Reliance second quarter net beats forecast on refining margin

India's Reliance Industries Ltd topped forecasts with a 7.4 percent rise in quarterly profit on Thursday, helped by stronger than expected refining margins, and said new projects would start to deliver in coming quarters. The energy conglomerate will begin production at a new 580,000 barrels per day refinery in western India later this year, with oil and gas from its blocks off India's east coast also adding to its earnings.
"We are at the final leg of capital expenditure in our key businesses and will see cash flows from these investments in the following quarters," Chairman and Managing Director Mukesh Ambani said in a statement. Reliance, India's biggest private company with a market value of $45 billion, said it had doubled oil output to 10,000 barrels per day from its KG-D6 block off the east coast since starting production in September.
It expects peak hydrocarbon production of 550,000 barrels of oil equivalent a day over six to eight quarters. The leading petrochemicals maker, which runs a 660,000 barrels per day refinery in western India, said net profit rose to 41.22 billion rupees ($828 million) in its fiscal second quarter ended September 30 from 38.37 billion reported a year ago.
Analysts had forecast a net profit of 39.2 billion rupees. Reliance said its capital expenditure in the first half was 114.01 billion rupees, primarily in the oil and gas business. Its refining margins for the quarter were $13.4 a barrel, more than double the benchmark Asian Dubai crack margin, which averaged about $5.8 a barrel in the period.
This is because its 660,000 barrels per day refinery in western India can process cheaper, high-sulphur crude oil, bolstering margins. A global economic slowdown will put pressure on refining margins, analysts said. "For the third quarter, gross refining margins are seen declining due to a fall in demand for fuel products globally," said Prayesh Jain, an analyst at brokerage India Infoline.
Crude oil prices are near a 16-month low as signs of a global recession have dragged down demand. Shares in Reliance dropped 7 percent in July-September quarter, compared with a 0.3 percent rise in the sector index and a 4.5 percent decline in the broader market. US oil major Chevron has not approached Reliance Industries about selling its 5 percent stake in subsidiary Reliance Petroleum, the Indian energy firm said. A television news channel citing unnamed sources had said Chevron would sell the stake to Reliance Industries.