By IANS
Mumbai : The stock of Reliance Industries Ltd (RIL), India's private sector behemoth and investors' favourite, is projected to gain further, as global investment firm UBS has revised its earnings estimates following an improved outlook for price realisation from its oil and gas reserves.
Global investment major UBS has said it would raise its estimates of RIL's FY09 earnings per share (EPS) by 3.6 percent.
"Based on an improved outlook for price realization of gas from the Krishna-Godavari (KG) basin Dhirubhai-6 (D6) deep water block, we have raised our FY09 estimates by 3.6 percent fro Rs.96.4 to Rs.99.8, while our FY08 estimates remains unchanged," Harshad Katkar, an analyst with UBS, told IANS.
He said that the firm would also raise its 12-month price target following higher valuation for oil reserves in KG D6 and value for RIL's stake in Reliance Petroleum Ltd (RPL).
The scrip, a traditional market leader, closed at Rs.1,671.25 on the Bombay Stock Exchange Monday, rising to Rs.1,727.15 on Tuesday. On the current EPS of Rs.78.28, the price-earning ratio comes to 22.06.
"RIL has recently called for limited bids from power and fertilizer firms to kick-start the price discovery process for gas from KG D6. RIL is awaiting for the petroleum ministry's approval, which is expected by July-end," Katkar said.
According to reports, RIL has received bids in the region of $4.3/mmbtu (million British thermal units) – $4.7/mmbtu. UBS said the contracts would be for three years and it would upgrade its estimates for average KG D6 gas realization from $3.55/mmbtu to $4.2/mmbtu.
State-run India Oil Corp has shown interest in consumption of 11.57 million standard cubic metres of natural gas a day (mscmd) of gas from the KG basin, primarily for captive purpose. RIL and state-owned thermal power producer NTPC are also likely to use 10-12 (million standard cubic meter per day) mmscmd and 12 mmscmd of KG D6 gas respectively, the analyst said.
Reliance has reported several oil and gas discoveries at KG D9 and D3 deep water blocks off the east coast and in the Gujarat Saurashtra basin.
Gas production from the block will begin in mid-2008 with oil production as early as March 2008 and RIL is investing $5.2 billion in bringing to production Dhirubhai-1 and -3 discoveries, first two of the over 12 gas finds.
The company is presently engaged in an extensive exploration in the D3 deepwater block.
Recent discoveries by RIL's British partner Hardy Oil and Gas plc (HOGP) also indicate reserves in the new blocks in the KG basin.
HOGP has estimated gross prospective resources of 33.6 tcf (trillion cubic feet) of gas in D9 and 4.2 tcf of gas in D3 and Reliance has 90 percent interest in these blocks.
It considers D9 block to have high potential as it is situated adjacent to the recent large oil and gas discoveries made by Cairn Energy plc and Reliance.
The D9 block is located immediately to the east of Reliance's KG D6 block.