Oil India Ltd Q2 FY2026 Concall Summary

Key Takeaways

• A quarter hit by disruptions and write-offs: EBITDA margin fell to 34% from 47% as production blockades, well provisions, and lower crude realizations converged. Operations have since normalized.
• Andaman exploration is live but early: Gas occurrence confirmed in shallow water, but the second well was provided for at ₹723 crores with no hydrocarbon presence. A third exploratory well is now drilling.
• NRL expansion is the near-term catalyst: Primary unit commissioning is on track for December 2025, with serious volume ramp-up starting Q2 FY27. The DNPL pipeline expansion is mechanically complete and expected operational before April 2026.
• Production targets are under pressure: FY26 oil target may scale down to 0.35 crore metric tons from 0.38 crore tons, and gas targets have been revised lower as demand ramp-up is phased.
• What to watch next quarter: Whether the December NRL commissioning stays on schedule, the pace of production recovery after the blockade, and any concrete data from Andaman's third well and supplemental seismic.

Production Disruptions & Recovery

• Blockade impact: Ethnic group economic blockades in the Eastern region, demanding SC Status, caused well closures for about one month. Daily production dropped from 9,720 metric tons to close to 9,000 metric tons per day.
• Q1 carryover: The quarter also absorbed residual impact from unplanned LPG shutdowns in Q1, compounding the Q2 disruption.
• Recovery underway: Operations have normalized and daily production is back on normal pace. Field headquarters are focused on bringing production back up, but management is cautious about reaching previously expected levels.

Borgohain: "I don't say that we'll be able to go to a very -- the expected level."

Andaman Exploration: Promise & Write-offs

• Discovery context: The East Andaman offshore campaign achieved a key milestone with gas occurrence. The discovery is in shallow water with 300-meter bathymetry, not deep water as some had assumed.
• Well #2 provision: Vijaya Puram-2 well was provided for ₹723 crores in Q2 because no hydrocarbon presence was established. This is a provision, not a final write-off; the final write-off occurs when all activities for the block are closed. The provision cannot be reversed and capitalized later.
• Well #1 and forward plan: Vijaya Puram-1 will be tested again. The third well being drilled now is a pure exploratory well, not an appraisal well. If hydrocarbons are established, it will go through appraisal and then development phases.
• Seismic campaign: Supplementary 3D seismic is planned within the next 3 to 4 months to ascertain the extent of potential hydrocarbon-bearing sand bodies. Concrete numbers are expected only after seismic exploration, imaging, and integration, with no specific date given.
• Accounting treatment: Exploration wells are generally written off because they are not monetized directly. Capitalization requires ascertaining total volume, economic viability, and completing appraisal and development phases.

Manral: "So this is not deep and ultra-deep waters. It is shallow waters. The water bathymetry is 300 meters."

NRL Expansion & Downstream Catalysts

• Refinery commissioning: The Numaligarh Refinery expansion is on track, with the primary unit (first crude intake) expected in December 2025. The DHDT plant is ~95% complete with pre-commissioning underway, and the CDU VDU pre-commissioning is also underway.
• Ramp-up timeline: Commissioning will be gradual, unit by unit. The refinery is complex and may take approximately two quarters to stabilize. Serious volume ramp-up will start from Q2 of next FY, around June or July onwards. Some production is expected in Q3 or Q4 of next year.
• Pipeline readiness: The DNPL pipeline expansion from 1 MMSCMD to 2.5 MMSCMD achieved mechanical completion on October 12, 2025. It now awaits PESO and PNGRB approvals, plus a 7-day disruption to hook up with the existing pipeline. Expected to be operational before April 2026.
• NRL current performance: Q2 throughput of 0.75 metric million tons was lower QoQ due to a marginal dip in crude supply from Oil India, not a maintenance shutdown. NRL still operated at more than 100% utilization. GRM of \$10.6 had only \$0.44 inventory impact, driven by spreads. Similar margins are continuing into Q3.
• No near-term shutdown: No planned shutdown at NRL in the next 3 to 6 months; the next shutdown will come in FY27 only.

Phukan: "Any very serious volume will come in the Q2 of next FY. So that means starting from, say, June onwards, July onwards, you will see a rapid ramp-up of the capacity."

Margins & Exceptional Costs

• EBITDA margin compression: Margin fell to 34% from 47%, driven by revenue reduction from lower crude price realizations and well write-offs. Crude oil price realization decreased 18.11%, and revenue was down approximately 44% versus the previous year.
• Well provisions: Other expenses were elevated by provisions for Bangladesh and Gabon blocks (~₹700 crores) and the Andaman Vijaya Puram-2 well (~₹723 crores).
• Employee cost step-up: Actuarial deficit of ~₹60 crores arose because DA crossed 50% (now 51.29%), triggering a gratuity liability increase from ₹20 lakhs to ₹25 lakhs. Normal salary increases and medical benefits added further pressure.
• Gabon and Bangladesh exit: The company has decided to exit Gabon, and Bangladesh is a closed chapter with the ONGC JV also deciding to exit. A little more expense may arise from closure efforts, but no further major increase is anticipated. Final write-offs for both may be taken by the end of this fiscal year.

Production Guidance & Capex

• FY26 oil target: Original target of 0.38 crore metric tons may be scaled down to 0.35 crore metric tons. Management is still trying to achieve the original target but is cautious.
• FY26 gas target: Set at 3.65 bcm for the full year. Gas ramp-up is constrained by demand seasonality, with tea gardens in the lean period taking less gas, and the phased ramp-up of NRL's new refinery consumption. Management expects same or slightly higher production versus last year.
• FY27 outlook: Oil target set at 0.4 crore tons. Gas target revised to 3.8 bcm, down from an earlier 4.31 bcm, reflecting the stepwise ramp-up of NRL's new refinery consumption. FY28 production is expected to touch 0.4 crore metric tons.
• Capex trend: Capex has been rising year-on-year. FY24-25 actual spending of ₹8,000 crores exceeded the budget of ₹6,880 crores, and the same trend is expected this year. H1 capex of ₹5,561 crores was detailed across capital equipment, drilling, survey, overseas, and subsidiaries/JVs. The NRL rights subscription caused the subsidiaries line to increase from ~₹350 crores planned to ₹1,117 crores.

Borgohain: "3.5 to 3.55 will be my target for the production."

International Portfolio & Partnerships

• Mozambique: Force majeure has been withdrawn from November 2025, removing a long-standing overhang.
• Russia dividends stuck: USD-denominated dividends from Russian assets, Vankor India Pte Ltd and Taas India Pte Ltd, are stuck due to Russian countermeasures against entities incorporated in "unfriendly jurisdictions" like Singapore. Total dividend paid back from TYNGD stands at USD 47.4 crore versus a USD 43.6 crore investment, and from Vankorneft at USD 49.8 crore versus a USD 59.8 crore investment. Management is evaluating options and is hopeful of positive news by early FY27.
• Total Energies: A service agreement exists for deep and ultra-deepwater exploration expertise covering well design, planning, and engineering. Advanced discussions are underway to expand the scope of services.
• Woodside Energy: The company is reaching out to Woodside Energy for a potential partnership focused on technical knowledge, beyond just financial engagement.
• Crude import strategy: After the Paradip-Numaligarh pipeline is completed, Oil India will import crude based on economics and sanctions compliance. Over 100 varieties of crude have been identified.

Manral: "We are further trying to even work upon with them, engage with them to expand our scope of services. And I'm not going to declare it right now because we are still working on it."

Guidance & Commitments

Key Metrics