Reliance Reports 32% Jump in 1Q Net Profit



Reliance reported its financial performance for the quarter ended June 30, 2010. Highlights of the un-audited financial results as compared to the corresponding period of the previous year are:

Highlights of Quarter's Performance

  • Turnover increased by 88.1% to 61,007 crore (US $13.1 billion)
  • Exports increased by 103.5% to 32,849 crore (US $7.1 billion)
  • PBDIT increased by 41.9% and achieved a record level of 10,064 crore (US $2.2 billion)
  • Profit Before Tax increased by 27.0% to 6,038 crore (US $1.3 billion)
  • Cash Profit increased by 46.1% to 8,536 crore (US $1.8 billion)
  • Net Profit increased by 32.3% to 4,851 crore (US $1.0 billion)
  • Gross Refining Margin at US $7.3 / bbl for the quarter ended June 30, 2010

CORPORATE HIGHLIGHTS

  • The Hon'ble Supreme Court of India delivered its judgment in the RNRL - RIL legal dispute. The judgment recognized the dominant role of the provisions of the Production Sharing Contract and upheld the policies formulated by the Government under which it has the authority to regulate the production and distribution of natural gas. The judgment defined the extent of marketing freedom that RIL enjoys in the area of sale of natural gas produced. In view of the findings of the judgment, RIL can sell gas only at the price approved by the Government and only to the entities that have been allocated gas under the Gas Utilization Policy. RIL has no ability to deviate from price, quantity and tenure as determined under Government’s policies, or to discriminate amongst various consumers.
  • RIL and Reliance ADA Group companies approved and signed an Agreement canceling all existing non-compete arrangements entered into between the two groups in January 2006 pursuant to the scheme of reorganization of the Reliance Group and entered into a new simpler, Non Compete Agreement with respect to only Gas Based Power Generation.
  • RIL and RNRL signed a Gas Supply Master Agreement in compliance with the Gas Utilization Policy and EGOM decisions.
  • RIL holds 95% of the equity in Infotel Broadband Services Private Limited, which has emerged as a successful bidder in all the 22 circles of the auction for Broadband Wireless Access (BWA) Spectrum conducted by the DoT.
  • RIL through its subsidiary, Reliance Marcellus LLC, has entered into a joint venture with United States based Atlas Energy, Inc., of Pittsburgh, Pennsylvania under which Reliance acquired 40% interest in Atlas's core Marcellus Shale acreage position.
  • RIL through its subsidiary, Reliance Eagleford Upstream Holding LP, has entered into a joint venture with United States based Pioneer Natural Resources Company, of Irving, Texas under which Reliance acquired 45% interest in Pioneer's core Eagle Ford Shale acreage position.

Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited said, "We had yet another record quarter due to high operating rates and improving margins across all our businesses. Reliance embarked on two major initiatives to create incremental value. We entered into joint ventures in shale gas to internationalize and diversify our upstream portfolio. Reliance has also committed itself to participate in the high growth and exciting area of broadband wireless. Both these initiatives are in line with the strategy to identify and invest in new, value creating businesses."

FINANCIAL PERFORMANCE REVIEW AND ANALYSIS

Turnover achieved for the quarter ended 30th June 2010 was 61,007 crore (US $13.1 billion), an increase of 88.1% over the corresponding period of the previous year. Increase in volume accounted for 48.4% growth in revenue and higher prices accounted for 39.7% growth in revenue. Exports were higher by 103.5% at 32,849 crore (US $7.1 billion) as against 16,145 crore in the corresponding period of the previous year.

DOMESTIC OPERATIONS
KG D6

Current production of about 60 MMSCMD is taken from 16 wells of D1/ D3 and 5 wells of D26 fields. During the quarter, D26 field was shut down for 2 days, in May '10, due to cyclone. The production of gas condensate from D26 fields commenced from 21st April 2010.
During the quarter ended 30th June 2010, production from KG D6 was 304,349 tonnes of crude oil, and 5,376 MMSCM of natural gas, a growth of 207% and 210% respectively as the oil and gas production was under ramp up during the corresponding period of the previous year. During the quarter, production of gas condensate stood at 12,841 tonnes.

In line with the Government of India's gas utilization policy, GSPAs have been executed, with 55 customers in the fertilizers, power, city gas distribution, steel, LPG, refinery and petrochemical sectors. During the quarter, GSPAs with two refineries and one power plant were signed.

Panna-Mukta and Tapti (PMT)

Production from Panna-Mukta was 502 MMSCM of natural gas, a growth of 7% and 403,394 tonnes of crude oil, reduction of 11% as compared to the corresponding period of the previous year. Decrease in oil production at Panna-Mukta was due to six days shutdown in Panna in April 2010 while increase in natural gas production was due to incremental production from infill and PK wells. Production from Tapti was 785 MMSCM of natural gas and 42,277 tonnes of condensate, a decrease of 6% and 18% respectively over the corresponding periodof the previous year. The decrease in production was due to natural reserves decline.

Other Domestic Blocks

During the quarter, following four discoveries were notified to Directorate General of Hydrocarbons (DGH) –

  • Dhirubhai-47 in Well AF1 in CB10 block
  • Dhirubhai-48 in Well AJ1 in CB10 block
  • Dhirubhai-49 in Well AT1 in CB10 block
  • Dhirubhai-50 in Well AN1 in CB10 block

Currently, three deepwater rigs are under operation for Exploration and one additional rig is expected in second half of the financial year 2010-11.

INTERNATIONAL OPERATIONS
Conventional

The International business comprises of 14 blocks with acreage of over 102,385 square kilometers – 3 in Peru, 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Northern part of Iraq i.e. Kurdistan Region and Colombia, 1 each in East Timor and Australia. Average production for the quarter ended June 30, 2010 at the Yemen Block 9 was about 4,600 barrels per day. Reliance had farmed-out 30% of its Participating Interest (PI) in Oman-Block 18 and 25% in Oman- Block 41 to Oman Oil Company Exploration and Production. This has been approved by the Oman Government.

Reliance had farmed-out 20% of its Participating Interest (PI) in Colombia Borjo North and Borjo South to Ecopetrol. The resolution has been passed by Association of National Hydrocarbon (ANH) to approve this farm out. However, the amendments to the contract are yet to be signed.

Shale Gas (Marcellus)

RIL through its Subsidiary, Reliance Marcellus, has entered into a joint venture with United States based Atlas Energy under which Reliance acquired a 40% interest in Atlas' core Marcellus Shale acreage position.

Reliance became a partner in approximately 300,000 net acres of undeveloped leasehold in the core area of the Marcellus Shale in southwestern Pennsylvania for an acquisition cost of US $339 million and an additional US $1.36 billion capital costs under a carry arrangement for 75% of Atlas' capital costs over an anticipated seven and a half year development program. The acreage will support the drilling of over 3,000 wells with a net resource potential of approximately 13.3 TCFe (5.3 TCFe net to Reliance).

Shale Gas (Eagle Ford)

RIL through its Subsidiary, Reliance Eagleford Upstream Holding LP, has entered into a joint venture with United States based Pioneer Natural Resources Company, of Irving, Texas under which Reliance acquired a 45% interest in Pioneer's core Eagle Ford Shale acreage position. Reliance became a partner in approximately 263,000 net acres of undeveloped leasehold in the core area of the Eagle Ford Shale for an acquisition cost of US $263 million and an additional US $1.052 billion capital costs under a carry arrangement for 75% of Pioneer and Newpek's capital costs over an anticipated four years.

The acreage will support the drilling of over 1,750 wells with a net resource potential to the joint venture of approximately 10 TCFe (4.5 TCFe net to RIL). The joint venture plans to increase the current drilling program to approximately 140 wells per year within three years. Also included in the transaction is current production of 28 MMSCFe/d (11 MMSCFe/d net to Reliance) from five currently active horizontal wells.

Additionally, Reliance and Pioneer have executed definitive agreements to form a midstream joint venture that will service the natural gas gathering needs of the upstream joint venture. Reliance's subsidiary, Reliance Eagleford Midstream, acquired 49.9% interest in the joint venture.


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