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Results in-line with estimates. Firm petchem and refining
performance compensate for weak E&P. Petchem EBIT
was supported by demand uptick after inventory
destocking in 1Q.
Refining differential over benchmark Singapore index
narrowed to US$1/bbl led by high Brent-Dubai differential
and weak gasoil and LPG spreads even as gasoline
spreads remained strong.
Satellite and R series development in D6 to commence
only after commerciality approval from the government.
Reiterate Outperform.
2Q earnings in line with estimates: RIL’s 1Q earnings of
Rs57bn (up 15.8% yoy, 0.7% qoq) and operating profit of
Rs98.4bn (up 4.8% yoy) was in line with our estimate.
Refining margin decline qoq: Refining EBIT at Rs30.8bn (up
40.3% yoy) was impacted by marginal decline in GRMs –
US$10.1/bbl vs.US$10.3/bbl in 1Q partly compensated by
higher volume of 17.1MT (17MT in 1Q) and weak exchange
rate. Differential over Singapore GRM was therefore reduced to
US$1/bbl (~US$3.1 in FY11) due to high Brent-Dubai
differential, weak gasoil and LPG spreads and high LNG price
even as gasoline spreads remained strong.
….but petchem segment remained strong: Petchem EBIT at
Rs24.2bn (9.3% qoq) was supported by strong demand uptick
(up 21% qoq) after inventory destocking in 1Q even as spreads
were weak. Oil and gas EBIT at Rs15.3bn (up 3.9% qoq) was
primarily due to the decline in the rupee and higher crude
prices even with falling output at KG-D6 and PMT.
D6 a long drawn out affair. During Q2, the company
submitted a commerciality proposal for 8 discoveries in CB 10
block located in the Cambay basin. RIL, at analyst meet,
mentioned that no further exploration work would be
undertaken in D6 until completion of reservoir study with BP.
Also, once the commerciality is approved by the government,
RIL will undertake development activity of satellite fields and R
series, though not simultaneously.
Depreciation for 2Q was at Rs29.6bn (-12% yoy and 7% qoq)
on the back of transfer of 30% stake to BP effective 30 Aug ’11
as also because of lower depletion charges given falling
production.
Maintain estimates and target: Maintain Outperform with a
PT of Rs969.
Key analyst meet takeaways
No further exploration work would be done at the D6 block as the company undertakes a
detailed reservoir study with BP. RIL expects to receive one rig in January 2012, post which
any activity would be taken up.
RIL will undertake development activity of satellite fields and R series once the plan is
approved by the government. However, the company will not simultaneously take up
development activity.
Total cash capex during the quarter was Rs18bn, with E&P accounting for 70%.
Shale gas exit production rate from the 2 producing JVs is 210mmscfd. RIL's share of
production during the quarter was 6.2bcf and the realisation was ~US$4/mmbtu.
The company continues to rely on LNG for its refinery (8-9mmscmd) despite rising
international prices
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Results in-line with estimates. Firm petchem and refining
performance compensate for weak E&P. Petchem EBIT
was supported by demand uptick after inventory
destocking in 1Q.
Refining differential over benchmark Singapore index
narrowed to US$1/bbl led by high Brent-Dubai differential
and weak gasoil and LPG spreads even as gasoline
spreads remained strong.
Satellite and R series development in D6 to commence
only after commerciality approval from the government.
Reiterate Outperform.
2Q earnings in line with estimates: RIL’s 1Q earnings of
Rs57bn (up 15.8% yoy, 0.7% qoq) and operating profit of
Rs98.4bn (up 4.8% yoy) was in line with our estimate.
Refining margin decline qoq: Refining EBIT at Rs30.8bn (up
40.3% yoy) was impacted by marginal decline in GRMs –
US$10.1/bbl vs.US$10.3/bbl in 1Q partly compensated by
higher volume of 17.1MT (17MT in 1Q) and weak exchange
rate. Differential over Singapore GRM was therefore reduced to
US$1/bbl (~US$3.1 in FY11) due to high Brent-Dubai
differential, weak gasoil and LPG spreads and high LNG price
even as gasoline spreads remained strong.
….but petchem segment remained strong: Petchem EBIT at
Rs24.2bn (9.3% qoq) was supported by strong demand uptick
(up 21% qoq) after inventory destocking in 1Q even as spreads
were weak. Oil and gas EBIT at Rs15.3bn (up 3.9% qoq) was
primarily due to the decline in the rupee and higher crude
prices even with falling output at KG-D6 and PMT.
D6 a long drawn out affair. During Q2, the company
submitted a commerciality proposal for 8 discoveries in CB 10
block located in the Cambay basin. RIL, at analyst meet,
mentioned that no further exploration work would be
undertaken in D6 until completion of reservoir study with BP.
Also, once the commerciality is approved by the government,
RIL will undertake development activity of satellite fields and R
series, though not simultaneously.
Depreciation for 2Q was at Rs29.6bn (-12% yoy and 7% qoq)
on the back of transfer of 30% stake to BP effective 30 Aug ’11
as also because of lower depletion charges given falling
production.
Maintain estimates and target: Maintain Outperform with a
PT of Rs969.
Key analyst meet takeaways
No further exploration work would be done at the D6 block as the company undertakes a
detailed reservoir study with BP. RIL expects to receive one rig in January 2012, post which
any activity would be taken up.
RIL will undertake development activity of satellite fields and R series once the plan is
approved by the government. However, the company will not simultaneously take up
development activity.
Total cash capex during the quarter was Rs18bn, with E&P accounting for 70%.
Shale gas exit production rate from the 2 producing JVs is 210mmscfd. RIL's share of
production during the quarter was 6.2bcf and the realisation was ~US$4/mmbtu.
The company continues to rely on LNG for its refinery (8-9mmscmd) despite rising
international prices
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