HOEC strikes oil after 12 years: KSG-71 well delivers 250 barrels a day in Kharsang Block reboot

Hindustan Oil Exploration Company Limited (HOEC) confirmed the successful drilling and completion of the KSG-71 well in the Kharsang Block, located within the resource-rich Assam Arakan Basin. As per its disclosure under Regulation 30 of SEBI’s Listing Obligations and Disclosure Requirements (LODR), HOEC stated that KSG-71 is currently under testing with variable choke sizes between 6mm and 8mm, initially delivering an oil production rate of approximately 250 barrels per day. The well will be integrated into the production system using an optimal choke after the completion of ongoing tests.

This development marks a major turning point, as drilling has resumed in the Kharsang Block for the first time in 12 years. A second well, KSG-72, has already been spudded, demonstrating a clear recommitment to development activities within this long-dormant hydrocarbon zone.

Why Is the Kharsang Block Important to HOEC?

The Kharsang Block spans about 10 square kilometers and is situated in the prolific hydrocarbon-bearing Assam Arakan Basin in northeast India. This basin is historically known for its petroleum potential, having hosted significant exploration and production activities for decades.

GeoEnpro Petroleum Limited, a wholly owned step-down subsidiary of HOEC, is the operator of the Kharsang Block and holds a 10% Participating Interest (PI). HOEC, through its direct stake, owns a 25% PI, resulting in a combined economic interest of 35% in the Block. The operational resumption and subsequent well success are therefore significant not only for revenue generation but also for proving the asset’s viability after a prolonged dormant period.

This move aligns with HOEC’s strategy of capitalizing on underexploited fields where the company already holds a vested interest and operational footprint. Given the existing infrastructure and previous geological data, the risks associated with these brownfield developments are generally lower than greenfield exploration.

What Led to the 12-Year Drilling Pause?

Drilling in the Kharsang Block had been stalled since 2013 due to a combination of regulatory, contractual, and operational constraints. Historically, the Kharsang field was one of the first private sector oil and gas blocks awarded under India’s pre-NELP (New Exploration Licensing Policy) framework, which was often associated with complex legal and operational dynamics.

However, over the past decade, HOEC has been proactive in resolving legacy issues through litigation, negotiation, and stakeholder alignment. The successful spudding of KSG-71—and now KSG-72—suggests that these long-standing impediments have been largely cleared, and the company is finally poised to leverage the full production potential of its upstream assets.

How Might This Impact HOEC’s Production and Revenue Outlook?

The initial flow rate of 250 barrels of oil per day from KSG-71, while modest in isolation, could yield substantial cumulative volumes if similar rates are replicated across the remaining eight wells planned in this development program. Assuming an average of even 200 barrels per day per well, the aggregate output from this cluster could exceed 1,500–1,800 barrels per day—potentially adding a material uplift to HOEC’s existing production base.

HOEC’s last reported total daily production across assets stood near 4,000–4,500 barrels of oil equivalent per day (boepd). A successful multi-well program in Kharsang could thus contribute up to a 40% incremental boost to daily volumes within the next 12–18 months, depending on drilling pace, completion success, and operational integration.

With crude oil prices continuing to hover in the range of $75–$85 per barrel as of mid-2025, the monetisation of these new volumes could offer meaningful revenue inflows, particularly if cost efficiency is maintained across field operations.

What Is the Broader Strategic Significance of This Drilling Success?

This development is consistent with HOEC’s stated strategy of maximizing output from existing fields through incremental brownfield developments. The company has increasingly focused on leveraging mature blocks where infrastructure exists, reducing capital expenditure and execution risks while ensuring faster time-to-revenue cycles.

Moreover, restarting operations in the Kharsang Block represents a broader sectoral trend of rejuvenating dormant fields, especially in the Northeast region of India, which has long been underexploited despite its proven geological prospectivity.

HOEC’s execution also sets a precedent for other private players and joint ventures managing similar pre-NELP assets under revamped production sharing contracts or extension agreements. It may even attract renewed policy and investor attention to the importance of North-Eastern oil fields in India’s energy security roadmap.

How Is the Market Responding to HOEC’s Kharsang Update?

Investor sentiment around HOEC has shown signs of cautious optimism following the announcement. The stock, listed on both the Bombay Stock Exchange (BSE: 500186) and National Stock Exchange (NSE: HINDOILEXP), recorded moderate intraday gains post-announcement, reflecting bullish undercurrents tied to this operational milestone.

However, given the relatively small initial production scale and the multi-well timeline, full investor enthusiasm may remain tempered until output from additional wells confirms scale-up feasibility. Institutional investors appear to be taking a wait-and-watch approach, with no substantial changes reported in foreign institutional investor (FII) or domestic institutional investor (DII) flows as of May 15, 2025.

The next major catalysts for the stock could include successful completion of KSG-72 and subsequent production hook-up, along with any forward guidance from management regarding expected cumulative output from the full development program.

What Are the Risks and Forward Outlook for HOEC in Kharsang?

While the resumption of drilling is clearly a positive development, several operational and regulatory risks remain. Logistical challenges in the Northeast, unpredictable monsoons, and historical community opposition could impact timelines. In addition, reservoir behaviour in mature fields may not always align with earlier geological models, necessitating adaptive drilling and completion strategies.

Nevertheless, the commercial reactivation of a previously frozen asset after over a decade offers both symbolic and material value. It reinforces HOEC’s capabilities in field turnaround, project perseverance, and strategic resource unlocking.

Looking ahead, HOEC is expected to provide updates on well-wise production profiles, full-field development economics, and potential reserve upgrades in future investor disclosures. Analysts and institutional investors will closely track whether this operational rebound translates into a sustainable uplift in top-line growth, margin expansion, and overall shareholder returns.

Energy analysts tracking mid-cap Indian exploration and production companies consider HOEC’s Kharsang progress a vital strategic inflection point. According to upstream industry observers, successful brownfield execution in northeast basins could become an important lever for mid-sized players seeking production-led growth without incurring the higher exploration risk premium associated with frontier acreage. HOEC’s dual role as operator (through GeoEnpro) and major stakeholder further de-risks execution challenges by ensuring end-to-end alignment on project management and investment priorities.

HOEC’s successful spudding and initial testing of the KSG-71 well in the Kharsang Block marks a resounding operational restart after a 12-year hiatus. The company’s ability to extract commercial quantities of oil from this long-dormant field, supported by its dual PI and operator role, could provide a meaningful boost to its medium-term production volumes and earnings trajectory. Institutional attention now turns to the scalability of this initiative as subsequent wells in the Block are drilled and brought online.