Oct. 15 (Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, reported a fourth straight quarter of lower profit after natural-gas production from the nation’s biggest field declined.
Net income declined 5.7 percent to 53.8 billion rupees ($1 billion), or 16.6 rupees a share, in the three months ended Sept. 30, the Mumbai-based company said in an e-mailed statement today. That matched the median estimate of 28 analysts compiled by Bloomberg, which was 53.7 billion rupees. Net sales rose 15 percent to 903.4 billion rupees.
Reliance’s billionaire Chairman Mukesh Ambani is betting on the world’s biggest refining complex to counter a slump in production from its natural-gas deposit that led profit to decline for four quarters in a row. The company plans to spend 1 trillion rupees in the next five years to improve refinery operations, build chemical plants and start telecommunications services.
“Raising gas production continues to be a challenge for Reliance,” said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management that oversees about $1.1 billion of emerging-market assets, including Indian stocks. “Refining margins are picking up around the world and that benefits Reliance too.”
Reliance has increased 19 percent this year, compared with a 21 percent gain in the benchmark Sensitive Index. The shares rose 0.5 percent to 823.05 rupees at the close today, before the earnings were announced. Profit in the quarter rose 20 percent from the previous three months.
The company earned $9.5 for every barrel of crude it turned into fuels in the quarter, compared with $10.1 a barrel a year earlier and $7.6 in the previous three months ended June 30. Profit from turning Dubai crude into diesel in Singapore, an Asian benchmark, averaged $18.72 a barrel in the three months ended Sept. 30, higher than $18 a year before, according to data from PVM Oil Associates Ltd., a London-based crude and refined-products broker.
Brent crude, a benchmark oil price used by much of the world, has increased 6.3 percent this year. The November contract fell 0.4 percent to $114.19 a barrel on the London-based ICE Futures Europe exchange as of 2:48 p.m. local time.
Reliance’s two adjacent refineries at Jamnagar in the western Indian state of Gujarat have the capacity to process 1.24 million barrels of crude a day. The plants are capable of turning cheap, low-quality crude oil in to high-value products.
The company had cash and equivalents of 791.6 billion rupees and 700.6 billion rupees of outstanding debt as of Sept. 30, according to the statement. The cash is invested in fixed deposits, mutual funds and government bonds.
The company is spending $8 billion to boost petrochemical capacity and $4 billion on a plant to make combustible gas to power its refineries, according to an April 20 presentation on its website.
Gas production from the KG-D6 block in the Bay of Bengal declined 35 percent to 197 billion cubic feet in the six months ended Sept. 30 from a year earlier, according to today’s statement. The drop was because of reservoir complexity and a natural decline in output, according to the statement.
The continuous decline in gas production has made analysts the most bearish on the company’s stock in three years. The consensus rating, or the average of recommendations updated by analysts in the past year, dropped to 3.25. Five denotes a buy and one a sell, according to data compiled by Bloomberg.
The company reduced its estimate of reserves at all its gas fields by 6.7 percent to 104 billion cubic meters, or 3.7 trillion cubic feet, as of March 31, according to its annual report. Niko Resources Ltd., which owns a 10 percent stake in the KG-D6 block, cut the estimate for its share of proved and probable gas reserves to 193 billion cubic feet as of March 31, according to a June 20 statement, which didn’t provide year-earlier figures.
Production is expected to decline to 20 million cubic meters a day in the year starting April 1, 2014, Oil Minister S. Jaipal Reddy said in parliament on May 8. The drop in output has cut gas supplies to customers, including power and fertilizer producers, all of which are selected by the government to buy the fuel at a state-set rate.
Reliance sold stakes in KG-D6 and 20 other blocks to BP Plc, Europe’s second-biggest oil producer by market value, as Ambani sought the London-based company’s technology to drill and produce gas from the deepwater area. BP, which completed the $7.2 billion deal a year ago, and Reliance are preparing a new plan to produce gas from the biggest deposits in the block and develop adjoining areas.
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