Reliance profit rises on higher gas sales

New Delhi: Reliance Industries Ltd, India's biggest company by market value, reported its first profit increase in more than a year as higher natural gas sales outweighed lower earnings from processing oil.

Net income in the three months ended December 31 rose 16 per cent to Rs40.08 billion (Dh3.1 billion) from a year earlier, the Mumbai-based energy explorer and refiner said in an e-mailed statement on Friday.

The first increase in profit in five quarters beat the Rs39.14 billion median estimate of nine analysts surveyed by Bloomberg News.

Reliance increased output at India's biggest gas field after starting production in April and higher earnings may help fund the company's bid to acquire bankrupt chemicals and fuels maker LyondellBasell Industries AF.

The Indian company, controlled by billionaire Mukesh Ambani, plans to expand globally and has said it may buy oil fields in the Gulf of Mexico and Brazil.

"Gas is the primary driver for the profits and will continue to be," Maulik Patel, head of research at K.R. Choksey Shares & Securities Pvt, said by telephone from Mumbai.

"We can expect more positive surprises on the exploration and production side."

Reliance, which has the biggest weighting in the benchmark Sensitive Index, was little changed at Rs1,053.85 at the close in Mumbai trading Friday. The stock has advanced 85 per cent in the past year, trailing the 91 per cent increase in the Sensitive Index.

Gas profits

Pretax profit from oil and gas sales exceeded gains from refining for the first time, according to the statement. Earnings from oil and gas more than doubled to Rs14.77 billion while those from refining declined 27 per cent to Rs13.79 billion.

Reliance earned $5.90 on every barrel of crude it turned to fuels in the quarter compared with $10 a barrel a year earlier, the company said.

Global refining margins, or earnings from processing oil into fuel, fell to $1.49 a barrel in the three months ended December 31 from $6.2 a barrel in the quarter ended March 31, according to BP Plc data.

Net sales in the quarter rose 92 per cent to Rs568.6 billion, Reliance said in the statement. Reliance, which also operates chemical plants and a nationwide, 950-store retail business, said in November it made a non-binding bid to buy LyondellBasell in an all-cash deal.

Opportunities

The company raised about $2 billion selling shares since September, Alok Agarwal, chief financial officer, said on Friday. The money "will increase our ability to make large capital expenditure decisions and look for international growth opportunities," he told reporters.

Reliance had outstanding debt of Rs700 billion and cash and cash equivalent of Rs159.6 billion as of December 31, according to yesterday's statement.

Buying the Netherlands-based chemicals maker, which may be valued at as much as $14.5 billion, would create a company with more than $80 billion in revenue.