at the last 10 quarters, I think there are 4 quarters in which exploration related write-offs should be on the higher side. And I haven't looked how much we are. For example, in FY '19, there was no such quarter where the exploration write-off was very big. So has something changed in the last 3 years and the assets in which -- is it the new acreage? Or what is it? And in the -- our acreage, let's say, [ '19 ], are any of these blocks do -- have you made any significant discoveries, or are we hopeful of some significant discovery going forward? Or until now it's been only resulted largely in exploration write-offs?
This is basically exploration write-offs, which have the larger numbers to what you are talking about. It's basically with respect to the block in Mizoram and the KG basin. Now these 2 blocks, all the wells were very high cost with Mizoram, because of the area and the accessibility issue. The costs are in the -- period as such because there was a [indiscernible] previous high pressure, high temperature. The costs per each well was around INR 354 -- INR 350 crores to INR 450 crores of each well. Very high cost well. Now these -- all these wells were under different -- different testing regime. And finally, as and when under each of the [indiscernible] testing, the well was found not to be commercially viable. The provision was made all the [indiscernible] were written off. So accordingly, this has happened. So this is the last well in the KG basin as well, which was [indiscernible]. And after detailed testing, finally, those there was a discovery in -- out of the 5, 2 or 3 of the wells, there were discoveries, but they were not commercially viable. So that's why we have already thought [indiscernible].
So can we say that we have now done -- so big exploration write-offs in KG are unlikely? What about Mizoram?
KG and Mizoram, all the wells which have been drilled, they have been finally found, you can say, commercially not viable or dry, and all provisions have been made in respect of all these.
So this phase may be over. It's will be and so we are unlikely to have such high exploration costs going forward or [ not much ]?
[indiscernible] write-off in next few quarters unless we start trading under the OOLC, on 1.5 years from now. But what I first is we are just continuing drilling operational sectors in this [indiscernible] goes on in the main operating areas, nominative growth, et cetera. Normal write-offs of INR 100 crores to INR 150 crores per quarter, that will keep coming.
And my second question is on Numaligarh. So in case of Numaligarh Refinery, what is the -- is now from -- if you could -- you've given us the GRM, which appears to be the core -- the one excluding the excise duty benefit. So is it possible to share the GRM with excise benefit or the amount of the excess benefit, if possible?
Because we don't have readily ready, maybe we will just -- I think last time also, it was asked that we further to collect this. You'll get that information, and we'll share it. So next time I [indiscernible] with you, we'll share this with them also.
[Operator Instructions] The next question is from the line of Somaiah from Spark Capital.
My first question is respect to the gas production increase in the current quarter. I mean, anything you would like to highlight, I mean, we have seen a decent increase, both on a sequential and Y-o-Y basis. What would be driving this?
It's been an endeavor to consistently try and increase our oil and gas production. And starting with gas production, due to the concentrated efforts that have been put for production enhancement, and we have entered into various kinds of new technologies finance for the latest technologies we brought in so that the production increases. As a result of this enhanced, the level of activities for increasing production in the gas front, it has yielded results, and that has led to the higher gas production.
One more reason, if you compare to the last year, sequentially, as last year, basically, a significant increase is coming from [indiscernible]. Last year, as you recollect, because of the COVID, the consuming industries, they were all closed for a longer period, fairly long period. So that's why the gas production had to be cut down last year, except the plant in [indiscernible], et cetera, which are supplied but all this plant, everything was shut down. So because of that, the volumes were low last year. This year, everything has started. So naturally, the production and sales volumes have picked up.
Got it. Sir, is there any new well addition during the quarter, which also kind of helped production ramp up?
Yes, certainly, there will be a few number of wells which have been added, regularly being added.
No, from -- more from a run rate standpoint, sir. I mean, is it like relatively more number of wells were added during the quarter? Because even on a Q-o-Q basis, the increase is relatively on the higher side. So just wanted to understand on that front.
Well, as a number, it was because it was almost in the same range. Some will go out of production, some will come into production. I mean, that's a continuous process. And there hasn't been a significant increase in our overall really.
Got it, sir. Sir, next question with respect to the production outlook. Could you just help us with how do we look at the ramp-up of production? And any ballpark numbers that you can give with respect to gas and oil. I remember that you have used to give these numbers, but can you just -- any updates to that? Or how do you see things ramping up over '23, '24, both in terms of gas and oil?
The gas, you are talking about, by '23, '24, we should be, what we are intending is that we should be able to increase our production to say around 3.22, 3.25 BCM in the next 2 years' time.
Okay. Got it, sir. So this is -- in FY '21, this number is 2.65.
FY '21, we possibly in FY '21 was very low, 2.8% something. So '22, it will be close to 3%, 2.9% is what we should be able to reach.
Got it, sir. And in terms of oil, so we were around close to 3% in FY '21?
In oil. With respect to oil, what we -- I just mentioned in that also in response to earlier question, around 3%, 3.1%, we should be able to achieve anywhere between 3% and 3.1% we should be able to achieve.
Got it, sir. Sir, and one question with respect to your CapEx outlook, both on a stand-alone basis and anything that you need to spend on the NRL part also?
Stand-alone, excluding NRL, all of the investment and the regular CapEx is around INR 4,200 crores planned for the next year. This year, it is INR 4,100 crores. Next year, it is INR 4,200 crores. Another [ repudiates ] expansion investment certainly will be coming about INR 3,000 crores, we have to invest. But that will come only in '23, '24 and '24, '25, last 2 years of the refinery expansion project because initially, the loan draw down and the internal resources of the NR will be used.
Got it. One final question, sir. So with respect to your debt breakup, the consol, the difference between consol and stand-alone, so that entirely pertains to NRL or you also have other subs debt? I mean, if you can give that breakup between stand-alone consolidate, it will be helpful.
Stand-alone and consolidated, the difference is not on account of NRL. NRL, as of date, there is no debt. But the difference will be on account of $500 million loan that is there in our figures for subsidiary, all in the international subsidiaries to which we have a [ returning ] business. That is the only...
The next question is from the line of [ Rakesh Setia ] from [ JMP ].
So I wanted to understand this provision and the exploration cost a little better. So if I see your -- this quarter, about INR 468 crores was in provision and another INR 127 crores in exploration. Is this entire amount, INR 468 crores plus INR 126 crores pertains to some sort of exploration and well write-offs?
Yes. This INR 460 crores pertains to provision for well write-off, which is when we [Audio Gap]
cost a little better. So I said 2 classification. One is provision for INR 468 crores and then exploration cost write-off. I mean, if you can help us understand why 2 separate headings and if all of this amount pertains to well which you have had in the past?
Yes. A house, let me apologize for this glitch here, which we had because we are far [indiscernible] for some reason. Now coming to your question, actually, you see we do this when we see that internally, we assess that a particular well has got no further commercial use, then we take a provision against it because it doesn't make proper accounting or rather, I should say, it does not make conservative accounting by carrying it as a work in progress once we have decided internally that it is unlikely to yield any commercial value. That is the stage when we take a provision against the value. However, most of these wells are under NELP and these wells are under [ OLB ]. Now in this situation, what's going to happen is that you can actually write-off the well from your books that is slightly off from our books only after all the formalities have been completed, and the well has been relinquished. So the first -- when we take a provision, normally it's at 2 stage. You take the provision first when internally you feel that it's not going to be to actually any commercial value. And then subsequent, after the formalities are over, you write it off. However, in some cases, where we are drilling a well in the nominated blocks, that's the earlier block that we have had before the NELP regime, in those blocks, when the -- those blocks don't have to go through this strong process because no other outside party's involved and the formal writing off of a well and internally deciding which is commercially not viable is the same step. Once we internally decide it's not commercially viable, we simply write it off. So we don't follow this 2-step system. Now coming to the amounts that you mentioned, we have shown provision as INR 454 crores that is because it is in an NELP block. And being NELP block, it will fall into 2 stages. First, will come the provision. Then subsequently, when all the formalities of the case are over, it will be written-off. Of course, when it will be written-off, they'll be no hit in the profit because the hit in the profit is already taken in the course of the taking provision. It will merely move from provision to write-off, that's all. However, for the other well for INR 126 crores that you talked about, there, this is a well in Assam. This is going to the 1 stage, like I explained to you. It's a single-stage right now. That means internally decided. Do you know there's no commercial value? You presume not. However, when we see that, we'll know.
So -- yes, yes, that was helpful. So when I look at your balance sheet, there is an exploration and evaluation assets worth upward of INR 1,076 crores as on September '21. So out of this INR 1,077 crores, how much of this pertains to the NELP block? I mean, I would assume the provision would be sitting in the liability side?
For -- against that, I'll have to check how much is in NPL. We'll come back to you on that. But write-off is not much, drilling is going on in NELP block. The NELP figure is off -- as of second quarter, the NELP figure is likely to be very slow.
Sir, let me ask other way around.
This is largely -- largely, it's Assam fields.
So let's say, if we were to assess risk of further write-offs, I mean, is the INR 1,100 crores or this INR 1,076 crores is the right number to look at in the balance sheet? This is the number if hypothetically, none of the wells proven to be commercially viable, then this is the maximum amount you would be writing it off?
No, that is a very unlikely situation going by the past record.
I'm just saying hypothetically.
Hypothetically, we'll add on to it during the course of the year. This will go bigger and bigger also.
Okay. So every year, how much you are adding -- every year how much you expect to add on your exploration assets?
See, adding -- because the distribution assets, these are -- this definition -- exploration or evolution asset is a definition as per the MDS, okay? So let's not take it in as a common occurrence. All right. This is a definition of India in particular, accounting standard in India, which has got this heading. And as the heading has been used. So what has happened, this signifies the exploratory wells, which are under drilling and have not been capitalized. Once this is successful, this will be capitalized, and they would come under PPE. There's the first heading in the balance sheet in the asset side, under PPE.
Okay.
And this is kind of work in progress of exploratory work. You can take it as that. The E&E assets are work in progress exploratory ones. If they become dry, there'll be written off. If they are successful, they will go into PPE.
Okay, okay. Understood. And sir, from a customer side, which are the large customers that are expected to increase your production of gas volumes, which you guided to previous and discussions?
The electricity plants, NTPS, LTPS, where there's -- the power plants are there, the fertilizers are there, Assam Petrochemical is there, BCP and Fertilizers, they are there. So all these customers are going to take.
So these customers will add capacity and therefore take higher natural gas? Or they currently, they are not using the natural gas and therefore, they'll take natural gas?
They are all using natural gas as of now. In some cases, they are a little starved and in some cases, like APL went through an overhauling process, BVFCL is also going through some overhauling process. So also as a matter of coincidence also what has happened, a lot of overhauling and expansion is going on in these [indiscernible]. So they're all expanding capacities now. So because of capacity enhancements, one. And because they're enhancing capacities, they were at some optimal levels right now. So that's why the hike would be a little more.
Okay. And my last question is on Numaligarh Refinery. How much will be the expansion CapEx, if that has been finalized? And what could be the breakup of funding that CapEx between internal accruals and borrowing? And then follow-up to that would be, will it affect the Numaligarh Refinery's ability to pay dividends to Oil India?
See I'll take the last part of your question first. The dividend by Numaligarh might really come down because if we are going ahead, having a net worth of INR 5,700 crores, and we go ahead with a project of INR 28,000 crores, obviously, there will be some impact on the dividend payout. That is quite natural, right? And so there would be some impact in the dividend we have as a value in [ funding ]. As far as OIL's share of capital is concerned, it will be INR 3,000 crores odd and that will be payable around '23, '24. That's the end part of the project.
Okay. So this is additional INR 3,000 crores Oil India's infusion to Numaligarh in...
Right, right.
Okay, okay. And of the INR 28,000 crores of CapEx you explained, how much would be the borrowings? Will it be 2/3, 1/3, the usual borrowing mix?
70% will be borrowing.
The next question is from the line of Abhijeet Bora from Sharekhan.
Only one question. Can I get the break-even price for both gas and oil?
Break-even price of oil is around $27, $28.
And for gas?
For gas, we have a loss now. So your -- it was at $2.
Sorry?
Around $2 per MMBtu.
The next question is from the line of Yogesh Patil from Reliance Securities.
Sir, question is related to your 4% stake in Mozambique Basin. So the plans of gas production from this basin has been further extended to FY '25, '26 as per your presentation. So what is the current status of this basin? And how much CapEx is committed from Oil India's side in next 2 years for this block? So sir, my question is from the perspective of current higher LNG prices and which can be a booster for existing investors of this block to ramp up the operations, so that we can see early operations and gas outlook from this block. So can you throw some light on the Mozambique Basin current status and your CapEx plans for the next 2 years for this block?
Actually, the Mozambique Basin, Mozambique, what has happened is right now, it is on the force majeure because there's some activities out there and which is on the force majeure the last few months. And maybe another few months, it might be in the force majeure. However, the situation is improving. There's an intervention at the industry level from India and as well as from other operators. So there's governmental talks which is going on, and we expect the situation to improve. So the -- because of this, the project would be delayed by, say, another year, obviously, because of this force majeure, situation which was has happened right now.
Okay. And my second question is related to, again, a gas production, on gas production ramp-up. So as you said, the gas production will be close to 3.3 BCM in FY '23, '24. So this additional gas production, you will be able to sell at market price? Is this a right understanding?
No, not at the market. You see most of it is going to come from our nominated blocks, right, largely coming from -- we won't get a marketplace. If something comes from the NELP block, obviously, we'll be able to sell it in the market, but not all of it. A small part of it, yes, maybe, but not all of it.
So could you give us a ballpark number how much would be a nominated block, additional production? And how much will be NELP or market pricing?
Very small. NELP, as per our current plan, I mean -- see, it's a dynamic situation, okay? As for the current scenario, nothing more than 10%. And maybe in 5%. I'll just give ballpark, nothing more than 10%.
[Operator Instructions] The next question is from the line of Nitin Tiwari from Yes Securities.
My first question is related to the oil production you spoke about where you indicate that in the coming years, the production will go up about 3.0 to 3.1 million tonnes. So what is the basis of that increase in production because for the past couple of years, you've been seeing a decline in production levels? So where this incremental production will come from, can you just throw some light on that?
The improving production of that is we are expecting to come from some focus areas that we have identified within our existing fields. And due to some enhanced recovery methods that we plan to use and this focus fields, it will come from our existing fields and they are looking at new fields to enhance the ramp of the production at this stage.
Typically, is that you're talking about IUR activity in the existing fields [indiscernible]?
IUR activities and let's not exclude part of the fields in the nominated blocks.
Understood. And sir my second question is -- sorry.
More extensive exploration in some of the areas, that would be also a focus area.
Sure, sir. And sir, my second question is related to the Numaligarh Refinery. So in case of Numaligarh, post the -- post [indiscernible] centric, how are the product offtake agreements either firmly through [indiscernible] tie ups with the oil marketing company for the current production and then for the ramp-up also subsequently that all the product would be offered?
Yes, there is an arrangement with them. The BPCL is for the next 15 years, I guess. So therefore, for these marketing conditions should continue.
Understood. So even for the increased production, that is going to come after expansion, that also may increase [ through the whole segment ]?
Yes, Yes.
And on the related note, only, sir, that, like we have start getting question that now like people are incrementally talking about renewable energy and reduced reliance on oil and oil products. So in that light, how do you see the -- is Numaligarh CapEx adding up because it's not a coastal refinery, it's remotely in the interland. And it's a substantial CapEx, which is going to happen for expansion of the capacity. So how do you see this scenario adding up if the demand moderates going ahead? And then eventually, the refinery has to support, so…
In fact, Numaligarh is going ahead with the project for ethanol plant, 1G, okay? So they're going ahead with the 1G internal plant right now and that's as far as Numaligarh is concerned. And secondly, as far as Oil India is concerned, we are seriously exploring the prospects of green hydrogen. So the -- so from the ordinary perspective, it's looking into the green hydrogen scope of things. And Numaligarh, they are looking into a thermal plant.
Right. And that I mean, that's on the side that Numaligarh is in. But I'm talking more from the perspective of that, how much of a value do you see in terms of adding capacity, actual Numaligarh has a substantial investment of INR 28,000 crores. Now, given it's not a coastal refinery, eventually, the logistics would turn out to be less sort of competitive for this refinery if it has to export out of the area. That's what I'm trying to get at. And if the demand over there gets curtailed.
Yes, I understand what you say. Your question is that how does it add up that you make an investment of INR 28,000 crores when fossil fuels are not the flavor of the season, right?
Understood. Yes.
That's the question, right?
Yes, that's the question, yes.
Yes. The point is that see, whether we like it or not, whether it be the flavor of season or not, we can't do with the fossil fuel in the near foreseeable feature, right? So whatever happens is going to not happen before 2025 years. And things -- for things to actually percolate in concern to India and be executed at India levels, right? Even if -- and see, let's see it practically. There is no substitute in fossil fuel for [ APS ], right? I guess now, there's nothing at all. So there are a lot of areas where no work has been done for substitution of fossil fuels, right? So let's -- so we don't think we are still reached a stage where we can write-off the fossil fuel -- the future of fossil fuel straightaway. But in the future, yes, maybe there might be [ dips ] here and there, but then we think we will live with it.
The next question is from the line of Kirtan Mehta from Bank of Baroda Capital.
Could you run us through the status of the capital projects under execution?
Capital projects under execution. Now there are no major projects. We look at the major projects right now, the only major project right now under execution is the reverse comping projects from [indiscernible] to Guwahati. That is under construction. Other than that, there's nothing major really project right now really. Of course, we have a lot of things are in the pipeline, the planning stage. But there is no other CapEx right now for major projects. Otherwise, the ongoing CapEx that happens due to drilling wells and other activities, of course, that is ongoing. But if you consider major projects like [ ASP ] and other [ mature fields ], [indiscernible] in the range of INR 500 crores, INR 600 crores, INR 700 crores or more. Nothing like that is in endorsing right now, excepting the reverse comping revamping from [indiscernible] to Guwahati.
Right. What is the exploration budget for the next 2 years?
The exploration budget for the next 2 years will be in the range of around INR 2,700 crores to INR 3,000 crores.
And how many wells would -- how it would be spent -- split between the wells and the G&A expenses?
Survey would be in the range to INR 600 crores or so. However, in the range of INR 600 crores or so, and this would be for drilling purposes.
Right, sir. And one more question on the phasing of the CapEx for NRL Refinery. Would you also indicate from the NRL side, how the phasing would work out?
I don't have the exact phasing right now, [indiscernible]. We already shared this with you. Some of this was sort of the exact case. Okay. We'll just share this with you. All right.
The next question is from the line of [ Avadhoot Sabnis ] from India Capital.
I just wanted to take a clarification. My understanding was this whole NRL expansion also included a pipeline that's been built from -- to Bangladesh, Siliguri to Parbatipur, which would be largely funded through government grant. Is my understanding is correct?
For the Bangladesh part, major part is government grant for that.
So point was that isn't that sort of [indiscernible] funded refinery, taking the product to Bangladesh?
Sorry, sorry.
Isn't the main part of the question, I mean, I'm trying to understand the question was asked earlier in terms of where the ended product will move in terms of the refinery expansion, isn't the main part an export to Bangladesh in part as to the pipeline group?
Yes. Some part, yes, but not the major part.
Is there anything finalized in terms of agreements with Bangladesh in terms of product processing?
No, nothing has been really finalized, but [indiscernible], there is some products are already being exported to Bangladesh through the road ways as we speak. So -- but nothing long term as to the total uptake has been finalized as to now -- as of now.
Okay. And sorry, I just missed -- I didn't quite catch the GRM number that you gave for the NRL Refinery for second quarter. Could you please repeat it, please?
Okay. Yes. The GRM numbers for the second quarter, NRL is $13.47 per value.
$1347 -- $13.47?
Correct.
What was it for the first quarter?
[ $5.21 ].
The next question is from the line of Rahul Agarwal from L&T Mutual Fund.
Sir, my question is basically to understand this write-off of dry wells. Is there -- can you give us a sense of over the years of how much of your CapEx would you -- in your exploration side, would you have written off? And is that something that you keep a track of in terms of operational efficiency or improvement of process over the years?
See, as far as write-off of dry wells is concerned, this, we are talking of a well, which has not delivered any production, okay? And there will be another kind of drivers that is lifted slight and has dried up, all right. Now for that particular accounting purpose, we know if it's on the bottom line because that would happen in the natural course of business. These are -- the wells that we're talking of are those wells which were drilled, and they did not yield any commercial hydrocarbon. And in exploration business, drilling of dry wells is a part and parcel of the business itself, right? And its drivers during exploration is common world over, even with the biggest players in the game. So that's a part of the business. And that's the way life is.
Sir, I understand that. What I'm asking is that there would be a per certain percentage of what you're spending that you are taking a write-off off. So is there any metric that you keep track of that? Or there's nothing else?
See, for maintaining conservative books of accounts as soon as we can internally decide this is not commercially viable, my auditors will not permit me to [indiscernible] and I have to write it off immediately. So I cannot plan the write-off per se. The write-off will happen when it happens. And I would have to account for it as it happens. So I would not be able to maintain the metrics and kind of, what you say, even it out. I can't even it out. I'll have to do as it comes.
Okay. And just last question is -- so this quarter, how much past provisions have got adjusted?
Past provision, none actually. Because the provision we have taken is -- of INR 454 crores is a new provision and the write-off we did of INR 136 crores did not have a provision. So the past provision have not [indiscernible] in this quarter.
The next question from the line of Vikash Jain from CLSA.
I just wanted to check what has been the seismic cost for this quarter?
Survey costs for this quarter?
Yes.
Okay with some other questions, we'll just get back to you on this. Do you have another question?
Okay. And the other one was, sorry, your -- amount that you mentioned, that is INR 450 crores this one-off, this INR 450. Can you repeat this?
INR 450 crores per 1 year. [indiscernible]
INR 450 crores, 5-0, okay. Yes, didn't catch it.
[indiscernible]
The next question is from the line of Saket Kapoor from Kapoor Company.
Sir, as has been the case with the write-off, how does the provisions work with the income tax department in terms of tax calculation on the income when the write-offs are being made into -- what is the rule for the same? We are taking provisions on the basis of the wells not performing, so how does the taxation part play, sir?
[indiscernible] that write-offs and the provisions are explained on our audited [ investment ] activity, sir..
Didn't get you sir?
See. But as far as this [indiscernible] so there is a provision that [indiscernible] and that's always expenditures as and when are incurred. [ Our gas covered ] are the [ 142 agreement ] and as part of the [ 142 agreement ], which that incurred should happen, in some cases, in the year in [ wholesale in this business ] are impacted over of 3 years. So this is why the subsequent write-offs are [ proven to be ], these are allowed, doesn't harm our income tax profit.
Right sir, and sir with this -- with the increase in the gas prices and overhauling of APM also, what kind of improved revenue -- increased revenue are we expecting, sir, going forward? And what portion has been factored for this quarter, sir?
If I increase revenues now, see, your gas revenue is in the range of 15% of the total revenue. And the increased revenues, also the prices have gone up from 1.79 going up about 2.9. That difference for 15% of the revenue would be the enhancement. Because in the revenue mix, gas is around 15% or so.
And what have been the crude realization for this second quarter?
Around $72.
$72?
Yes.
Right. And sir, lastly, sir, on the CapEx part, you mentioned INR 2,500 crore to INR 3,000 crore for this current year, sir?
Sorry, please come again?
For the CapEx part, the amount to be spent would be INR 2,500 crore to INR 3,000 crore?
For the exploration, seismic, exploratory wells and development wells. That is exploration and activities.
And how much have we spent on the same for the first half?
Around half of it has been spent.
Okay. And sir for the hydrogen part, the green hydrogen part, what is the thought process of the management? And where are -- what are the inroads we are making currently? If you could throw some more light on the same?
Actually, it's still in the [ growing board ] stage. So we -- we are exploring the options, and we have not really even zoomed in on what kind of green hydrogen we want to use. So we're just looking the options and there are certain options available there. So the technical team is looking into the options. Once we have something concrete to discuss about, we'll definitely share that with you.
Okay. And what have been our investment in the renewable segment, sir?
Mr. Kapoor, may we request that you refer to the question queue for follow-up question?
Yes, please. I will do that .
The next question is from the line of Somaiah V. from Spark Capital.
Just one clarification with respect to the break-even numbers that you mentioned. What are the cost heads that is getting accounted when we mentioned this break-even numbers?
That break-even number is -- includes the resin costs. And includes the DDA. It includes the absorb costs, and it includes the levies. It does not include development costs. That is without development cost, okay?
Got it.
It includes resin cost, DDA absorb costs and levies.
As there are no further questions from the participants. I now hand the conference over to the management for closing comments.
Okay. This was very interesting and very encouraging, I must say because the questions were -- the participation was very encouraging. And the questions that were asked were very incisive. And we found a participation also very involved in the whole process. I must take the opportunity to thank everybody who has participated in this Q&A session, and especially thanks to Mr. Hazarika and Emkay Global Financial Services for arranging this call. Thank you.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.