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Event: Hardy Oil and Gas Plc, Reliance Industries' (RIL) partner in D3 block,
has announced that it has elected not to exercise an option to increase its
participating interest in the KGD3 block by 3%. Consequently, RIL will hold
60%, BP 30% and Hardy Oil 10% participating interest in the block once
the RIL-BP deal receives government approval. To date four successful
wells have been drilled in the block, resulting in natural gas discoveries.
Impact: Hardy Oil has stated that BP, as part of the RIL-BP deal, has valued
the D3 block at USD 5bn. We value the 3.9TCF risked resources (Source:
Hardy Oil) in KGD3 block at USD3.2bn (Rs29/share of RIL). If we value the
D3 block at USD5bn it increases our SOTP for RIL by INR16/sh. We believe
that completion of the proposed RIL-BP deal could accelerate exploration
programme targeting the prospective D4, D9 and D3 blocks. BP's technical
expertise and experience for deepwater exploration and development will
also benefit RIL. With about 60% stake still in its E&P blocks, RIL's fortunes
in this segment continues to be tied to gas production in KGD6, development
of discoveries already made and future exploration successes.
Reiterate Buy with INR1150 TP: With refining and petchem contributing
two-thirds of RIL's EBITDA, RIL should benefit from strength in downstream
margins, but clarity on gas production ramp-up and capital allocation will be
equally important going ahead. The stock is currently trading at 7.3x FY12e
EV/EBITDA, at the lower end of its three-year trading range
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Event: Hardy Oil and Gas Plc, Reliance Industries' (RIL) partner in D3 block,
has announced that it has elected not to exercise an option to increase its
participating interest in the KGD3 block by 3%. Consequently, RIL will hold
60%, BP 30% and Hardy Oil 10% participating interest in the block once
the RIL-BP deal receives government approval. To date four successful
wells have been drilled in the block, resulting in natural gas discoveries.
Impact: Hardy Oil has stated that BP, as part of the RIL-BP deal, has valued
the D3 block at USD 5bn. We value the 3.9TCF risked resources (Source:
Hardy Oil) in KGD3 block at USD3.2bn (Rs29/share of RIL). If we value the
D3 block at USD5bn it increases our SOTP for RIL by INR16/sh. We believe
that completion of the proposed RIL-BP deal could accelerate exploration
programme targeting the prospective D4, D9 and D3 blocks. BP's technical
expertise and experience for deepwater exploration and development will
also benefit RIL. With about 60% stake still in its E&P blocks, RIL's fortunes
in this segment continues to be tied to gas production in KGD6, development
of discoveries already made and future exploration successes.
Reiterate Buy with INR1150 TP: With refining and petchem contributing
two-thirds of RIL's EBITDA, RIL should benefit from strength in downstream
margins, but clarity on gas production ramp-up and capital allocation will be
equally important going ahead. The stock is currently trading at 7.3x FY12e
EV/EBITDA, at the lower end of its three-year trading range
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