RIL’s profits buoyed by refining gains

26 October 2016, Week 42 Issue 548

India’s Reliance Industries Ltd (RIL) has booked higher downstream earnings in the July-September quarter, although its exploration and production business has slipped into the red.

The country’s biggest private oil company recorded a turnover of 816.5 billion rupees (US$12.2 billion) for the three months ending September 30, up 9.6% year on year. Revenues for the first and second quarters combined stood at 1.53 trillion rupees (US$22.9 billion), down 2.5% compared to the corresponding period in 2015.

Quarterly net profits totalled 72 billion rupees (US$1.08 billion), a slide of 43.1% year on year. Excluding exceptional items – such as RIL’s exit from US shale gas unit EFS Midstream in 2015 – net income fell by only 22.9%.

First-half performance was healthier, with net profits down just 6.8% to 143 billion rupees (US$2.14 billion). Without factoring in exceptional items, income for the six-month period rose by 29.5% year on year.

“The company has achieved outstanding second-quarter results with strong refining business performance and record petrochemical earnings,” RIL’s chairman, Mukesh Ambani, said in a statement.

Refining turnover in the quarter stood at 605 billion rupees (US$9.05 billion), down 0.4% year on year. During the six-month period ending September 30, sales declined by 9.6% to 1.17 trillion rupees (US$18 billion). Operating profits for the segment, however, climbed by 9.7% to 59.8 billion rupees (US$895 million) for the quarter, and by 17.7% to 125.6 billion rupees (US$1.88 billion) for the six-month period.

RIL attributed the growth in income to larger refining runs and a shift towards production of higher-margin products. The firm’s refineries processed 18 million tonnes (1.43 million bpd) of crude during the quarter, up 5% year on year.

Revenues from RIL’s petrochemical business edged up by 5.6% to 224 billion rupees (US$3.35 billion) for the quarter and by 2.5% to 431 billion rupees (US$6.45 billion) for the six-month period. Quarterly operating income increased by 5.6% year on year to 34.1 billion rupees (US$510 million). Six-month earnings were up 28.3% at 62.2 billion rupees (US$930 million).

The upstream business proved more vulnerable to the volatile oil market, with revenues down 35.7% at 13.3 billion rupees (US$199 million) for the quarter. Six-month turnover fell by 35.2% to 26.7 billion rupees (US$399 million).

The slump in sales translated into a pre-tax loss of 4.91 billion rupees (US$73 million) for the quarter and 8.03 billion rupees (US$120 million) for the half year. In the six months ending September 30, 2015, RIL’s exploration and production operations generated a pre-tax profit of 35.25 billion rupees (US$527 million).

RIL blamed the poor result on a drop in domestic yields, coupled with weak oil and gas prices internationally. The firm has interests in a number of onshore and offshore Indian blocks as well as in joint ventures targeting shale gas in the Marcellus and Eagle Ford plays in the US.

It also owns the 1.24 million bpd Jamnagar refinery, which is the biggest refining hub in the world.

Edited by

Andrew Kemp


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