RIL Q1 net up 5.6%_PVC（Polyvinyl chloride）

RIL Q1 net up 5.6%

June 13, 2024

Reliance Industries Ltd has posted an increase of 5.6 per cent in its net profit at Rs 4,473 crore for the first quarter ended 30th June, 2012 as compared to Q4 FY12 and decreased by 21 per cent as compared to Q1 FY12. Turnover increased by 8.1 per cent to Rs 94,926 crore as compared to Q4 FY12 and 13.4 per cent as compared to Q1 FY12.

* Exports increased by 7.7 per cent to Rs 55,261 crore as compared to Q4 FY12 and 6.8% as compared to Q1 FY12.

* PBDIT decreased by 2.3 per cent to Rs 8,651 crore as compared to Q4 FY12 and 21.4% as compared to Q1 FY12.

* Profit before Tax remains flat at Rs 5,433 crore as compared to Q4 FY12 and decreased by 25.2 per cent as compared to Q1 FY12.

* Gross Refining Margin at $ 7.6 / bbl for the quarter ended 30th June 2012.

Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited said: “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. We have commenced our next phase of capital investments in the refining and petrochemical segments to enhance earnings and value of our core energy businesses.”

CORPORATE HIGHLIGHTS

Reliance Industries Limited (RIL) has selected Irving, Texas based Fluor Corporation to perform project management services for its projects being executed at its world scale Jamnagar refining and petrochemical complex on the west coast of India. The investment in the expansion of energy and petrochemicals projects represents one of the largest such investments globally. The proposed coke gasification facility is also among the largest such projects ever built.

RIL has announced that it has selected Phillips66’s E-Gas technology for its planned gasification plants at Jamnagar. The planned gasification plants at Jamnagar will be among the largest in the world and will process petroleum coke and coal into synthesis gas utilizing the E-Gas technology. The synthesis gas will be used as feedstock for a new chemical complex and will fuel the refinery\’s existing gas turbine power generation units. Phillips 66 will license Gas technology to RIL and provide process engineering design and technical support gasification technology relating to the process area.

The Government of India, by its letter of 02 May 2012 has communicated that it proposes to disallow certain costs which the PSC relating to Block KG-DWN-98/3 entitles RIL to recover. RIL continues to maintain that a Contractor is entitled to recover all of its costs under the terms of the PSC and there are no provisions that entitle the Government to disallow the recovery of any Contract Cost as defined in the PSC. The company has already initiated arbitration on the above issue.

On July 6, 2012 RIL selected Technip as a technology supplier and engineering contractor to implement its Refinery Off-Gas Cracker (ROGC) project. This is part of the expansion project being executed at RIL’s world-scale Jamnagar refining and petrochemical complex in Gujarat, on the West Coast of India. The ROGC plant will be amongst the largest ethylene crackers in the world and will be using refinery off-gas as feedstock. The products from the plant will be utilized for the new downstream petrochemical plants being built at Jamnagar.

Reliance Exploration and Production DMCC, a wholly owned subsidiary of Reliance has completed the transaction for divestment of its 80% working interest and operatorship in the production sharing contracts (PSCs) for Rovi and Sarta Blocks in the Kurdistan Region to the subsidiaries of Chevron Corporation. This is in line with its portfolio rationalization strategy of international assets.

RIL has signed a US$ 2 billion equivalent loan with nine banks covered by Euler Hermes Deutschland AG. (“Euler Hermes”) on 07 May 2012 at Berlin, Germany. The loan will be primarily used to finance goods and services procured from German suppliers as part of RIL\’s petrochemicals expansion projects at Jamnagar, Hazira, Silvassa and Dahej in India.

During the quarter, deferred tax reversal was Rs. 122 crore as against deferred tax expense of Rs. 110 crore in the trailing quarter. The difference is due to estimated lower tax depreciation as compared to book depreciation. Deferred tax was Rs150 crore in the corresponding period of the previous year.

Profit after tax was higher at Rs. 4,473 crore ($ 0.8 billion) as against Rs4,236 crore in the trailing quarter and lower by 21% from Rs5,661 crore to Rs4,473 crore as compared to the corresponding period of the previous year.

Basic earnings per share (EPS) for the quarter ended 30th June 2012 was Rs13.7 ($ 0.2) against Rs12.9 in the trailing quarter. Basic earnings per share (EPS) for the quarter ended 30th June 2011 was Rs17.3.

Outstanding debt as on 30th June 2012 was Rs73,213 crore ($ 13.2 billion) compared to Rs68,259 crore as on 31st March 2012. The increase in debt in rupee terms is mainly on account of change in exchange rates. Net gearing as on 30 June 2012 was 1.3% as compared to nil as on 31 March 2012.

RIL had cash and cash equivalents of Rs70,732 crore ($ 12.7 billion). These are primarily invested in fixed deposits, certificate of deposits with banks, mutual funds and Government securities / bonds.

Cash outflow on account of capital expenditure for the year amounted to Rs2,398 crore ($ 431 million) .The increase in capital expenditure is primarily on account of capital expenditure incurred for the Petrochemical Projects at Dahej and Silvassa. The net capital expenditure for the quarter ended 30th June 2012 was7,656 crore ($ 1.4 billion) including5,218 crore capitalized on account of exchange difference on loans.

DOMESTIC OPERATIONS

KG-D6

The KG-D6 field produced 0.9 million barrels of crude oil, and 104.40 BCF of natural gas, which was lower by 36.7% and 33.1% respectively over the previous period. The reduction in production was due to reservoir complexity and natural decline. Production of gas condensate was 0.1 million barrels, reduction of 30.6% over the previous period.

As compared to Q4 FY12, the decrease in oil production by 17 %, in gas production by 9% and in condensate production by 1% was due to a reduction is reservoir pressure associated with production from the field.

Production from KG-D6 has resulted in cumulative sales of 1,869 BCF (52.92 BCM) since start of production while sales for 1Q FY 12-13 was about 103.35 BCF (2.93 BCM).

Significant efforts towards augmenting production from KG D6 have been undertaken during the quarter.

For KG-D6, RIL is planning to submit Revised Field Development Plan (RFDP) for D1-D3 which is aimed at maximizing gas recovery from the existing fields. It also plans to further pursue approval of RFDP of D 26 (MA) submitted in the earlier quarter. Further, to expedite the development projects of other discoveries, RIL is preparing development plan(s) based on an integrated concept which is planned for submission in 3Q FY13.

RIL has also commenced pre-development activities in the D6 block which includes Engineering Surveys i.e. Geophysical Surveys & Geotechnical Investigations and Conceptual Engineering and FEED.

Panna-Mukta and Tapti (PMT)

PMT JV has achieved the significant milestone of 500 MMBOE of oil and gas production.

Panna-Mukta fields produced 2.2 MMBL of crude oil and 17.9 BCF of natural gas in1Q FY13:

a reduction of 19% in case of crude oil & growth 2% in case of natural gas over the previous year. The change was due to higher production of gas relative to oil production from the well intervention jobs. The decrease is also due to natural decline in reserves.

Decrease of 8 % in oil production as compared to 4QFY12 was due to due to higher production of gas relative to oil production from the well intervention jobs and natural decline in reserves. There was no change in gas production from the field.

Tapti fields produced 0.2 MMBL of condensate and 13.8 BCF of natural gas in 1QFY13:

a decline of 39% and 32% respectively over the previous year due to a natural decline in the reserves.

Decrease of 18 % in natural gas production and decrease of 21 % in condensate production as compared to Q4 FY 12 was also due to natural decline in reserves.

Plan for FY 2012-13 is to commence drilling of 3 extended reach development (ERD) wells at Mid-Tapti field from which first gas flow is expected in 2H FY13.

Other Domestic Blocks

During the period, as part of portfolio rationalization RIL relinquished 4 blocks: MN-V-D4, MN-VI-D21, KK-D1 and KK-D2.

Additional prospect inventory build-up and exploration efforts are underway in KG, CY and Mahanadi basins.

RIL’s portfolio currently consists of 13 exploration blocks excluding KGD6, CBM, Panna Mukta and Tapti.

Preparing of commencement of drilling campaign in early 2013 is underway and is subject to approvals with the return of 1 deep-water rig.

CBM BLOCKS

RIL has 3 CBM blocks in Central India viz. Sohagpur (East), Sohagpur (West) and Sonhat North in the domestic unconventional portfolio. Exploration activities for Sohagpur East & West blocks have been completed and blocks are in development phase. The following works have been completed in the Sohagpur (East) and Sohagpur (West) blocks:

Land acquisition under progress.

Over 97 production wells are drilled and some are under completion

Further, RIL has appointed consultants for subsurface and surface facilities design. Proposal for CBM gas pricing formulae based on price discovery has been submitted to MoPNG for approval. Regulatory approvals are awaited prior to further field development activities.

INTERNATIONAL OPERATIONS (CONVENTIONAL)

As at 30 June 2012, Reliance had 10 blocks with acreage of about 51,000 square kilometers in its international oil & gas portfolio including 3 in Yemen (1 producing and 2 exploratory), 2 each in Northern part of Iraq i.e. Kurdistan Region, Peru and Colombia and 1 in Australia.

During the period, average oil production in Yemen Block 09 was approx. 5000 barrels per day.

INTERNATIONAL OPERATIONS (SHALE GAS)

Reliance’s shale gas business in the United States comprises of three upstream joint ventures with Chevron, Pioneer Natural Resource and Carrizo Oil & Gas and a midstream joint venture with Pioneer. Aggregate investments since inception of these joint ventures stood at US$ 4.09 billion as at the end of Q1 2012-13.

Reliance’s shale gas business performance improved during the quarter. Development activities gained momentum and Reliance’s share of gross production grew 18% over the trailing quarter. Reliance share of gross production stood at 22.1 Bcfe in Q1 2012-13, as compared to production of 18.77 Bcfe in Q4 2011-12. Average combined daily production for all 3 JVs stood at 529.3 MMscfed in Q1 2012-13, which includes 35,086 barrels of condensate.

During the quarter, RIL processed 17.3 mn tons of crude and achieved utilization rate of 111%. In comparison average utilization rates for refineries globally during the same period were 84.4% in North America, 74.6% in Europe and 82.3% in the Asia.

Revenue increased by 12.0% from Rs76,211 crore to Rs85,383 crore ($ 15.4 billion) over the trailing quarter. Increase in volumes accounted for 7.6% growth in revenue while higher prices accounted for 4.4% growth in revenue. Revenue increased by 15.9 % from73,689 crore to Rs85,383 crore over the corresponding period of the previous year.

During the quarter exports of refined products was at $ 8.8 billion and accounted for 9.3 million tonnes of aggregate volumes as compared to 8.4 million tons during the trailing quarter.

EBIT was Rs2,151 crore ($ 387 million), an increase of 26.8% over the trailing quarter. Increase in EBIT was mainly on account of higher crude processed during the quarter. On a year-on-year basis, EBIT was lower by 32.8% from Rs. 3,199 crore to Rs2,151 due to sharp decline in refining margins.

The benchmark Singapore refining margin was lower on a year-on-year basis due to lower gasoil and naphtha cracks while gasoline continued to remain weak. In the US however, WTI crack margins improved on account of stronger gasoline cracks. The advent of driving season, export opportunities to Latin America and closure of Atlantic basin refineries curtailed supply lead to an uptick in gasoline crack margins. Similarly, this quarter, Brent cracking margin were higher on a year-on-year due to account of stronger gasoline crack as arbitrage opportunities to US opened up.

On a Q-on-Q basis, Arab Light-Heavy differential widened as demand forecast for fuel oil reduced following announcements of the restarting of nuclear power generation in Japan. On a Y-o-Y basis, Arab Light – Arab heavy crude differential narrowed by US$ 1.8 / bbl as compared to the corresponding period of the previous year. This is due to closures of a number of simple refineries in Europe and on the East coast of US, availability of more light crude in US and increased demand for heavy crude as more complex refineries got operationalized.

Slowing Chinese economy, substantial new refinery capacity coming on line, lower turnarounds, deepening euro zone crisis and higher stocks led to Singapore gasoil cracks during the quarter being weaker at $ 15.4 per barrel, a reduction of $1 per barrel. On a year-on-year basis, Singapore gasoil cracks have declined by $ 4.1 per barrel.

Gasoline cracks remained relatively unchanged in the Asian market on Q-o-Q basis, in contrast to strong performance of gasoline cracks in US and European market. The strong performance of gasoline cracks in US and Europe can be attributed to refinery closures. However in Asia, excess supply together with modest demand growth kept the pressure on Singapore gasoline cracks. Gasoline cracks were $10.6 per barrel during the quarter as against $11.7 per barrel for the same period last year.

During the quarter, naphtha cracks in Asia was $ (-8.5) per barrel, lower by US$ 6.3 / bbl in Asia vis-í -vis the same period last year. On a Q-o-Q basis also, naphtha cracks remained weaker by $ 5.2 per barrel as petrochemical demand weakened resulting in reduced run rates in naphtha crackers. Poor petrochemical margins, lower demand, several planned and unplanned shutdowns of naphtha crackers and influx of higher supplies from the west have pressurized fundamentals.

On a quarter on quarter basis, RIL’s Gross Refining Margin (GRM) remained flat at US$ 7.6 / bbl as the weakness in product cracks were offset by wider light-heavy crude differentials.

During the quarter, both PE and PP production has increased by 5% over the trailing quarter partially offset by decreased in production of PVC by 9% due to plant shutdown. Industry demand of polymers has decreased by 6% over the trailing quarter due to EU crisis and surge in imports.

Production of ethylene and propylene was 0.5 million tonnes and 0.2 million tonnes, an increase of by 2% and 4% over the trailing quarter.

REFINING AND PETROCHEMICAL PROJECTS UPDATE:

There has been significant progress in the downstream projects in Refining and Petrochemical segments. In most instances, these projects leverage from the complexity and scale of RIL’s refining complex at Jamnagar, India. These are aimed at providing significant margin upside to RIL’s refining business and add to the cost competitiveness and volumes in its petrochemical business.

Projects currently underway include setting up of a world-scale pet-coke gasification facility, setting up one of the world’s largest ethylene cracker using refining off-gases as feedstock, downstream expansions in polymers, synthetic rubbers, polyester and fibre-intermediate products. Key technology suppliers and engineering contractors have been finalised and all these projects are at various stages of implementation.

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