RIL’s shale output in the U.S. tops local gas.

Amid all the brouhaha about staggering its natural gas output from domestic exploration and production (E&P) venture, Reliance Industries (RIL) has silently outpaced the number with its international E&P foray.

RIL informed analysts that for the first time the company’s share of output of natural gas from its shale gas operations in the United States has touched 11 million standard cubic metres per day (mmscmd).

This is against its share of output of just below 10 mmscmd it is currently seeing from the Krishna Godavari basin (KG D6) in the Bay of Bengal.

Alok Agarwal, CFO, said on Tuesday production of natural gas from KG Basin has come down to just below 16 mmsmcd, which translates into 9.6 mmscmd for RIL’s 60% share of the block.

The remaining 30% is owned by its joint venture partner British Petroleum and 10% by Niko Resources.

Also, the shale gas operations reached record revenues and operating profit of $616 million and $483 million, respectively, last fiscal.

“We believe RIL’s US shale assets will start to become more meaningful over the medium term as production ramps up and Ebidta from shale joint ventures grow,” said analysts Nilesh Banerjee, Vikas S Jain and Siddharth Raizada, from international brokerage Goldman Sachs in a note.

They said with Ebidta rising to more than 6% of its total in last fiscal versus less than 3% in fiscal 2012 and Henry Hub (benchmark of US gas prices) prices rising above $4 per million metric British thermal units (mmBtu), company’s shale operations are entering a positive and rewarding territory.

RIL has invested $5.7 billion across its three shale joint ventures so far, including $500 million in the fourth quarter.

D1, D3 fields to last just 4 more years

The prolific D1 and D3 fields in the D6 block of Krishna-Godavari (KG) basin will last for four more years, RIL told analysts in a late-evening conference call on Tuesday.

The management indicated that the company will be able to arrest the fall in production from the fields by fiscal 2014 due to implementation of workover wells programme.

Also, the company will be deploying a booster compressor in fiscal 2015, which will slightly augment production too.

The current natural gas production from the KG D6 basin has fallen to below 16 million metric standard cubic metres per day (mmscmd), the lowest ever, forcing it to cut supply to allocated sectors such as power and city gas distribution.

However, after the announcement of annual results on Tuesday, which met or exceeded market expectations in most cases, the company apprised the analyst fraternity of the steps being taken across its business value chain that is likely to add value in the long term.

This resulted in most analysts giving a ‘buy’ or a ‘hold’ rating on the stock.

Source : DNA

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