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Hindustan Oil Exploration Company Ltd.
BSE CODE: 500186   |   NSE CODE: HINDOILEXP   |   ISIN CODE : INE345A01011   |   03-May-2024 Hrs IST
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March 2015

DIRECTORS' REPORT

TO

THE MEMBERS OF

HINDUSTAN OIL EXPLORATION COMPANY LIMITED,

Your Directors have pleasure in placing before you the 31st Annual Report on the business and operations of the Company and the audited accounts for the Financial Year ended 31 March 2015

During the year, your Company produced 0.25 million barrel of oil equivalent (mmboe) of crude oil and gas (previous year 0.37 mmboe), the main reason for the decrease is decline in production and inability of downstream consumer to of f­take PY-1 Gas for 41 days due their shut-down / limitation.

The lower production has resulted in a Turnover of INR 404 million for the year (previous year INR 569 million), a decrease of 29% over the previous year. The total revenue for the year was INR 478 million (previous year INR 627 million) and the decrease is mainly due to the reason as stated above.

On a standalone basis, the Loss-Before-Tax was INR 12,210 million (previous year INR 1,377 million). This is mainly due to the impairment of producing assets  PY-1 and other offshore assets CY-OS-90/1 (PY-3) and  CB-OS/1. This impairment is necessitated consequent to the re-estimation of recoverable reserves in PY-1 due to poor reservoir performance. The other offshore assets PY-3 and CB-OS/1 are not economically viable to develop at the current oil prices and need to be impaired. In addition, the exceptional items include the write-off of exploration costs and additional depletion due to the reduction of PY-1 Reserves.

During the year under review, the deferred tax asset of INR 4,478 million has not been considered as uncertainty exists over its recoverability. Accordingly, the carried forward business losses and unabsorbed depreciation to the extent of deferred tax liability as at 31 March 2015 stands adjusted.

During the year under review, your Company had a Loss-After-Tax of INR 12,210 million (previous year INR 1,248 million) mainly due to exceptional write-off as stated above. Your Company had borrowed from ENI Lasmo Plc for the development of PY-1 and as the PY-1 assets were impaired, ENI Lasmo Plc has waived off the entire outstanding loan of INR 9,608 million with no further obligations. This waiver of the loan of INR 9,608 million is transferred to Capital Reserves.

On consolidated basis, the total revenue has reduced from INR 818 million to INR 669 million a reduction of 18%, loss after tax has increased from INR 1,237 million to INR 12,196 million for reasons as stated in the Standalone accounts.

2. DIVIDEND

In view of the Loss-After Tax during the year, the Directors have not recommended any dividend for the Financial Year  2014-2015.

3. CAPITAL EXPENDITURE

During the year under review, the company incurred capital expenditure aggregating to INR 114.59 million towards exploration and development program in its existing portfolio of assets.

4. BRIEF DESCRIPTION OF THE COMPANY'S OPERATIONS DURING THE YEAR

Operations review has been provided in the Management Discussion and Analysis Report, which forms part of this Annual Report.

5. MEASURES TAKEN TO IMPROVE THE OPERATIONAL & FINANCIAL PERFORMANCE

The Company has initiated measures to achieve improvement in operational and financial performance by focusing on cost optimization in existing producing fields. In order to monetize the existing discoveries the Company has focused on achieving the approval development plan for the Dirok discovery which was obtained in May 2015. To put the field on fast track development, various environmental, forest and wildlife clearances are required which are being processed.

6. NO CHANGE IN THE NATURE OF BUSINESS

There is no change in nature of business being carried out by the Company.

7. OUTLOOK

The Company has capital requirements to implement its business plans and the development of Dirok discovery in Assam in the immediate future, which can be met through the internal accruals and the existing working capital. The Board recognizes that the Company has a successful track record of raising capital in the past and the Company shall raise financial resources as and when needed to meet its discretionary spending for any potential growth opportunities. Accordingly, the Financial Statements have been prepared on the basis that the Company is a going concern.

8. CREDIT RATING

ICRA has accorded a long term stable rating of (ICRA) BBB + for the line of credit of INR 100 crores on 15 May 2015.

9. WAIVER OF LOAN BY ENI LASMO PLC

During the year, consequent to the impairment of carrying value of PY-1 asset due to the reduction of recoverable reserves, Eni Lasmo Plc has waived the outstanding loan obligation of INR 9,608 million vide the deed of termination dated 3 December 2014 with no further future obligation towards this loan.

The Company had adjusted the waiver of the loan to Capital Reserves as it is a capital receipt akin to promoter's contribution.

10. SHARE CAPITAL

The Company has not issued any shares with differential rights as to voting, dividend or otherwise. During the year, based on the approval of the Members at their 30th Annual General Meeting held on 26 September 2014, the authorized capital of the Company has been increased  from INR 200 Crores to INR 500 Crores.

11. PROMOTERS

Eni UK Holding Plc, Burren Shakti Limited and Burren Energy India Limited (referred to as "Eni Group") collectively hold  47.18% of the paid-up capital of the Company. Eni Group, the promoters have declared that they have not pledged any of their shareholding in the Company.

During the year, the Company has received a request for excluding their names as promoters as they have only two nominee non-executive directors in the reconstituted board of directors which has six directors and their holding is only 47.18% of the diluted share capital of the Company. It is further stated that they do not control the management / policy of HOEC and neither do they have the ability to appoint majority of the directors to the Board. This request was considered by the Board for declassifying them as promoter to public shareholder. However, the stock exchanges stated that the current regulatory framework does not allow such declassification and therefore the status quo is maintained.

12. HOEC BARDAHL INDIA LIMITED (HBIL), WHOLLY OWNED SUBSIDIARY OF HOEC

At the Board meeting held on 14 February 2015, the Board of Directors nominated Mr. P. Elango and Mr. R. Jeevanandam to the Board of the subsidiary and noted the resignation of Mr. Manish Maheshwari, Non-Executive Director / Chairman of HOEC Bardahl India Limited.

The Consolidated Financial Statements presented by the Company include financial information of the subsidiary HBIL prepared in accordance with the Companies Act, 2013, and the relevant accounting standards.

Pursuant to sub-section (3) of Section 129 of the Act, the statement containing the salient feature of the financial statement of a Company's subsidiary i.e. HOEC Bardahl India Limited is given as Annexure-IV and this forms part of this report.

Further, the Annual Accounts and related documents of the subsidiary company is kept open for inspection at the Registered Office of the Company during normal working hours. Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company in this Annual Report include the financial information of its subsidiary.

13. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Accounting Standard (AS) 21 and the Listing Agreement entered into with the Stock Exchanges, Consolidated Financial Statements for the Financial Year 2014-2015 are appended to and form part of this Annual Report.

14. COST ACCOUNTING RECORDS

The Company is required to maintain cost records and get them audited in terms of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit)  Rules, 2014.

Board appointed Mr. K. Suryanarayanan, a Cost Accountant in Practice as cost auditor of the Company for the financial  year 2015-2016 at a fee of INR 2,00,000 (Rupees Two  Lakhs only) plus applicable taxes and out of pocket expenses subject to ratification of the said fees by the shareholders at the ensuing Annual General Meeting.

The cost audit report would be filed with the Central Government within the prescribed timelines.

15. AUDITORS' REPORT & DIRECTORS EXPLANATION

In response to the specific observation in the Auditors Report, the Directors explanation is as hereunder:

Auditors have made an observation under heading "Basis for qualified opinion" in their report that "The attached financial statements include Company's share of current assets / (liabilities), non-current assets / (liabilities), expenses and cash flows aggregating to INR 829, 974 / INR (79,685,217), INR 310,586,199 / INR (331,065,000) INR Nil and INR (1,924) respectively as at or for the year ended 31 March 2015 in respect of two of its unincorporated joint ventures ('UJV's) not operated by the Company, the audited accounts which are not available with the Company. The financial statements have been incorporated based on the un-audited financial information detailed in note 28 (b) of attached financial statements. In the absence of audited UJVs, we are unable to comment on the adjustments that may be required to be made in these financial statements."  In this regards the Directors have to state that:

1. In case of unincorporated joint ventures the due date for submission of the accounts do not coincide with the accounts of the Company. The due date for submission of accounts for the block CB-OS/1 is  30 June and for CY-OS-90/1 is 30 September of the  respective year whereas the due date of Company's audited accounts is 30 May of the respective year. It is therefore imperative to carry out the verification of material adjustments by following alternate procedures and it may not always be possible to obtain the audited accounts of the unincorporated joint venture before 30 May of the respective year.

2. Current Assets INR 829,974 relate to the CB-OS/1 based on the billing statement for the current year received from the Operator of the block. Out of the total liability as stated INR 79,685,217, an amount of INR 43,661,684 relates to CB-OS/1 and INR 36,023,533 relates to CY-OS-90/1. In case of  CB-OS/1, an amount of INR 34,560,505 relates to  the period up to 31 March 2014 which has been audited and the balance INR 9,101,179 was based  on billing statement received for the current year. In case CY-OS-90/1, no expenditure was authorized beyond 31 July 2011 and the provision for liability accounted INR 36,023,533 is based on the last relevant audited accounts for the financial year 2011­2012.

3. In case of Non-current asset, INR 310,586,199  relates to the Site Restoration Deposit made with  the State Bank of India (SBI) for the block CY-OS-90/1  (PY-3) and the bank confirms the balance. Non-current liability of INR 331,065,000 relates to the provision for site restoration liability estimated by the Operator for PY-3 block. This block has been shut-down since 31 July 2011 and the last relevant audited accounts  for the block are of 2011-2012. In this case the

Non-Current Deposit is certified by the SBI, Chennai and considering the current downtrend of the costs, the non-current liability estimated for the site restoration does not require any upward revision.

4. It is stated in that the cash flow movement of INR 1,924 relates to the difference in bank balances of audited accounts of 2013-2014 and the unaudited accounts of 2014-2015 and it relates to the block CB-OS/1.

Auditors in the emphasis of matters invited to note 38 of the financial statement which describe the factors and conditions that indicate the existence of material uncertainties that cast a substantial doubt on the Company's ability to continue as a going concern. The audit report is not qualified for this matter.

Director explanation for the above emphasis of matter is that as seen from the note 38 of the consolidated financial statement, the Company's net current assets is INR 1,275 million (excluding ENI payables of INR 263 million). Considering the available working capital and with the internal accruals, the company can meet the ongoing development capital expenditure of the block AAP-ON-94/1. Further this capital expenditure for this block will be spent over a period of18 months. The Company has a BBB + stable rating for the borrowing to the tune of INR 1,000 million which can meet any of the discretionary capital spending for the value creation. This emphasis of matter by auditor about the "going concern" was continuing from the financial year 2013-2014 and this emphasis is continuing even after 2 years. In Directors opinion there is no doubt about the ability of the Company as a going concern and the company can meet all its financial obligations including the growth capital and will continue to grow as a going

16. ACCOUNTING FOR SURVEY COST

In compliance with SEBI directions relating to treatment of survey cost under the Guidance Note (Accounting for Oil and Gas Producing Activities, issued by Institute of Chartered Accountants of India), the Company has expensed off survey costs amounting to INR 70 million (INR 446 million pertaining to previous years) in the Statement of Profit and Loss.

17. UNINCORPORATED JOINT VENTURES

The financial statements of the Company reflect its share of assets, liabilities, income and expenditure of the Joint Venture operations which are accounted on the basis of available information on a line-by-line basis with similar items in the Company's Accounts to the extent of the participating interest of the Company as per various "Production Sharing Contracts". The financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures.

18. FIXED DEPOSITS

Your Company has not accepted any fixed deposits and as such, no principal or interest are outstanding as at the balance sheet date.

19. CORPORATE GOVERNANCE CERTIFICATE

The report on Corporate Governance as stipulated under the Listing Agreement forms an integral part of this Report. The requisite certificate from the Company Secretary in Practice, confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance.

20. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 as required pursuant to Section 92 of the Companies Act, 2013 is included in this Report as Annexure -I and this forms an integrated part of this Report.

21. DIRECTORS

During the year, Mr. Manish Maheshwari, Managing Director resigned from the Board on 08 October 2014, Mr. R. Vasudevan, Non-Executive Independent Director (Chairman) and Mr. V. S. Rangan, Non-Executive/ Non-Independent Director also resigned from the Board on 08 October 2014. Mr. Dhruv S. Kaji, Non-Executive and Independent Director who joined the board on 14 February 2014 resigned on 25 September 2014. However, Mr. Sunil Behari Mathur resigned from the Board on

08 October 2014 has re-joined the Board on 17 November 2014 as an Independent Director and Non-Executive Chairman. The Board places on record its appreciation for the services rendered by the above resigned directors.

During the year Ms. Sharmila Amin has been appointed as Non-Executive, Independent woman director on 17 December 2014. Mr. P. Elango, has been appointed as Additional Director and designated as Managing Director for a period of 3 years effective from 02 February 2015 subject to approval of the members in the General Meeting. Mr. R. Jeevanandam, has been appointed as Additional Director and designated as Chief Financial Officer for 3 years effective from 02 February 2015 subject to approval of the members in the General Meeting.

Mr. Guido Papetti and Mr. Paolo Ceddia, Directors retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment.

Pursuant to Section 149 of the Companies Act, 2013 and the rules made thereunder and other applicable provisions, if any, your Directors are seeking appointment.

Ms. Sharmila Amin joined the Board as an Additional Director (Non-Executive Independent Director (Woman)) of the Company effective from 17 December 2014 and she shall hold office up to the date of the ensuing Annual General Meeting. The Company has received notice in writing from a member along with requisite deposit proposing the appointment of Ms. Sharmila Amin as a Non-Executive Independent Director for a period of 5 (five) consecutive years from the date of appointment. The Board recommends her appointment by way of Ordinary Resolution by the members in the ensuing Annual General Meeting.

Mr. Sunil Behari Mathur re-joined the Board as Chairman and Non-Executive Independent Director effective 17 November 2014 and he shall hold office up to the date of the ensuing Annual General Meeting. The Company has received notice in writing from a member proposing the appointment of Mr. Sunil Behari Mathur as a Non-Executive Independent Director for a period of 5 (five) consecutive years from the date of appointment. The Board recommends his appointment by way of a Special Resolution by the members in the ensuing Annual General Meeting.

The Board of Directors at its meeting held on 02 February 2015, has appointed Mr. P. Elango as Additional Director effective from 02 February 2015 in accordance with Section  161 of the Companies Act, 2013. Mr. P. Elango holds office  up to date of the ensuing Annual General Meeting. Company has received notice in writing from a member along with requisite deposit proposing his appointment as a Director. The Board also designated him as the Managing Director for a period of 3 years effective from 02 February 2015 to 01 February 2018. The Board recommends the appointment and the remuneration payable to him for the approval of the members at the ensuing Annual General Meeting of the Company by way of a Special Resolution.

The Board of Directors at its meeting held on  02 February 2015, has appointed Mr. R. Jeevanandam as Additional Director effective from 02 February 2015 in accordance with Section 161 of the Companies Act, 2013. Mr. R. Jeevanandam holds office up to date of forthcoming Annual General Meeting. Company has received notice in writing from a member along with requisite deposit proposing his appointment as a Director. The Board also designated him as the Whole-time Director and Chief Financial Officer for a period of 3 years effective from 02 February 2015 to 01 February 2018. The Board recommends the appointment and the remuneration payable to him for the approval of the members at the ensuing Annual General Meeting of the Company by way of a Special Resolution.

The Company has received necessary consents / declarations from the concerned directors. The brief resume of the Directors seeking appointment / reappointment and other information have been detailed in the Notice. Your Board recommends the above appointments / reappointment of Directors in the best interest of the Company.

All independent directors have given declarations that they meet the criteria of independence as stipulated under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

22. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit and Nomination & Remuneration Committees. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report.

23. NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE

During the year, 10 Board Meetings and 6 Audit Committee Meetings were convened and held. The details of meetings are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

24. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY

Details of loans, investments, guarantees and securities provided along with the purpose covered under the provisions of section 186 of the Companies Act, 2013 are given in the Notes 10 and 12 to the Standalone Financial Statements.

25. REMUNERATION AND NOMINATION POLICY

The Board of Directors has framed a policy which lays down a frame work for the remuneration payable to Directors and other key managerial personnel. This policy also states the criteria for selection and appointment of Board Members. The details of the policy is stated in the Corporate Governance Report. Nominee Directors of the Company on the Board of HOEC Bardahl India Limited (wholly owned subsidiary of HOEC) do not receive any remuneration or commission.

26. MANAGERIAL REMUNERATION

Due to the loss during the year, the managerial remuneration paid to Mr. Manish Maheshwari, the then Managing Director, has been in excess of the limits prescribed under the Companies Act, 2013. In terms of the provisions of Schedule V Part II of the Companies Act, 2013, such managerial remuneration requires the approval of the Shareholders. Accordingly, the Board recommends the same by way of a Special Resolution and to make an application to the Central Government in terms of the Companies Act, 2013.

27. PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report as Annexure III which is an integral part of this report.

28. EMPLOYEES STOCK OPTION SCHEME

In supersession of the existing stock option scheme with no outstanding stock option, a new stock option scheme "Associate Stock Option Plan-2015" is recommended by the Board for the approval of the members in the ensuing Annual General Meeting by way of a special Resolution. The ASOP scheme is necessitated to retain and get the new talent pool for the growth of the Company. The ASOP scheme is detailed in the Notice to the Annual General Meeting.

29. RELATED PARTY TRANSACTIONS

All transactions entered with related parties for the year under review were on arm's length in the ordinary course of business. The particulars of every contract or arrangement entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arm's length transactions are disclosed in the Form AOC-2 as Annexure II. Your Directors also draw attention of the members to Note 30 to the standalone financial statements which set out related party disclosures.

30. MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company.

31. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There were no material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

32. DIRECTORS' RESPONSIBILITY STATEMENT

Your directors state that to the best of knowledge and belief and according to the information and explanation obtained by them, they make the following statements in term of Section 134 (3) (C) of the Companies Act, 2013:

(i) that in the preparation of Annual Accounts for the year ended 31 March 2015, the applicable accounting standards have been followed along with proper explanation for material departures if any.

(ii) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31 March 2015 and of the loss of the company for the year ended on that date.

(iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing, detecting fraud and other irregularities.

(iv) the annual accounts have been prepared on a going concern basis.

(v) the directors, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

33. STATUTORY AUDITOR

M/s. S.R. Batliboi & Associates LLP (FRN: 101049W) has been the auditor of the Company for the last five years and the five year terms comes to an end at this Annual General Meeting. Board of Directors recommend as a matter of policy and good governance, the statutory auditors are to be rotated once in five years. Accordingly, based on the recommendation of the Audit Committee and as a matter of good governance, the Board has at its meeting held on 28 May 2015 recommended to appoint M/s. Deloitte Haskins & Sells LLP (FRN: 117366 W/W 100018), a leading Chartered Accountants for a period of 5 (five) years from this Annual General Meeting. This appointment is subject to ratification at every Annual General Meeting of the Company.

M/s. Deloitte Haskins & Sells LLP have confirmed that they are eligible for appointment and within the limits prescribed under Section 139 of the Companies Act, 2013. Accordingly, the recommendation of appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as the Statutory Auditors from the year 2015-2016 is proposed for the approval of the members by way of an Ordinary Resolution.

34. COMPANY SECRETARY

Upon resignation of the erstwhile Company Secretary in 2011, Assistant Company Secretary was authorized to discharge the functions of the Company Secretary  and Compliance officer for the years 2012-13, 2013-14  and 2014-15. However, the company has appointed Mr K. Premnatha as Dy. Manager, being a qualified Company Secretary will discharge the function of the Company Secretary and Compliance Officer with effect from 10 August 2015.

35. SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act, 2013 and rules made there under the company has appointed M/s. S. Sandeep & Associates, Company Secretary in Practice to undertake the secretarial audit of the Company. The Secretarial Audit report is included as Annexure V to this report.

It is observed in the Secretarial Audit Report, the remuneration paid to the then Managing Director, Mr. Manish Maheshwari for the period from 01 April 2014 to 08 October 2014 is in excess of the limits specified in Schedule V to the Companies Act, 2013, which needs to be ratified. It is also observed, the Company needs to appoint a qualified Company Secretary and certain delay in filing the returns required under the Companies Act and in terms of the Listing Agreement which was due to the reconstitution of the Board and the appointment of Directors. In this regard the Directors to state that a Special Resolution is proposed for the ratification of the remuneration paid to the then Managing Director and necessary application will be filed. In case of other observation, a qualified Company Secretary is appointed and will function as a Company Secretary and the Company will ensure the returns will be filed in time.

36. INTERNAL AUDIT

During the year, the Company has engaged M/s. Guru & Ram, Chartered Accountants, as its Internal Auditor. The Company continues to implement their suggestions and recommendations to improve the control environment. Their scope of work includes review of internal controls and its adherence, statutory compliances, health safety and environment compliance, compliance towards related party transactions and risk assessments. Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations.

37. INTERNAL FINANCIAL CONTROLS

The company has a proper and adequate system of internal control commensurate with the size and nature of business. The systems provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the company and ensuring the compliance with corporate policies. The system monitors and manages the risks associated with each asset's operations and performance. Periodic evaluations are done mainly through its Internal Audit, in order to determine the adequacy of its internal control systems. Further the adequacy of internal controls system is monitored on a systematic basis by the Audit Committee. Reports by the Management and the Internal Auditors include assessments of the major risks and the effectiveness of the Internal Control System in addressing them.

38. MANAGEMENT DISCUSSION AND ANALYSIS

Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

39. PROTECTION TO WOMEN EMPLOYEES

The Company has a policy to prevent the sexual harassment of women at work place in terms of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. In order to implement the policy, a committee has been set up and no complaint was received during the year under review.

40. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS  AND OUTGO

Your Company operates in environmentally responsible manner for enduring benefit to all stakeholders. During the year under review several steps were taken for conservation of energy and 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 equipment's with preference for BEE Star rated equipment's, wherever feasible.

2. As a responsible Corporate Citizen and in adherence to climate change policy, Company is continuously taking effective steps to conserve energy and to reduce methane and other Green Houses Gases (GHG) emissions, wherever feasible.

3. Minimized environmental impact from its activities. Company continues with its initiatives on energy and resource conservation at its PY-1 facilities and use of renewable energy like solar panels at offshore locations.

4. The Company regularly monitored air emission sources and ambient air quality and ensured that emission levels at all times remain lower than the statutory limits.

5. Except the emergency lights, all lights and electrical gadgets are turned off after working hours and on holidays at office premises of the Company to help in minimizing the energy consumption.

b) Steps taken by the Company for utilizing alternate source of energy

During the year the Company is in the process of formulating a policy for use of solar energy in its process installation.

c) The 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 and consequent impact on the cost of production of goods Reduction in emission of Green House Gases as a result of minimal use of air conditioning and reduced consumption of power and fuel.

B) Technology absorption

(a) During the year the technology absorption, adaptation and innovation is nil.

(b) No technology import was made during the last 3 years.

(c) No Research and Development expenditure was made during the year.

(d) No benefits were derived like product improvement, cost reduction, product development or import substitution during the year.

C) Foreign exchange earnings and Outgo

(a) activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans: Company is engaged in production of crude oil and natural gas; the existing Government policies and Production Sharing Contracts (PSCs), to which Company is a party, is subject to domestic market obligations till self-sufficiency in domestic production of hydrocarbons.

(b) total foreign exchange used and earned:

41. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The company is in continuous loss and no amount has been spent on CSR. However, the Company is in the process of formulating a CSR policy.

The Board of Directors at their meeting held on 28 May 2015 constituted a committee called as Corporate Social Responsibility Committee with Mr. Sunil Behari Mathur as Chairman, Mr. P. Elango and Ms. Sharmila Amin as members with a mandate to formulate a CSR policy and the subsequent implementation of the policy effective from  the financial year 2015-16.

42. HUMAN CAPITAL & MANAGEMENT

The Company continues to pursue best practices to develop its human capital. The Company has a transparent Performance Appraisal System (PAS) with focus on the organizational objectives aligned with Key Performance Indicators. An objective performance measurement with an assessment of potential and identification of training needs for individual growth are being pursued.

43. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of the Investor Education Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has already filed the necessary form and submitted the details of unpaid and unclaimed amounts lying with the Company with the Ministry of Corporate Affairs.

44. LISTING WITH STOCK EXCHANGES

The Company confirms that it has paid the Annual Listing  Fees for the year 2015-2016 to NSE and BSE where the  Company's Shares are listed.

45. ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and co-operation received from Government agencies namely the Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, Ministry of Defence, Ministry of Environment and Forests and the State Governments of Gujarat, Tamil Nadu, Assam, Rajasthan and Telangana and the authorities working under them. Your Directors express their gratitude to the company's stakeholders, shareholders, business partners and the bankers for their understanding and support and look forward to their continued support in future. Your Directors value the professionalism, dedication and commitment of the HOEC team to overcome the present challenges.

For and on behalf of the Board of Directors

S. B. Mathur

DIN: 00013239

Chairman

Place  : Chennai

Date : 10 August, 2015