Mumbai: India’s top petrochemical producer and refiner, Reliance Industries Ltd, is expected to report its first fall in quarterly profit in three years as slumping oil prices squeezed refining and petrochem margins.
Earnings will, however, get a boost when the energy giant starts pumping 30-40 million cubic metres of natural gas a day from its deep-sea fields off India’s east coast in the second half of February.
“RIL’s earnings are likely to have low sensitivity to refining margins going forward as new cash flow from its gas business is likely to become more meaningful for the company,” Goldman Sachs said in a report.
A new 580,000 barrels a day refinery which started operations on 25 December should also boost profit in the coming quarters.
However, Reliance’s net profit in October-December is expected to have dropped 19.3% from the net profit excluding one-off gains reported a year ago, its first quarterly drop since late 2005, a Reuters poll showed.
“For Reliance, refining margins and volumes and pethcem margins and volumes -- all are likely to drop,” said Sanjeev Prasad, co-head of institutional equities at Kotak Institutional Equities.
“It may book significant inventory losses for the December quarter,” he said, referring to crude oil prices that fell sharply in the quarter.
Reliance’s most watched gross refining margins are likely to have fallen to $9.16 per barrel from $15.4 per barrel a year earlier as sluggish demand in the wake of global economic slowdown pushed oil prices sharply lower.
Reliance’s refining margins are significantly higher than the Asian benchmark in Dubai as its refinery can process cheaper heavy crude to produce high value products.
State-run Oil & Natural Gas Corp is set to report a second consecutive fall in quarterly net profit on lower crude prices, and its outlook is weighed down by falling output and its costly acquisition of UK-listed Imperial Energy.
ONGC, India’s top oil producer, agreed to pay 1.3 billion pounds ($1.9 billion) for the Russia-focused Imperial when oil prices were near $130 a barrel versus current prices around $36.