Reliance Industries - Reserve downgrade likely

BSE Index Analysis, Securties , Standard Experts

ANALYST MEET HIGHLIGHTS

E&P: Reserve downgrade likely 

Management indicated that it has downgraded reserve estimate of KG-D6 block by 12-15% due to reservoir complexity. BP had downgraded  reserve estimates, while Niko has indicated downward adjustments in reserves. 

Approval of engineering surveys/ pre-development secured After approval of Optimized Field Development Plan for its four satellite fields in Jan ’12, RIL has received approval for engineering survey and pre-development activities (integrated development studies for R-Series field and four satellite fields). RIL-BP JV would update reservoir estimates and assumptions and would file revised FDP in due course. 

Shale gas: Profitable despite low gas prices 

Management has indicated that despite low gas prices in US 
shale gas business is profitable due to higher liquid production (43%).
Shale gas revenue in Q4FY12 stood at US$ 250 mn, while EBITDA and PAT stood at US$ 200 mn and US$ 30 mn respectively.  

Pioneer JV: Ramp-up focused on liquid production  

The JV is currently operating with 12 rigs and  gross exit production rate stands at ~10.3 

mmscmd, including ~35 kbpd of condensate. RIL’s net share of gross production stood at 4.6 

mmscmd in Q4FY12. Gross field capex stood at US$ 372 mn with cumulative investment of 

US$ 2.14 bn+. 

Chevron JV: Midstream concerns to be addressed by H1FY13 

The JV is currently operating with 5 rigs. Current gross production rate is ~2.3 mmscmd, of 

which RIL’s share is ~0.9 mmscmd. Management has indicated midstream constraints will be  addressed by H1FY13. Gross field capex was US$ 178 mn in Q4 (cumulative investment of over  US$ 1.04+). 

Carrizo JV: Rapid ramp-up 

RIL commenced gas production from the block in Q3FY12. However, management is cautious over development related activities due to low gas prices. Capex stood at US$ 73 mn in Q4FY12 with cumulative investment of over US$ 590 mn. 23rd  April 2012 ENAM Securities Direct  4 

Reliance Industries 

REFINING SEGMENT UPDATE

RIL reported GRM of US$ 7.6/bl vs. US$ 6.8/bl in Q3FY12. RIL management attributed the  recovery in GRM to strong mid-distillate and gasoline cracks, which were partly offset by (a) maintenance shutdown, (b) higher LNG costs, and (c) weaker naphtha cracks.  

Maintenance shutdown leading to higher capacity, higher GRM  

RIL management indicated maintenance shutdown taken in Q3FY12/Q4FY12 would increase refining capacity by ~3%. Debottlenecking  of auxiliary units (VGOHT, LCOHC, DHDS and Alkylation unit) would further improve GRMs by US$ 0.25/bbl.   

Petcoke gasification unit commissioning by FY15; GRM improvement of US$ 3/bl   

RIL has achieved financial closure of its petcocke gasification unit. The project would entail 

investment of US$ 4 bn and would be commissioned by FY15. The unit would improve GRM 

by  US$  3/bl,  as  cost  of  synthetic  gas  produced  (US$  5/mmbtu)  would  be  much  cheaper compared to imported LNG (at US$ 10-14/mmbtu).   

PETROCHEMICAL SEGMENT UPDATE

Petchem project on track; phase-wise commissioning    

RIL management indicated commissioning of  PFY capacities by end-CY12, whereas PTA 

capacities would be commissioned in two phases in H2CY13 and H1CY14. New PET capacity 

would get commissioned in CY13.