RIL pulls back in green; KG D6 output concern remains

MUMBAI: Shares of oil & gas major Reliance Industries pared intraday losses and bounced back in trade today even as concerns of lower gas output from KGD6 block remained.

According to reports, the KG D6 gas production has fallen to 17.3 mmscmd in March 13. Peak gas production at the block was at 60mmscmd in 1Q 2010.

Niko Resources, which is a partner of Reliance Industries in KG D6, has indicated that KG D6 gas output would continue to fall in early FY14 and rebound later in FY14. It is guiding KG D6 gas production to be Y-o-Y lower in FY14E but a YoY rise in output in FY15E.

“RIL's earnings growth outlook for FY14-15E is better after two years of weak EPS growth in FY12-13E (FY08-13E CAGR just 4%), improving refining outlook, imminent gas price hike in FY15 and petrochemical capacity addition would mean stronger earnings growth in FY14-15 than in FY08- 13. However, FY14-15 EPS growth is not strong enough and RIL's E&P remains de-rated,” said a Bank of America Merrill Lynch report.

The brokerage has a price target of Rs 893 on the stock.

At 12:15 p.m.; the stock was at Rs 827.50, up 0.60 per cent, on the BSE. It touched a high of Rs 830 and a low of Rs 810.60 in trade today.