ALPHAGEO (INDIA) LIMITED
ANNUAL REPORT 2011-2012
YOUR DIRECTORS HAVE PLEASURE IN PRESENTING THEIR TWENTY FIFTH ANNUAL REPORT
AND AUDITED ACCOUNTS FOR THE FINANCIAL YEAR ENDED MARCH 31, 2012. THE
FINANCIAL HIGHLIGHTS OF THE COMPANY ARE AS FOLLOWS:
Financial Results (Rs. in Lakhs)
Particulars 2011-12 2010-11
Revenue From Operations 2523.30 2086.21
Total Income 2723.50 2197.26
Operating Profit (PBIDT) 383.98 108.15
Finance Costs 52.08 45.52
Depreciation 891.79 1551.54
Profit/(Loss) Before Tax (559.89) (1488.91)
Provision for Tax (50.44) (223.02)
Profit/(Loss) After Tax (509.45) (1265.89)
Revenue from operations for the year ended March 31, 2012 at Rs. 2523 Lakhs
was higher by 21% as compared to Rs.2086 Lakhs for the previous year. For
the financial year ended March 31, 2012, Profit from Operations was Rs.384
Lakhs, as compared to a profit of Rs. 108 Lakhs for the previous year
higher by 255%.
For the year ended March 31, 2012, the Company`s Loss before Tax stood at
Rs. 560 Lakhs as compared to a Loss of Rs. 1,489 Lakhs in the previous
year, registering a recovery of 62%. The Loss after Tax was Rs.510 Lakhs as
compared to a Loss after Tax of Rs.1,266 Lakhs in the previous year. The
EPS (basic) strengthened to negative Rs.9.92 from a negative Rs.24.65 in
the previous year.
During the year under review, the Company has received new orders valued at
Rs.1946 Lakhs to supplement the unexecuted order position at the beginning
of the year of Rs. 2850 Lakhs. The unexecuted Order Value as of March 31,
2012 stood at approx Rs. 2000 Lakhs.
During the year Alphageo could not achieve the targeted income due to
difficulties in the contract being executed in the North East. Due to
circumstances beyond its control prevailing in the north east region, your
Company has had to incur expenditure without any contributing income for
long periods of time when the crew has to remain idle. However, your
company excelled in performing the remaining contracts within the agreed
time with the desired quality to the utmost satisfaction of the clients.
On the cost side, the Company critically reviewed all areas however small,
maintained a strict financial discipline and eliminated all inefficiencies.
We continued to maintain our clear focus on operational excellence.
In order to plough back the resources for the operations of the Company, no
dividend is recommended for the year ended 31.03.2012.
Mr. A. Rajesh and Mr. P. K. Reddy, Directors, retire by rotation and being
eligible, offer themselves for reappointment. The Board of Directors of
your Company at its meeting held on August, 10, 2012 recommended, their re-
appointment as Non-Executive Directors of your Company, liable to retire by
rotation, for the approval of the members.
your directors wish to inform that Dr. Avinash Chandra has resigned as a
Director of the Company with effect from 14.05.2012. your directors place
their appreciation for the contributions made by Dr. Avinash Chandra,
during his tenure as director of the Company.
Management Discussion and Analysis Report and Corporate Governance
The Corporate Governance and Management Discussion and Analysis Report form
an integral part of this Report and are presented as separate sections to
this Annual Report. The Auditors` Certificate certifying compliance with
the conditions of Corporate Governance as stipulated in Clause 49 of the
Listing Agreement with Stock Exchanges is annexed with the Report on
The auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants,
Hyderabad (Firm Registration Number No. 002283S), retire at the conclusion
of the ensuing Annual General Meeting and have confirmed their eligibility
and willingness to accept office, if reappointed.
The Company has not invited any deposits from the Public under Section 58A
of the Companies Act, 1956.
Conservation of energy, research and development, technology absorption,
foreign exchange earnings and outgo
The particulars as prescribed under Section 217(1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of particulars in the report of
the Board of Directors) Rules, 1988, are set out as Annexure-I in this
your company, with a view to explore the business opportunities in the
international markets, had incorporated 2 subsidiaries - Alphageo
International Limited, a wholly owned subsidiary incorporated in Jebel Ali
Free zone Area in Dubai and a step down subsidiary Alphageo DMCC
incorporated in Dubai Multi Commodity Centre (DMCC). The Subsidiaries have
achieved a turnover of Rs. 1873 Lakhs and earned Profit before depreciation
of Rs. 335 Lakhs and Profit before Tax of Rs. 83 Lakhs for the year ended
31st March, 2012
In accordance with the General Circular No. 2 and 3 dated 8th February 2011
and 21st February 2011 of The Ministry of Corporate Affairs, Government of
India, the financial statements and other documents of the subsidiary
companies are not being attached with the financial statements of the
Company. The Company makes available the Annual Accounts of the subsidiary
companies and the related detailed information to any member on their
written request to the Company who may be interested in obtaining the same.
The annual accounts of the subsidiary companies will also be kept open for
inspection at the Corporate Office of the Company. The Consolidated
Financial Statements presented by the Company include the financial results
of its subsidiary companies.
Consolidated Financial Statements
In compliance with the Accounting Standard -21 on consolidated financial
statements and with the listing agreement with the stock exchanges, the
consolidated financial statements for year ended 31st March, 2012 have been
prepared and the same together with Auditors Report thereon form part of
this Annual Report.
The group performance for the year ended 31st March, 2012 has resulted in
an operational turnover of RS. 4393 Lakhs compared to 2963 Lakhs for
previous year ended 31st March, 2011. The Operational profit for the
current year was Rs. 721 Lakhs compared to Rs. 366 Lakhs for the previous
year. The Loss before tax for the current year is Rs. 476 Lakhs compared to
Loss of 1309 Lakhs for the previous year. The consolidated EPS for the
current year is negative of Rs. 9.88 compared to negative Rs. 21.84 for the
Alphageo has successfully completed its first international contract during
the year and is optimistic in procuring further contracts in the coming
Particulars of Employees
There are no employees who are, in receipt of remuneration of Rs. 60 Lakhs
or more per annum, if employed throughout the year or Rs. 5 Lakhs or more
per month if employed for a part of the year, falling within the provisions
of Section 217(2A) of the Companies Act, 1956 read with Companies
(Particulars of Employees) Rules, 1975, during the year ended 31.03.2012.
Directors` Responsibility Statement
Pursuant to the requirement under Section 217 (2AA) of the Companies Act,
1956 with respect to Directors` Responsibility Statement, it is hereby
(i) in the preparation of the annual accounts, the applicable accounting
standards have been followed and that there is no material departure from
(ii) the directors have 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 31st March, 2012 and of the loss incurred for the year ended
31st March, 2012;
(iii) the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern basis.
Employees Stock Option Scheme
Your Company always believes that its human resources are its greatest
strength, which makes your Company a force to reckon with in the highly
competitive environment. The Company has an Employee Stock Option Scheme
viz. ESOS 2008, for the employees. Pursuant to the provisions of Clause 12
of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, as amended, the required disclosures regarding Employee
Stock Options are set out as Annexure-II of this report.
Your Directors take this opportunity to thank the Shareholders, Customers,
Suppliers, Bankers, Central and State Governments for their consistent
support to the Company. The Directors also wish to place on record their
appreciation of the sincere and dedicated services of the employees for the
working of the Company.
For and on behalf of the Board
Place: Hyderabad Z.P. Marshall
Dated: 10.08.2012 Chairman
Annexure - I
Disclosure of Particulars under Section 217(1)(e) of the Companies Act,
a. Conservation of Energy: Not Applicable
b. Technology absorption: Nil
c. Research and Development: Nil
d. Foreign exchange earnings: Nil
e. Foreign exchange outgo towards
(i) Salaries And Allowances (Net of Tax): Rs.19,65,676
(ii) Travelling Expenses: Rs.6,53,393
(iii) Investment in Subsidiary: Rs.66,59,250
For and on behalf of the Board
Place: Hyderabad Z.P. Marshall
Date : 10.08.2012 Chairman
Annexure - II
Details of Stock Options Pursuant to Sebi guidelines on Stock Options as on
1.1 Options Granted 0n 15.10.2008 09.11.2009
1.2 Options Granted - Nos. 70000 86000
2. Pricing Formula The exercise price shall The exercise price
be the discount of 20% is Rs.150/- per
of the "Market Price" Share
on the date of grant of
the options as defined
in the ESOP Guidelines.
i.e. Rs. 153.76p
3. Options Vested 70000 86000
4. Options exercised 14933 Nil
5. Total number of equity
shares arising out of the
options 14933 Nil
6. Options lapsed 38,167 40,931
7. Variation of terms of At the AGM held on 25.09.2009, the pricing
Options formula was changed such that the exercise
price shall be the price as determined by
the Board/Compensation Committee from time
to time and shall not be less than the par
value and shall not be more than the market
price on the day on which grants would be
8. Money realised by
exercise of the Options Rs.22,96,098 NA
9. Total number of
Options in force 16,900 45,069
10. Employee wise details
of Options granted to:-
i) Senior Managerial As per Note 1 As per Note 1
ii) Any employee who
receives in any one year of
grant of options amounting
to 5% or more of options
granted during the year. Nil Nil
iii) Employees who were
granted options during any
one year, equal to or
exceeding 1% of the issued
capital of the Company at
the time of the grant Nil Nil
11. Diluted earnings per
share (EPS) calculated
in accordance with AS-20
for the year ended on
31st March 2012 (9.92) (9.92)
12.i) Method of Calculation The Company has calculated the employee
of employees Compensation compensation cost using the intrinsic
Cost value of the stock options.
ii) Difference between the
employee compensation cost
so compared at (i) above
and the employee compensation
cost that shall have been
recognised if fair value
of options had been used Nil Nil
13. Weighted average
exercise price and weighted
average fair value of
options granted during year
whose exercise price equals
market price of stock on
the grant date.
Stock Options granted on 15/10/2008 9/11/2009
Exercise Price (Rs.) Rs.153.76 Rs.150.00
Fair Value (Rs.) Rs.153.73 Rs.150.00
Closing market price at
NSE on the date prior to
the Grant (Rs.) Rs.192.20 Rs.247.55
14. A description of method The Black-Scholes options-pricing model was
and significant assumption developed for estimating fair value of traded
used during the year to options that have no vesting restrictions and
estimate the fair value of are fully transferable.Since, options-pricing
options granted during the models require use of substantive assumptions
year. changes therein can materially affect the
fair value of options. The options-pricing
models do not necessarily provide a reliable
measure of the fair value of options.
i) Risk Free Interest Rate - 7% -
ii) Expected Life - 4 -
iii) Expected Volatility
based on daily closing -10.11% -9.63%
iv) Expected Dividend yield 0.35% 0.46%
v) The price of underlying 192.20 247.55
share in the market at the
time of options granted
Note 1: Details of Options granted to senior managerial personnel
Sl Name of the Options Options Options Options
Personnel Granted Exercised Lapsed Outstanding
Rs. Nos. as on
1. S Balaji 7000 153.76 1000 1000 5000
2. Sudhir Kumar 2800 153.76 433 2367 NIL
3. Sachinder Singh 4100 153.76 300 3800 NIL
4. Ch. Vinay Kumar 2000 - NIL 2000 NIL
For and on behalf of the Board
Place: Hyderabad Z.P. Marshall
Date : 10.08.2012 Chairman
MANAGEMENT DISCUSSION AND ANALYSIS
Global: From a positive start in 2011, the global environment turned
adverse in the second half of 2011, owing to the Euro zone crisis and
monetary imbalances in emerging economies. Capital flows to developing
nations declined by almost half in 2011 compared with 2010.
Europe seemed to enter a recessionary phase. The Euro zone crisis impacted
the economic performance of trade partners. Growth in several developing
countries (Brazil, India, and to a lesser extent China, Russia, South
Africa and Turkey) declined, partly owing to the Euro zone weakness and
domestic policy tightening.
Despite apprehensions raised by rating agencies, the US delivered a
heartening performance marked by declining unemployment, rising retail
sales and growing new home sales. Notwithstanding the relatively strong
activity in the US and Japan, global economic trade and growth slowed. The
global GDP grew 3.9% in 2011 compared with 5.3% in 2010.
Particulars 2010 2011
World output 5.3 3.9
Advanced economies 3.2 1.6
Emerging and developing economies 7.5 6.2
Euro Area 1.9 1.4
Estimate for 2012-13: As per the IMF, global prospects are gradually
strengthening, though downside risks remain. This is primarily due to
improved economic activity in the US and the adoption of prudent economic
policies and financial packages in the euro area, reducing the threat of a
sharp global slowdown. Accordingly, it is expected that there will be a
weak recovery in the major advanced economies while there will be
relatively more solid support from most emerging and developing economies.
Global growth is projected to decline from 3.9% in 2011 to 3.5% in 2012 due
of weak activity during the second half of 2011 and the first half of 2012.
World economic growth estimates for 2012 and 2013 (average annual growth %)
UN/DESA IMF World Bank* OECD*
2011 2012 2013 2011 2012 2011 2012 2013 2011 2012 2013
GDP 1.3 1.3 1.9 1.6 1.9 1.4 1.3 1.9 1.9 1.6 2.3
US 1.7 1.5 2.0 1.5 1.8 1.7 2.2 2.4 1.7 2.0 2.5
Euro Zone 1.5 0.4 1.3 1.6 1.1 1.6 (0.3) 1.1 1.6 0.2 1.4
Japan (0.5) 2.0 2.0 (0.5) 2.3 (0.9) 1.9 1.6 (0.3) 2.0 1.6
LAC 4.3 3.3 4.2 4.5 4.0 4.2 3.6 4.2 - - -
Brazil 3.7 2.7 3.8 3.8 3.6 2.9 3.4 4.4 3.4 3.2 3.9
Russia 4.0 3.9 4.0 4.3 4.1 4.1 3.5 3.9 4.0 4.1 4.1
India 7.6 7.7 7.9 7.8 7.5 6.5 6.5 7.7 7.7 7.2 8.2
China 9.3 8.7 8.5 9.5 9.0 9.1 8.4 8.3 9.3 8.5 9.5
Sources: UN/DESA. Global Economic Outlook. World Economic Situation and
Prospects for 2012; IMF. World Economic Outlook, September 2011; World
Bank. Global Economic Prospects, January 2012; and OECD. Economic Outlook
No. 90. Paris, November 2011.
India: In 2011-12, India found itself in the heart of conflicting demands.
Managing growth and price stability are the major challenges in
macroeconomic policy making. In 2011-12, India was embroiled in these
conflicting demands without corresponding initiatives towards economic
growth. As a result, the Indian economy grew 6.5% in 2011-12, down from
8.4% in 2010-11. The real GDP growth in 2011-12 was the lowest in the past
Global factors such as the Euro zone crisis, geopolitical disturbances and
weather extremities contributed to the domestic economic slowdown. Domestic
factors like monetary tightening and raising the repo rate to control
inflation slowed industrial investment and growth.
Headline WPI inflation remained high at around 9% during 2011 for the
Higher prices of primary products (vegetables, eggs, meat and fish) due to
Increasing global commodity prices
Persistently high international crude petroleum prices
To counter inflation, RBI tightened the monetary situation by hiking
interest rates 13 times between March 2010 and October 2011, making
industrial borrowing expensive, infrastructure projects unviable and
depressed the manufacturing sector growth.
The Indian rupee was under stress as overseas investors pared their
exposure to Asia`s third-largest economy. The rupee lost more than 10% of
its value during the year, making it one of the worst performing currencies
in Asia, eroding India Inc.`s profitability, widening India`s trade deficit
and adversely impacting India`s current account deficit.
Estimate for 2012-13: The government estimates a 7%-plus GDP growth in
2012-13, a reasonable estimate. However, inflation will continue to pose a
challenge for the government owing to recent hikes in excise duty, service
tax, fuel prices, railway freight and sub-optimal rainfall.
Oil and the Indian economy
It is interesting to note that while India`s domestic energy resource base
is substantial, production levels are low and erratic, compelling it to
rely on ever-increasing oil imports.
The high economic growth in the past few years and increasing
industrialisation coupled with a burgeoning population was a cause for
concern for India`s energy scenario.
India`s oil import bill accounts for almost one-third of the total imports.
India`s oil import bill increased from US$ 79.55 billion in 2009-10 to
US$106 billion in 2010-11 and US$140 billion in 2011-12.
Oil and India`s economy
A B C D E
50 38.9 2.1 0.4 1.5
60 66.7 9.7 1.9 3.6
70 94.2 16.9 3.4 5.7
80 122.2 24.5 4.9 7.9
140 126.1 29.7 7.3 7.2
A = International oil prices per barrel ($)
B = Increase in international oil prices (%)
C = Extent of fall in manufacturing sector (%)
D = Extent of fall in GDP growth (%)
E = Extent of increase in WPI (%)
Source: Impact of increase in oil prices: Extractive Industries for
Global oil sector
Oil remains the world`s leading fuel, accounting for 33.1% of global energy
consumption in 2011.
Global oil consumption grew by a below-average 0.6 million barrels per day
(b/d), or 0.7%, to reach 88 million b/d. Despite strong oil prices, oil
consumption growth was below average in producing regions of the Middle
East and Africa due to regional unrest. China recorded the largest
increment to global consumption growth (+505,000 b/d, +5.5%) although the
growth was below the 10-year average.
Since 2000, the increase in oil consumption for emerging markets was
staggering - a whopping 44% increase compared with the 3.5% drop for OECD
economies. As a result, while the emerging world still only accounts for
25% of total world GDP, it accounts today for nearly half of the oil
Annual global oil production increased by 1.1 million b/d, or 1.3%.
Majority of the net growth was in OPEC, with large increases in Saudi
Arabia (+1.2 million b/d), the UAE, Kuwait and Iraq, more than offsetting a
loss of Libyan supply (-1.2 million b/d).
Global refinery capacity utilisation fell to 81.2% as global refining
capacity increased by 1.4 million b/d (+1.5%), outpacing growth in
Global oil trade in 2011 grew by 2%, or 1.1 million b/d. At 54.6 million
b/d, trade accounted for 62% of global consumption, up from 58% a decade
ago. While crude oil accounted for 70% of global trade in 2011, refined
products accounted for two-thirds of the growth in global trade last year.
China accounted for roughly two-thirds of the growth in trade last year,
with net imports (6 million b/d) rising by 13%. Middle East countries
accounted for 81% of the growth in exports last year (Source: BP
Statistical Review of World Energy June2012).
The year under review witnessed the highest ever average oil prices in a
single year with Brent crude averaging USD 111 per barrel. Dated Brent
averaged US$111.26 per barrel in 2011, a 40% increase from the 2010 level.
The key reasons for high 2011 oil prices were one-off events namely the
Japan calamity which also pushed up LNG prices, MENA region political
crisis and likely sanctions on Iran.
Production (Thousand barrels daily)
2007 2008 2009 2010 2011 Change 2011
North America 13631 13122 13471 13880 14301 3.0%
South & Central America 6982 7104 7229 7293 7381 1.3%
Europe and Eurasia 17753 17537 17703 17629 17314 -1.8%
Middle East 25219 26320 24633 25314 27690 9.3%
Africa 10263 10284 9792 10114 8804 -12.8%
Asia Pacific 7881 7969 7903 8251 8086 -2.0%
World 81729 82335 80732 82480 83576 1.3%
Proven reserves At end 1991 At end 2001 At end 2010
`000 mn barrels `000 mn barrels `000 mn barrels
North America 123.2 230.1 217.8
South & Central America 74.6 98.8 324.7
Europe and Eurasia 76.8 102.4 139.5
Middle East 660.8 698.7 765.6
Africa 60.4 96.8 132.7
Asia Pacific 37.0 40.5 41.7
World 1032.7 1267.4 1622.1
Consumption (Thousand barrels daily)
2007 2008 2009 2010 2011 Change 2011
North America 25070 23841 22945 23491 23156 -1.4%
South & Central America 5582 5786 5763 6079 6241 2.9%
Europe and Eurasia 19984 20002 19123 19039 18924 -0.6%
Middle East 6895 7270 7510 7890 8076 1.8%
Africa 3006 3150 3243 3377 3336 -1.4%
Asia Pacific 25783 25720 26047 27563 28301 2.7%
World 86321 85768 84631 87439 88034 0.7%
Indian oil sector
India possesses 0.5% of the world`s oil and gas resources and 15% of the
world`s population. This makes India heavily dependent on the import of
crude oil and natural gas.
According to International Energy Agency, coal/peat accounts for 40% of
India`s energy consumption. Crude oil and natural gas account for 24% and
India`s crude oil production has not shown significant growth in the last
decade whereas its refining capacity grew by more than 20% over the last
five years. Oil consumption is growing at around 4.1% per year and natural
gas consumption at 68% per year.
The domestic production of crude oil rose at a CAGR of only 2.25% during
2006-2012, growing from 33.99 mt to 38.08 mt. Over the years, the share of
offshore reserves of crude oil in India has steadily declined, while that
of onshore reserves increased, such that offshore oil production fell from
21.28 mt (in 2010-11) to 20.06 mt (in 2011-2012) and onshore oil production
rose from 16.42 mt to 18.02 mt during the same period.
While crude oil production by the private sector (including joint ventures)
increased at a CAGR of about 23%, ONGC production declined by 8.13%.
On the gas production front, the picture appears slightly more stable. The
sector registered an impressive CAGR of 11% during the five-year period
2006-07 to 2011-12, when production grew from 30.79 bcm to 52.22 bcm.
However, following the sharp fall in KG-D6 gas production, which stood at
30.2 mmscmd in June 2012, along with delayed deployment in the North Tapti
fields and fall in Bombay High`s C-Series fields, gas production levels
fell to 47.54 bcm in 2011-12.
However, an interesting point is that India`s established reserves for both
these fuels are not meagre, with oil reserves estimated to be 800 mt and
gas reserves to be 1,200 bcm, representing reserves/production (R/P) ratios
of 18 years and 27 years respectively.
Per capita consumption
India is the third-largest oil consumer in Asia, even though on a per
capita basis, the consumption is a mere 0.1 tonne per year, the lowest in
the region and a fifth of the global average, leaving a significant
potential for increase. Despite low per capita consumption, the domestic
demand outstrips supply, such that a reliance on imports is paramount.
2011-12 in retrospect
Despite a slowdown in its GDP growth rate, India`s energy demand continues
to rise. In 2011, India`s oil consumption of close to 150 million tones
(mt) positioned it as the fourth-largest oil consumer globally, after the
US, China and Japan.
As per the Ministry of Petroleum and Natural Gas (MoPNG), crude oil
production in 2011-12 stood at 38.08 mt (about 25% of the domestic demand),
making only a 1% year-on-year increase. During the past decade (2002 to
2011), crude production increased at a CAGR of merely 1.39% (with declines
witnesses in 2006 and 2009).
The combination of rising oil consumption and relatively flat production
left India increasingly dependent on imports to meet its petroleum demand.
In 2011-12, by importing a total of 172 mt of oil, which fuelled 82% of its
domestic oil consumption, India became the world`s fifth-largest net oil
A similar trend was witnessed in the case of natural gas, with India
importing 13.87 billion cubic metres (bcm) of liquefied natural gas (LNG)
to cater to the domestic gas demand of 56.34 bcm.
The Planning Commission projected oil consumption to rise at a compound
annual growth rate (CAGR) of 4.7%, from 148.28 mt in 2011-12 to 186.80 mt
According to the U.S. Energy Information Administration, the consumption of
crude oil in India is expected to rise by 1.8% annually between 2007 and
2035 driven by the transportation sector. Consumption is expected to rise
to 3.2 mbpd in 2015 to 3.9 mbpd in 2025 and 4.7 mbpd in 2035, far exceeding
the domestic production. The consumption is expected to grow at almost
double the rate of growth in production.
Estimated demand of petroleum products and natural gas in the Twelfth and
Thirteenth Plan periods (tmt)
Product 2012-13 2013-14 2014-15 2015-16 2016-17 Twelfth Thirteenth
LPG 16,986 18,363 19,765 20,857 21,831 97,802 118,848
Motor spirit 16,091 17,527 19,083 20,766 22,588 96,055 144,634
diesel oil 65,040 68,654 72,589 76,904 81,599 364,786 491,557
Naphtha 12,353 11,417 11,417 11,022 11,022 57,231 72,400
turbine fuel 6,009 6,587 7,202 7,849 8,540 36,187 54,304
kerosene oil 7,949 7,631 7,326 7,033 6,751 36,690 30,838
FO/LSHS 7,954 7,902 7,899 7,872 7,872 39,499 39,225
oil 400 400 400 400 400 2,000 2,000
Others 20,155 21,954 23,043 24,269 25,606 115,027 151,180
Grand total 152,937 160,435 168,724 176,972 186,209 845,277 1,104,986
(mmscmd) 293 371 405 446 473 1,988 2,761
Tmt: thousand metric tonnes
Source: Report of the Working Group on Petroleum and Natural Gas Sector for
the Twelfth Five Year Plan (2012-17)
Oil exploration space
India`s oil reserves are mainly located in five sedimentary basins -
Mumbai, Cambay and Barmer in the north-west, the Assam shelf in the north-
east, and the Krishna-Godavari (KG) basin in the south.
The Indian sedimentary basins are spread over an area of 3.14 million
square km. Of these, onland and offshore basins up to 200 metre-isobath
have an aerial extent of around 1.79 million square km. Onland basins cover
an area of 1.39 million square km and shallow water covers around 0.4
million square km. In deep waters, that is, beyond 20 metre isobaths, the
sedimentary area is estimated to be around 1.35 million km.
Over the years, the share of offshore reserves of crude oil in India
declined, while the share of onshore reserves currently account for 51% of
total proven crude oil reserves.
The prospects of the Indian oil industry are for more exciting than any
other, with India being among the least explored countries globally at a
well density of 20 per 10,000 sq km.
Of the 26 sedimentary basins, only eight have been explored so far. As of
now, of the total 3.14 million square km sedimentary basin areas, about
2.15 million square km has already been offered for systematic exploration
but vastly under-explored. All this makes India an attractive destination.
To address the increasing energy demand-supply gap, the New Exploration
Licencing Policy (NELP) was operationalised by the MoPNG in 1999, as part
of its Hydrocarbon Vision 2025. The policy seems to have paid off in part.
Prior to the introduction of the NELP, only 11% of the Indian sedimentary
basin was explored.
During the past five years (2007-12), ONGC has dominated India`s E&P
segment and has made 49 onland discoveries of oil or oil and gas and 16
discoveries were made in offshore basins.
The conclusion of NELP IX, where 34 blocks were offered, of which 33 blocks
received 74 bids from 37 companies -was the biggest highlight of the year
In November 2011, ONGC made a discovery in the second Aliabet well drilled
in the concession identified as CB-OSN-2003/1 in the Cambay basin of
Gujarat, which was tested to produce gas at the rate of 77,167 cubic metres
per day and 11 cubic metres per day of condensates.
The other two finds are a discovery made in the KG onland basin with a
capacity to produce 570.33 cubic metres of oil per day and an onshore
discovery in Mehsana district in north Gujarat with a capacity to produce
oil at the rate of 174 barrels per day (bpd).
Exploration and production (E&P) is considered to be the most important
vertical for the oil and gas sector in the country, making NELP one of the
most crucial policies for the stakeholders involved and the most beneficial
for the country.
The Open Acreage Licensing Policy (OALP) is expected to succeed the NELP
(after the IX bidding round) in 2012.
The OALP, as a whole, is expected to be an improvement compared with the
NELP by giving greater flexibility to bidders in choosing blocks at any
time of the year depending on their technical and economic capabilities
(whereas under the NELP block identification was the task of the DGH).
However, delays in establishing a key perquisite- the National Data
Repository (NDR) for providing detailed geo-scientific data on oil and gas
reserves to interested parties - and the likelihood of a tenth NELP round
postponed the adoption of the OALP to 2014.
Seismic service space
Seismic technology is used by geologists and geophysicists to interpret the
data to map structural traps that could potentially contain hydrocarbons.
Seismic exploration is the primary method of exploring for hydrocarbon
deposits, on land, under the sea and in the transition zone (the interface
area between the sea and land).
The seismic method is used to identify geological structures and relies on
the differing reflective properties of sound waves to various rock strata,
beneath terrestrial or oceanic surfaces. The method requires a controlled
seismic source of energy, such as dynamite or a specialised air gun.
An energy source transmits a pulse of acoustic energy into the ground,
which travels as a wave into the earth. At each point where different
geological strata exist, a part of the energy is transmitted to deeper
layers within the earth, while the remainder is reflected back to the
surface. Here it is picked up by a series of sensitive receivers. By noting
the time it takes for a reflection to arrive at a receiver (seismometer),
it is possible to estimate the depth of the feature that generated the
On land, the typical seismometer used in a reflection experiment is a
small, portable instrument known as a geophone, which converts ground
motion into an analog electrical signal. In water, hydrophones are used
which convert pressure changes into electrical signals. As the seismometers
detect the arrival of the seismic waves, the signals are converted to
digital form and recorded. The signals are then displayed as seismograms
for interpretation by a seismologist. The number of `shots` per day range
from around 20 to 70, depending on the terrain.
Typically, the recorded signals are subjected to significant amounts of
signal processing and various imaging processes before they are ready to be
interpreted. In general, the more complex the geology of the area under
study, the more sophisticated are the techniques required to perform the
data processing. Modern reflection seismic surveys require large amounts of
Although the technology of exploration activities has improved
exponentially in the past two decades, the basic principles for acquiring
seismic data have remained the same.
The basic reflection concepts in 2D and 3D are the same but the
implementation of 2D and 3D in acquisition is different, requiring an
increase in the number of channels.
Although the cost of 3D data acquisition is higher than the 2D alternative,
the benefits more than counter the increased survey by reducing the dry
holes. This means that while client companies need to pay more for 3D
mapping, they are well placed to recover this incremental cost through a
reduced number of dry holes, accelerating development.
3D preferred over the 2D alternative
Clarity of image: Since 2D data collection occurs along a line of
receivers, the resultant image represents only a section below the line and
does not always produce a clear image of the geology, making accurate
interpretations difficult. A 3D seismic survey is more capable of
accurately imaging reflected waves because it utilises multiple points of
Number of channels: The number of channels per square km (sq. km) is far
higher in 3D at 2,500 than the number of channels per line km (LKM) at 250
only in 2D. This translates into a more concentrated data per block and
precise information mapping (visualised as a volume/cube).
Quality control: Owing to an increase in the number of channels, the volume
of incoming data is significantly higher, warranting a specialised onsite
quality control and onsite processing for quality control.
Applications: More statistical methods can be applied to a 3D technique
across multiple parameters to provide quantitative interpretation.
The Company is among the leading providers of seismic survey in India. It
possesses the unique distinction of offering the best services in the
inhospitable terrains of the North East. In 2011-12, the Company worked on
five projects covering 746.28 GLK of 2D seismic survey and 264.87sq km of
3D seismic survey. The unexecuted order book stood at approximately Rs 200
million as on March 31, 2012.
Alphageo`s internal control systems and procedures are designed to enable
the reliable reporting of financial statements, reporting timely feedback
on the achievement of operational or strategic goals and ensure compliance
with laws and regulations. The Company`s overall system of internal control
is adequate given the size and nature of operations and effective
implementation of internal control self assessment procedures and ensure
compliance to policies, plans and statutory requirements.
Alphageo`s team represents is primary strength off its Balance Sheet. The
Company`s HR function is aligned with its overall growth vision and
continuously works on areas such as recruitment and selection policies,
disciplinary procedures, reward/recognition policies, learning and
development policies and all-round employee development.
Client Service Project details Completion
Mercator 2D services The survey was conducted in client`s January 2012
block in Gujarat
Jubilant 2D services The survey was conducted in client`s The assignment
block in Manipur which was one of the is expected to
most challenging assignments in the be completed
recent past. in 2012-13
Kei_ross 3D services The survey was conducted in client`s April 2011
block in east Godavari districts of
Andhra Pradesh which was one of the
most challenging assignments in the
NTPC 3D services The project was in Kadi, Gujarat. The assignment
is expected to
Mercator 3D services This was repeat business for the January 2012
Company on the same block in
Gujarat on which it conducted 2D
services Statement of profit and loss
Revenue: Revenue from seismic survey and related operations increased 21%
from Rs. 207.90 million in 2010-11 to Rs. 252.00 million in 2011-12. The
Company has executed five projects of which two projects were related to 2D
seismic surveys and three projects were related to 3D seismic surveys.
Other income: The sizeable increase in other income was due to the foreign
exchange currency gain and credit balance of earlier years written back in
the current year.
Operating cost analysis: Enhanced business execution in 2011-12 resulted in
a 12% increase in operational expenses from 213.4 million in 2010-11 to
239.1 million in 2011-12.
Survey expenses increased consequent to the increased work volume compared
to previous year. The increase in expenses was also due to increased
camping expenses in the Manipur Project as result of several weeks of
unproductive working days due to local disturbances beyond the control of
Employee expenses decreased due to effective utilisation of workforce and
reduction in deferred employee compensation cost for employee stock option
scheme ESOS 2008 for 2011-12 compared to 2010-11.
Snapshot 2011-12 2010-11 Y-O-Y
Amount Proportion Amount Proportion (%)
(Rs in of total (Rs in of total
million) operating million) operating
related expenses 168.6 71 128.9 60 30.80
Employee cost 43.1 18 55.3 26 -22.06
Other expenses 22.2 9 24.6 12 -9.76
Finance costs 5.2 2 4.6 2 13.04
Total 239.1 100 213.4 100 12.04
Finance cost was primarily due to the short-term loans to manage working
capital requirement and for bank guarantees given for projects being
Depreciation and amortisation for the year 2011-12 is Rs. 89.2 million
compared to Rs. 155.2 million for the previous year. The provision for
depreciation declined sharply due to the Company`s accelerated depreciation
Capital employed: Capital employed in the business declined 7.61% from Rs.
521.38 million as on March 31, 2011 to Rs. 481.68 million as on March 31,
2012. The capital employed declined due to a decline in reserves and
Shareholders` funds: It declined from Rs 508.13 million as on March 31,
2011 to Rs. 454.21 million as on March 31, 2012. This is due to a decline
in the reserves and surplus due to the net loss incurred during the period
under review. The share capital however remained unchanged; the promoter
group held 34.61% of the Company`s equity as on March 31, 2012.
The Company will become free from its long-term debt with the repayment of
the long-term loans - Rs 11.14 lakh by February 2013.
It comprised short-term borrowings, trade payables, short-term provisions
and other current liabilities. Short term borrowings increased from Rs 11
million as on March 31, 2011 to Rs 27 million as on March 31, 2012
primarily to fund working capital requirement. Trade payable declined
marginally due to timely payments to creditors for goods and services
backed by timely receivables from customers. The decline in the balance of
short-term provisions is due to the non-declaration of dividend for fiscal
2011-12 considering the loss incurred from operations and payment of
divided for 2010-11 and dividend distribution tax thereon.
It is a cumulation of all assets which are long-term in nature namely
tangible and intangible assets, long-term investments and loans and
advances which are long-term in nature.
The Net Block value of tangible and intangible assets declined primarily
due to depreciation and amortisation charge for the year and the scrapping
of old equipment and vehicles to some extent.
The long-term investment portfolio increased from Rs 0.1million as on March
31, 2011 to Rs 132.2 million as on March 31, 2012 due to the allotment of
equity against share application money given in previous and current
financial years in its international subsidiary.
Long term loan and advances comprised security deposits and rent deposit
for the corporate office.
It comprised trade receivables, inventories, cash and bank balances and
short-term loans and advances.
Trade receivables comprised outstanding amounts for projects completed
towards the close of the financial year. A large part of the outstanding
was received in the first quarter of 2012-13. The inventory balance
increased largely due to the Company`s proactive practice of storing
consumables and spares which prevents project progress due to equipment
The balance in the short-term loans and advances has reduced drastically.
In 2010-11 the share application money pending allotment by the Company to
its international subsidiary were reflected in this head. With the
allotment complete, the amount was transferred to the investment account.
de-risking the business
ALPHAGEO HAS ALWAYS HAD A SYSTEMS-BASED APPROACH TO BUSINESS RISK
MANAGEMENT. A COMBINATION OF CENTRALLY-ISSUED POLICIES AND DIVISIONALLY-
EVOLVED PROCEDURES ENSURES THAT BUSINESS RISKS ARE EFFECTIVELY ADDRESSED. A
ROBUST AND COMPREHENSIVE FRAMEWORK OF STRATEGIC PLANNING AND PERFORMANCE
MANAGEMENT HELPS REALISE BUSINESS OBJECTIVES BASED ON EFFECTIVE STRATEGY
IMPLEMENTATION. THE COMPANY`S SENIOR MANAGEMENT PERIODICALLY REVIEWS THE
RISK MANAGEMENT FRAMEWORK TO ENSURE THAT IT EFFECTIVELY ADDRESSES THE
CHALLENGES OF A DYNAMIC BUSINESS ENVIRONMENT.
Global oil prices have a significant bearing on the prospects of the
seismic survey space. A reduction in the same could adversely impact the
As an increasing number of nations globally are graduating the social value
chain - moving to the developing and to the developed status -- oil demand
will continue to accelerate. Supply growth globally is only marginal
holding the oil prices at close to US$ 100 per barrel. At this level,
exploration at marginal fields also becomes a viable business option,
growing the opportunities for the seismic survey space.
Companies that have been allotted oil blocks may not have the financial
strength to invest in seismic survey, curtailing growth.
The government laid down a strict timeframe within which the allottee was
required to commence exploration failing which it was required to pay the
government a penalty and would be at risk of losing the oil block. Hence,
seismic survey business opportunities can be postponed but not eliminated.
This will impact the entire sector and Alphageo will be no exception.
Reduced opportunities and increased competition could impact revenues and
The Company`s unique value proposition of superior data capturing and
interpretation, strict adherence to time lines and expertise in
successfully conducting surveys in logistically and operationally difficult
terrains allows it to earn a premium. Besides, the Company`s aggressive
depreciation policy provides it with the unique advantage of pricing
competitively when bidding for new projects.
The seismic survey business comes to a complete standstill in the second
quarter of every financial year for service providers operating in the
Alphageo is not restricted to seismic survey assignments in the North East.
It successfully completed a number of challenging assignments in South and
West India, facilitating revenue distribution across its financial year.
Its international subsidiary is scouting for global business opportunities
which will help reduce the seasonality of its financial performance.
The attrition of key employees could have an important bearing on the
Alphageo provides an interesting remunerative package (attractive
compensation, multi-geographic work exposure, conducive working environment
and safe operations) enabling it to attract skilled talent. The Company
focuses on growing team learning curve; it appointed expatriate talent to
train team members in global best practices. These factors enabled the
Company to retain its knowledge pool.
A weak Balance Sheet turns credible customers away.
Alphageo`s Balance Sheet strength is reflected in the following: reserves
of about Rs 402.7 million as on March 31, 2012, modest debt-equity ratio of
0.06:1 and a comfortable working capital outlay. The recent net losses in
the last two financial years only marginally impacted its reserves.
Besides, the Company earned cash profits in both these years, resulting in
no cash drain.