RIL to invest more in retail; goes slow on shale gas

Reliance Industries (RIL) said it would be investing Rs 500 crore in its retail business for the financial year 2016-17 while curbing investment in the shale gas business.

Srikanth Venkatachari, joint chief financial officer, said, capital expenditure for the shale gas business would see a drop of 20-25 per cent to $900 million from $1.2-billion in 2015. Capital expenditure for the shale business for 2016 is at $500 million.

The company said drilling and completion activities had slowed down across its shale joint ventures. RIL and its joint venture partners are not drilling any new wells at Carrizo and Chevron closing the third quarter with zero rigs, an RIL release stated.
 

"Pioneer JV dropped two rigs to close the quarter with only four rigs under operation. The activity levels are likely to be reduced further in FY17, as part of ongoing development planning efforts with JV partners," RIL said, adding, "All joint venture partners continued to reduce costs leveraging weak services market and remained focused on improving operational efficiency."

This helped RIL and its partners reduce well cost significantly. "Declining trend in well costs continued- normalised well costs at present are lower by 25 per cent at both Chevron and Pioneer JVs, compared with CY2014 levels," it added.

Unit realisation for the shale gas business dropped 47 per cent year-on-year and 14 per cent quarter-on-quarter during the third quarter.

There was modest growth in volumes. Revenues for the quarter were at $110 million as against $117 million in the second quarter.

Reliance Retail, on the other hand, posted its highest-ever quarterly turnover of Rs 6,042 crore during the December quarter, against Rs 4,686 crore during the same period last year, registering a growth of 29 per cent.

The subsidiary saw a seven per cent jump in its profit before depreciation, interest, and taxes in the third quarter of the current financial year at Rs 243 crore, against Rs 227 crore in the corresponding period of the previous year.

Reliance Retail operates more than 3,000 stores, becoming the first retailer in the country to reach this milestone. As on December 31, 2015, it had 3,043 stores across 371 cities in India.

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SHIFTING FOCUS

• RIL said it would be investing Rs 500 cr in its retail business for the FY17
   
• Capex for the shale gas biz would see a drop of 20% to $900 mn from $1.2-bn in 2015
   
• Revenues from the shale gas biz for Q3 were at $110 mn, against $117 mn in Q2
   
• Reliance Retail posted its highest quarterly turnover of Rs 6,042 cr in Q3 FY16, versus Rs 4,686 cr during the Q3 FY15