Reliance Industries Ltd., the operator of India's biggest natural gas field, posted a 30 percent increase in fourth-quarter profit, missing estimates, as sales of the fuel partly countered lower earnings from refining.
Net income in the three months ended March 31 rose to 47.1 billion rupees ($1.1 billion), or 14.40 rupees a share, from 36.3 billion rupees, or 11.50 rupees, the Mumbai-based energy explorer and refiner said in an e-mailed statement yesterday. That compares with a 51.4 billion-rupee mean profit estimate of 14 analysts surveyed by Bloomberg News.
Reliance, controlled by Asia's richest man, Mukesh Ambani, increased output from the KG-D6 field off India's east coast as accelerating economic growth spurred demand from power and fertilizer producers. Profits from processing crude oil may remain "under pressure" because of a large increase in Asian refining capacity, Goldman Sachs Group Inc. said in February.
"Refining margins are below expectations," said Saeed Jaffery, an analyst at Ambit Capital Pvt. in Mumbai. "Refining will continue to be under pressure for at least another quarter."
Reliance, which has the biggest weighting in the benchmark Sensitive share Index, rose 1.2 percent to 1,088.20 rupees in Mumbai yesterday, valuing the company at $80 billion. The stock has advanced 23 percent in the past year, trailing the 59 percent increase in the Sensitive Index.
Refinery Profit
The company, India's biggest by market value, also operates chemical plants and fuel-retail outlets. Pretax earnings from refining fell to 19.9 billion rupees or 34 percent of the total, compared with 49 percent a year earlier. Reliance's 1.24 million barrel-a-day Jamnagar refining complex in the western state of Gujarat ran at 108 percent, according to the statement.
Net sales in the quarter more than doubled to 575.7 billion rupees, Reliance said. Profit was the highest in nine quarters, according to data compiled by Bloomberg. Profit a year earlier, adjusted for one-time items, was 39.6 billion rupees, the company said.
Reliance earned $7.50 on every barrel of crude it turned to fuels in the quarter, the company said. That compares with $9.90 a barrel reported a year earlier.
Global refining margins widened to $3.08 in the three-month period from $1.49 in the December quarter, according to BP Plc data. The margins will "remain depressed," BP said. Adjusted earnings at Europe's biggest oil company rose 68 percent in the three months ended Dec. 31, falling short of estimates.
Crude oil for January delivery rose 1.7 percent to $85.12 a barrel in New York, the highest settlement since April 15.
Debt, Cash
Reliance had outstanding debt of about 625 billion rupees as of March 31 and cash and equivalents of 218.7 billion rupees, according to the statement.
Reliance has notified the Directorate General of Hydrocarbons, India's oil and gas regulator, of four more discoveries in the KG-D6 gas field that are commercially viable, two people familiar with the matter said April 9. The field started production in April last year.
Peak output of 80 million cubic meters a day may be reached at the field by mid-2010, the government said in December. That will double the availability of gas in India and make Reliance the biggest producer of the fuel in the South Asian nation. Output is currently about 60 million cubic meters a day, according to the statement.
Shale Gas
Hardy Oil & Gas Plc, Reliance's partner in two other gas fields in India's Bay of Bengal, this month cut by 51 percent the prospective resource estimate in the KG-D9 field.
Reliance acquired shale gas assets in the U.S. from Atlas Energy Inc. this month to diversify the risk of investing in India where it is fighting a lawsuit over supply and pricing of gas from the field.
The explorer agreed to buy a $1.7 billion stake in natural- gas properties from Atlas, joining other international energy companies betting on growing fuel output in U.S. shale formations, the company said April 9. It expects to spend $5 billion on the venture over 10 years, according to Chief Financial Officer Alok Agarwal.
Reliance is examining more opportunities in shale gas and wants to build a "meaningful position" in North America, Agarwal said in Mumbai yesterday.
Acquiring assets overseas may help Reliance hedge the risk of investing in India. Reliance is awaiting the verdict of India's Supreme Court in the lawsuit.
Gas Lawsuit
Anil Ambani, Mukesh Ambani's estranged brother, wants Reliance Industries to supply gas to his company at a rate agreed when the family business was split. Reliance says it can't sell the fuel at less than the rate set later by the government. The court reserved judgment after arguments concluded on Dec. 18.
Reliance's attempts to buy LyondellBasell Industries AF out of bankruptcy was rejected in March, and the company missed out on an oil-sands block in Canada owned by Value Creation Inc. Reliance has said it may buy oil fields in the Gulf of Mexico and Brazil.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.
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