 "Penalty to push RIL’s oil & gas business further into loss")
The $1.55-billion (Rs 10,338 crore) penalty on Reliance Industries Ltd (RIL) for extracting natural gas from the state-owned Oil and Natural Gas Corporation's (ONGC’s) fields in the Krishna-Godavari basin will be higher than the annual oil and gas segment revenue of the company. Besides, it will erode nearly one-third of RIL’s Rs 27,630 profit made in 2015-16.
Analysts, however, do not see a big blow for the conglomerate because the group reported an annual revenue of Rs 296,091 crore last year.
RIL made Rs 7,527 crore ($1.12 billion) from its oil and gas production business in 2015-16. For the September quarter, the company reported an earnings before interest and tax loss of Rs 491 crore. The penalty, if paid, will push its oil and gas segment further into losses.
Analysts, however, expect the penalty to be contested, leaving little room for an immediate impact. In the long run, they said, $1.55 billion in penalty would not hit RIL very hard.
The government slapped a $1.55-billion penalty on RIL for producing ONGC’s share of natural gas in the Krishna-Godavari basin. Business Standard reported a letter was issued to RIL on Thursday asking it to pay the penalty.
“There is no immediate impact because it will go into arbitration,” said an oil and gas analyst with a domestic brokerage who did not wish to be named. The oil ministry has given Reliance Industries and its partners 30 days to respond to the penalty notice.
“The post tax impact is Rs 25-26 per share, which is, if they have to pay. At the operations level, it is not a big number for RIL,” said a second oil and gas analyst on condition of anonymity. RIL’s shares closed at Rs 1,005.80, 1.92 per cent lower than its previous close.
RIL's investments in the exploration and production business have so far been unable to make handsome returns for the company.
“One also needs to see that the penalty has to be split with partners Niko and BP. One needs to see what is the agreement clause for past liabilities with Niko surely there will be a share, so the net impact may be lower,” said the first analyst quoted earlier in the story. UK's BP holds 30 per cent in the block since 2011 and the remaining 10 per cent is with Niko Resources of Canada.
Analyst do not expect any significant impact of the penalty decision on RIL’s share price because the St is glued to developments in the company’s telecom business. “The news of a penalty has been around for some time and has been factored in. What has to be looked at is whether the act was intentional or accidental,” said a third oil and gas analyst with a foreign brokerage firm.
Analysts, however, do not see a big blow for the conglomerate because the group reported an annual revenue of Rs 296,091 crore last year.
RIL made Rs 7,527 crore ($1.12 billion) from its oil and gas production business in 2015-16. For the September quarter, the company reported an earnings before interest and tax loss of Rs 491 crore. The penalty, if paid, will push its oil and gas segment further into losses.
Analysts, however, expect the penalty to be contested, leaving little room for an immediate impact. In the long run, they said, $1.55 billion in penalty would not hit RIL very hard.
The government slapped a $1.55-billion penalty on RIL for producing ONGC’s share of natural gas in the Krishna-Godavari basin. Business Standard reported a letter was issued to RIL on Thursday asking it to pay the penalty.
“There is no immediate impact because it will go into arbitration,” said an oil and gas analyst with a domestic brokerage who did not wish to be named. The oil ministry has given Reliance Industries and its partners 30 days to respond to the penalty notice.
“The post tax impact is Rs 25-26 per share, which is, if they have to pay. At the operations level, it is not a big number for RIL,” said a second oil and gas analyst on condition of anonymity. RIL’s shares closed at Rs 1,005.80, 1.92 per cent lower than its previous close.
RIL's investments in the exploration and production business have so far been unable to make handsome returns for the company.
“One also needs to see that the penalty has to be split with partners Niko and BP. One needs to see what is the agreement clause for past liabilities with Niko surely there will be a share, so the net impact may be lower,” said the first analyst quoted earlier in the story. UK's BP holds 30 per cent in the block since 2011 and the remaining 10 per cent is with Niko Resources of Canada.
Analyst do not expect any significant impact of the penalty decision on RIL’s share price because the St is glued to developments in the company’s telecom business. “The news of a penalty has been around for some time and has been factored in. What has to be looked at is whether the act was intentional or accidental,” said a third oil and gas analyst with a foreign brokerage firm.
