Reliance Industries quarter profit slides 21 pct

[July 21, 2012]  MUMBAI, India (AP) -- Reliance Industries reported a 21 percent slide in quarterly profit Friday, as declining oil and gas production and smaller earnings in its core petrochemical and refining businesses failed to make up for better than expected refining margins. It's the third quarter in a row of shrinking profits at what was once India's most valuable conglomerate.

Net profit in the April to June quarter was 44.7 billion rupees ($808.9 million), better than estimates, down from 56.6 billion rupees during the year ago quarter. Revenue rose 13 percent, to 949.3 billion rupees ($17.2 billion) from 839.9 billion rupees a year ago.

A survey of analysts by FactSet forecast net income of 43.9 billion rupees and sales of 879.2 billion rupees.

Reliance, which operates the world's largest refining complex, said refining margins held steady from the prior quarter at $7.6 a barrel, better than expected. Investment income from RIL's huge pile of cash -- which totaled 707.3 billion rupees ($12.8 billion) at the end of the quarter -- again boosted profits, as did lower taxes. Other income rose 76.6 percent from the year ago quarter, to 19.0 billion rupees ($344.3 million), due to the company's larger cash balance, Reliance said.

RIL has been plowing some of its cash back to investors. Earlier this year, the company said it would buy back up to 120 million equity shares, then worth $2.1 billion. The company said Friday that it had purchased over 35.8 million shares at a cost of 25.6 billion rupees ($463.0 million).

"RIL has improved its earnings profile as profits from operations were higher on a sequential basis on the back of volume growth in the refining business," chairman and managing director Mukesh Ambani said in a statement.

Oil and gas output from RIL's key field off India's eastern coast continued to slide, despite what the company said were "significant efforts towards augmenting production." The KG-D6 field, which contains India's largest known reserves, produced 0.9 million barrels of oil and 104.4 billion cubic feet of natural gas, down 36.7 percent and 33.1 percent, respectively, over the prior quarter.

Falling output from the KG-D6 basin off India's eastern coast has fueled a long spat with government regulators, who have questioned RIL's claims for cost recoveries in its production contract. The company has initiated arbitration proceedings with the government over the cost dispute.

This week, the Press Trust of India reported that RIL and partner BP had warned the government that gas production would stop in 2015 unless the government expedited needed investment approvals.

Angel Broking analyst Bhavesh Chauhan said that the upside earnings surprise came on the back of unexpectedly lower tax rates, but the outlook for the company's oil and gas business remains clouded by regulatory uncertainty.

"There is a cat and mouse game going on between the government and Reliance," he said. "Reliance wants capex to be approved, while the government is not willing to give additional capex."

[Associated Press]

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